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 811-02857
811-21434
Name of Fund: BlackRock Bond Fund of BlackRock Bond Fund, Inc.
Master Bond Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock Bond Fund of BlackRock Bond Fund, Inc. and Master
Bond Trust, 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing
address: P.O. Box 9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 09/30/06
Date of reporting period: 10/01/05 - 09/30/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock Bond Fund
OF BLACKROCK BOND FUND, INC.
ANNUAL REPORT SEPTEMBER 30, 2006
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
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.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.blackrock.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Bond Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS...logo)
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To sign up today, go to www.blackrock.com/edelivery.
BlackRock Bond Fund of BlackRock Bond Fund, Inc.
Proxy Results
During the six-month period ended September 30, 2006, BlackRock Bond Fund of
BlackRock Bond Fund, Inc.'s shareholders voted on the following proposals.
Proposals 1 and 3 were approved at a shareholders' meeting on August 15, 2006.
A description of the proposals and number of shares voted were as follows:
Shares Voted Shares Voted Shares Voted
For Against Abstain
1. To approve a new investment advisory agreement with
BlackRock Advisors, Inc. 101,759,257 1,499,907 1,565,165
3. To approve a contingent subadvisory agreement with
BlackRock Advisors, Inc. 101,601,755 1,583,342 1,639,231
Important Tax Information
The following information is provided with respect to the ordinary income
distributions paid by BlackRock Bond Fund of BlackRock Bond Fund, Inc. for the
fiscal year ended September 30, 2006:
Federal Obligation Interest
Month Paid: October 2005 - September 2006 7.47%*
Interest-Related Dividends for Non-U.S. Residents
Month Paid: November 2005 .80%**
December 2005 90.65%**
January 2006 - September 2006 75.45%**
* 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 taxes.
** Represents the portion of the taxable ordinary income dividends eligible for
exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
A Letter to Shareholders
Dear Shareholder
It is my pleasure to welcome you to BlackRock.
On September 29, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch
Investment Managers, L.P. ("MLIM") united to form one of the largest asset
management firms in the world. Now with more than $1 trillion in assets under
management, over 4,000 employees in 18 countries and representation in key
markets worldwide, BlackRock's global presence means greater depth and scale
to serve you.
The new BlackRock unites some of the finest money managers in the industry.
Our ranks include more than 500 investment professionals globally - portfolio
managers, research analysts, risk management professionals and traders. With
offices strategically located around the world, our investment professionals
have in-depth local knowledge and the ability to leverage our global presence
and robust infrastructure to deliver focused investment solutions. BlackRock's
professional investors are supported by disciplined investment processes and
best-in-class technology, ensuring that our portfolio managers are well
equipped to research, uncover and capitalize on the opportunities the world's
markets have to offer.
The BlackRock culture emphasizes excellence, teamwork and integrity in the
management of a variety of equity, fixed income, cash management, alternative
investment and real estate products. Our firm's core philosophy is grounded in
the belief that experienced investment and risk professionals using disciplined
investment processes and sophisticated analytical tools can consistently add
value to client portfolios.
As you probably are aware, most former MLIM investment products now carry the
"BlackRock" name. This is reflected in newspapers and online fund reporting
resources. Your account statements, as of the October month-end reporting
period, also reflect the BlackRock name. Unless otherwise communicated to you,
your funds maintain the same investment objectives that they did prior to the
combination of MLIM and BlackRock. Importantly, this union does not affect
your brokerage account or your relationship with your financial advisor.
Clients of Merrill Lynch remain clients of Merrill Lynch.
We view this combination of asset management leaders as a complementary union
that reinforces our commitment to shareholders. Individually, each firm made
investment performance its single most important mission. Together, we are
even better prepared to capitalize on market opportunities on behalf of our
shareholders. Our focus on investment excellence is accompanied by an
unwavering commitment to service, enabling us to assist clients, in cooperation
with their financial professionals, in working toward their investment goals.
We thank you for allowing us the opportunity, and we look forward to serving
your investment needs in the months and years ahead as the new BlackRock.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Vice Chairman
BlackRock, Inc.
Data, including assets under management, are as of June 30, 2006.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
A Discussion With Your Fund's Portfolio Managers
We maintained a relatively conservative approach throughout the fiscal year,
looking to our yield curve positioning and duration profile as the key drivers
of relative performance.
How did the Fund perform during the fiscal year in light of the existing
market conditions?
For the 12-month period ended September 30, 2006, BlackRock Bond Fund of
BlackRock Bond Fund, Inc.'s (formerly Core Bond Portfolio of Merrill Lynch
Bond Fund, Inc.) Class A, Class B, Class C, Class I and Class R Shares had
total returns of +3.13%, +2.60%, +2.46%, +3.39% and +2.88%, respectively. For
the same period, the benchmark Lehman Brothers Aggregate Bond Index returned
+3.67%. (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 6 and 7 of this report to shareholders.)
The past year was characterized by reasonable (albeit slowing) economic
growth, inflationary fears propagated by high energy prices and a continued
vigilant Federal Reserve Board (the Fed). The Fed raised interest rates
six times during the fiscal period before pausing on August 8, at last
acknowledging a slowdown in economic growth. At this point, the bond market
began to rally, with the benchmark 10-year Treasury yield falling as bond
prices correspondingly rose. Still, year-over-year, yields rose across the
curve and uncertainty prevailed as the markets struggled to interpret the
intentions of new Fed Chairman Ben Bernanke. On balance, it was a fairly
challenging period for fixed income investment.
The Fund's performance was influenced by our duration profile, yield curve
strategy and sector allocation decisions. In the first half of the year, we
had positioned the portfolio for a flattening yield curve, expressed largely
through an underexposure in the two-year - five-year part of the curve and an
above-average position in the 30-year area. Because bond prices move in the
opposite direction of yields, our strategy was correct as short-term yields
rose more than long-term yields. This effect reversed in March as the yield
curve began to resteepen, and we took the opportunity to begin moving away
from our flattening bias.
Similarly, we began the fiscal year with a relatively short duration but
started to limit that bias somewhat as the Fed approached its desired
"neutral" federal funds target. By mid-year, the Fund was positioned with a
slightly long duration, a posture we assumed as the 10-year Treasury yield
approached 5.25%. Our increasing duration hurt performance at times when
interest rates rose (as a shorter duration means less sensitivity to interest
rate risk, and vice versa). However, our longer relative duration was a
positive in the final quarter of the period as yields began to move lower.
In terms of specific fixed income sectors, we maintained a neutral-to-slightly
underweight position in corporate bonds and mortgages for much of the year, a
strategy that benefited performance compared to the benchmark. This was
particularly true in the second quarter of 2006 as credit spreads (versus
Treasury issues of comparable maturity) widened. Conversely, we overweighted
structured products, such as asset-backed securities (ABS) and commercial
mortgage-backed securities (CMBS), a move that enhanced performance as these
sectors offered an incremental yield advantage over Treasury issues. Exposure
to Treasury Inflation Protected Securities (TIPS) early in the year detracted
from performance.
What changes were made to the portfolio during the period?
We actively adjusted the portfolio's duration profile based on our assessment
of interest rate direction. Although interest rates rose year-over-year, they
also fell at times when the Fed began to soften its stance on inflation and
expectations for future interest rate hikes declined. As Chairman Bernanke
sought to establish credibility with the markets, his statements often
resulted in ambiguity regarding the direction of interest rates. We worked to
manage the Fund's duration amid the uncertainty.
We began the year with a relatively short duration. In March, the Treasury
curve steepened by 20 basis points (.20%) between the two-year and 30-year
sectors. This was a dramatic one-month move considering the flatness of the
curve, and served to support the short end as the long end normalized. This
prompted us to remove some of our curve flattening bias and to move from a
short duration bias toward a more neutral duration profile. By the second
quarter of 2006, as long-term interest rates continued to rise, the Fund's
duration was slightly longer than that of the benchmark index. In our view,
the 10-year U.S. Treasury began to represent value as its yield approached
5.25%. By period-end, as long-term interest rates moved lower, we returned to
a slightly short duration bias in an effort to shield the portfolio from any
potential backup in rates.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Turning to sectors, the portfolio was underweight in corporate bonds for much
of the year as credit spreads remained tight, meaning there was little
additional yield to be gained in exchange for the risk involved. In the final
three months of the period, we reestablished some exposure to corporate bonds
as spreads widened and value was restored to the sector. We felt corporate
bonds should perform well if rates remained at or near the low levels reached
in the second quarter. With this additional exposure, the portfolio's position
in corporate bonds increased from an underweight versus the benchmark to an
overweight. At period-end, 23.6% of the Fund's net assets was invested in
investment grade corporate bonds.
For the most part, we continued to favor high-quality spread sectors
throughout the year for their yield-enhancement potential. Having said that,
we did reduce exposure to these sectors in the second quarter of 2006 in
keeping with a general theme of risk reduction in the portfolio. Overall, we
preferred CMBS and ABS for their relatively high credit quality and potential
to generate additional yield for the portfolio.
How would you characterize the Fund's position at the close of the period?
In our last report to shareholders, we noted that a slowdown in economic
activity should help to calm some of the inflationary fears propagated by the
Fed. This seemed to materialize as the Fed opted to interrupt its two-year
interest rate-hiking campaign in August, and again chose to leave rates
unchanged on September 20, citing an obvious slowdown in the economy as a
factor in its decision. Indeed, inflation is a lagging indicator, and we
believe we have yet to feel the full effects of the Fed's 17 consecutive
interest rate hikes. In addition, the housing market is weakening and high
energy prices have taken a bite out of consumption. All of this gives us
reason for optimism. As such, we shifted the portfolio slightly to take
advantage of a more favorable credit environment.
John Burger
Vice President and Portfolio Manager
Patrick Maldari
Vice President and Portfolio Manager
James J. Pagano
Vice President and Portfolio Manager
Frank Viola
Vice President and Portfolio Manager
October 2, 2006
Effective October 2, 2006, Portfolio Managers Keith Anderson, Scott Amero,
Matthew Marra and Andrew Phillips assumed responsibility for the day-to-day
management of the Fund's portfolio. Mr. Anderson is a Vice Chairman of
BlackRock, Inc., Chief Investment Officer for Fixed Income and a member of the
firm's Executive and Management Committees. He is Chairman of the Investment
Strategy Group and is responsible for global fixed income strategy, asset
allocation and the overall management of client portfolios. Mr. Anderson is a
founding partner of BlackRock, which was established in 1988. Mr. Amero is a
Managing Director of BlackRock, co-head of the fixed income portfolio
management team and a member of the Management Committee and the Investment
Strategy Group. Mr. Amero joined BlackRock in 1990. Mr. Marra, a Managing
Director of BlackRock and portfolio manager, is a member of the Investment
Strategy Group. He joined BlackRock in 1995. Mr. Phillips, a Managing Director
of BlackRock and portfolio manager, also is a member of the Investment
Strategy Group. He joined BlackRock in 1991.
Effective October 2, 2006, the Portfolio's Class A, Class B, Class C and
Class I Shares were redesignated Investor A, Investor B, Investor C1 and
Institutional Shares, respectively. As previously communicated to
shareholders, new sales charge schedules came into effect at the same time
for certain of these classes. Class R Shares remain the same.
On October 16, 2006, the Fund acquired all of the net assets of BlackRock
Intermediate Term Fund of BlackRock Bond Fund, Inc. pursuant to a plan of
reorganization.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Performance Data
About Fund Performance
The Fund has multiple classes of shares:
* Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and an account maintenance fee of 0.25% per year (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales charge of
4%, declining to 0% after six years. All Class B Shares purchased prior to
December 1, 2002 will maintain the four-year schedule. In addition, Class B
Shares are subject to a distribution fee of 0.50% per year and an account
maintenance fee of 0.25% per year. These shares automatically convert to Class
A Shares after approximately 10 years. (There is no initial sales charge for
automatic share conversions.)
*Class C Shares are subject to a distribution fee of 0.55% per year and an
account maintenance fee of 0.25% per year. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one year
of purchase.
* Class I Shares are not subject to any front-end sales charge. Class I Shares
bear no ongoing distribution or account maintenance fees and are available
only to eligible investors.
* Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of 0.25%
per year and an account maintenance 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 the Class I Shares (which have no
distribution or account maintenance fees) restated for Class R Share fees.
None of the past results shown should be considered a representation of future
performance. 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 following tables assume reinvestment
of all dividends and capital gain distributions, if any, at net asset value on
the payable 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. The Portfolio's Investment Adviser waived a portion of
its fee. Without such waiver, the Portfolio's performance would have been
lower.
Recent Performance Results
6-Month 12-Month 10-Year Standardized
As of September 30, 2006 Total Return Total Return Total Return 30-day Yield
Class A Shares* +3.37% +3.13% +69.41% 4.32%
Class B Shares* +3.10 +2.60 +60.88 3.97
Class C Shares* +2.98 +2.46 +59.89 3.93
Class I Shares* +3.50 +3.39 +73.68 4.75
Class R Shares* +3.24 +2.88 +66.12 4.25
Lehman Brothers Aggregate Bond Index** +3.73 +3.67 +86.31 --
Merrill Lynch U.S. Corporate Master Index*** +4.08 +3.46 +94.59 --
* Investment results shown do not reflect sales charges; results shown would be lower if a
sales charge was included. Cumulative 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 payable date.
** This unmanaged market-weighted Index is 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.
*** This unmanaged Index is comprised of all investment grade corporate bonds rated BBB or higher,
of all maturities.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in Class A
Shares*++, Class B Shares*++, Class C Shares*++, Class I Shares*++ and Class
R Shares*++ compared to a similar investment in Lehman Brothers Aggregate
Bond Index++++ and Merrill Lynch U.S. Corporate Master Index++++++. Values
illustrated are as follows:
Class A Shares*++
Date Value
September 1996 $ 9,600.00
September 1997 $10,459.00
September 1998 $11,481.00
September 1999 $11,248.00
September 2000 $11,789.00
September 2001 $13,107.00
September 2002 $14,083.00
September 2003 $14,858.00
September 2004 $15,390.00
September 2005 $15,769.00
September 2006 $16,263.00
Class B Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,839.00
September 1998 $11,837.00
September 1999 $11,547.00
September 2000 $12,041.00
September 2001 $13,318.00
September 2002 $14,236.00
September 2003 $14,943.00
September 2004 $15,397.00
September 2005 $15,681.00
September 2006 $16,088.00
Class C Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,824.00
September 1998 $11,824.00
September 1999 $11,519.00
September 2000 $12,005.00
September 2001 $13,271.00
September 2002 $14,178.00
September 2003 $14,873.00
September 2004 $15,318.00
September 2005 $15,606.00
September 2006 $15,989.00
Class I Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,922.00
September 1998 $12,019.00
September 1999 $11,815.00
September 2000 $12,414.00
September 2001 $13,837.00
September 2002 $14,903.00
September 2003 $15,764.00
September 2004 $16,369.00
September 2005 $16,799.00
September 2006 $17,368.00
Class R Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,868.00
September 1998 $11,901.00
September 1999 $11,640.00
September 2000 $12,170.00
September 2001 $13,497.00
September 2002 $14,465.00
September 2003 $15,293.00
September 2004 $15,812.00
September 2005 $16,147.00
September 2006 $16,612.00
Lehman Brothers Aggregate Bond Index++++
Date Value
September 1996 $10,000.00
September 1997 $10,971.00
September 1998 $12,234.00
September 1999 $12,189.00
September 2000 $13,041.00
September 2001 $14,731.00
September 2002 $15,997.00
September 2003 $16,863.00
September 2004 $17,483.00
September 2005 $17,971.00
September 2006 $18,631.00
Merrill Lynch U.S. Corporate Master Index++++++
Date Value
September 1996 $10,000.00
September 1997 $11,123.00
September 1998 $12,311.00
September 1999 $12,185.00
September 2000 $12,878.00
September 2001 $14,623.00
September 2002 $15,731.00
September 2003 $17,468.00
September 2004 $18,281.00
September 2005 $18,807.00
September 2006 $19,459.00
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
++ The Fund invests primarily in long-term, fixed income securities that
are rated in the four highest categories of the recognized rating
agencies (Baa or better by Moody's Investors Service, Inc. or BBB or
better by Standard & Poor's Corp.).
++++ This unmanaged market-weighted Index is 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.
++++++ This unmanaged Index is comprised of all investment grade corporate
bonds rated BBB or higher, of all maturities.
Past performance is not indicative of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/06 +3.13% -0.99%
Five Years Ended 9/30/06 +4.41 +3.56
Ten Years Ended 9/30/06 +5.41 +4.98
Return Return
Without CDSC With CDSC++++++
Class B Shares++
One Year Ended 9/30/06 +2.60% -1.35%
Five Years Ended 9/30/06 +3.85 +3.50
Ten Years Ended 9/30/06 +4.87 +4.87
Return Return
Without CDSC With CDSC++++++
Class C Shares++++
One Year Ended 9/30/06 +2.46% +1.47%
Five Years Ended 9/30/06 +3.80 +3.80
Ten Years Ended 9/30/06 +4.81 +4.81
Class I Shares Return
One Year Ended 9/30/06 +3.39%
Five Years Ended 9/30/06 +4.65
Ten Years Ended 9/30/06 +5.68
Class R Shares Return
One Year Ended 9/30/06 +2.88%
Five Years Ended 9/30/06 +4.24
Ten Years Ended 9/30/06 +5.21
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
++ Maximum contingent deferred sales charge is 4% and is reduced
to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales
charge.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
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 following example (which is
based on a hypothetical investment of $1,000 invested on April 1, 2006 and
held through September 30, 2006) 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 first table below 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 in the first line under
the heading entitled "Expenses Paid During the Period."
The second table below 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 second table
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.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value April 1, 2006 to
April 1, September 30, September 30,
2006 2006 2006
Actual
Class A $1,000 $1,033.70 $4.26
Class B $1,000 $1,031.00 $6.89
Class C $1,000 $1,029.80 $7.19
Class I $1,000 $1,035.00 $2.99
Class R $1,000 $1,032.40 $5.52
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,020.71 $4.23
Class B $1,000 $1,018.12 $6.84
Class C $1,000 $1,017.82 $7.14
Class I $1,000 $1,021.96 $2.97
Class R $1,000 $1,019.46 $5.49
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(.84% for Class A, 1.36% for Class B, 1.42% for Class C, .59% for Class I and 1.09% for Class R),
multiplied by the average account value over the period, multiplied by 182/365 (to reflect the
one-half year period shown). Because the Fund is a feeder fund, the expense table example
reflects the expenses of both the feeder fund and the master fund in which it invests.
** 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.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statement of Assets and Liabilities BlackRock Bond Fund
As of September 30, 2006
Assets
Investment in Master Bond Portfolio (the "Master Portfolio"), at value
(identified cost--$2,033,601,134) $ 2,038,977,045
Prepaid expenses 58,478
---------------
Total assets 2,039,035,523
---------------
Liabilities
Payables:
Dividends to shareholders $ 2,321,158
Distributor 602,454
Other affiliates 568,800
Administrator 471,855 3,964,267
---------------
Accrued expenses 10,365
---------------
Total liabilities 3,974,632
---------------
Net Assets
Net assets $ 2,035,060,891
===============
Net Assets Consist of+++
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized $ 5,221,997
Class B Shares of Common Stock, $.10 par value, 250,000,000 shares authorized 2,168,844
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 3,884,854
Class I Shares of Common Stock, $.10 par value, 250,000,000 shares authorized 6,088,247
Class R Shares of Common Stock, $.10 par value, 250,000,000 shares authorized 328,821
Paid-in capital in excess of par 2,055,765,345
Accumulated distributions in excess of investment income--net $ (4,103,401)
Accumulated realized capital losses allocated from the Master Portfolio--net (39,669,727)
Unrealized appreciation allocated from the Master Portfolio--net 5,375,911
---------------
Total accumulated losses--net (38,397,217)
---------------
Net Assets $ 2,035,060,891
===============
Net Asset Value+++
Class A--Based on net assets of $600,846,716 and 52,219,966 shares outstanding $ 11.51
===============
Class B--Based on net assets of $249,402,994 and 21,688,436 shares outstanding $ 11.50
===============
Class C--Based on net assets of $446,869,865 and 38,848,543 shares outstanding $ 11.50
===============
Class I--Based on net assets of $700,102,967 and 60,882,471 shares outstanding $ 11.50
===============
Class R--Based on net assets of $37,838,349 and 3,288,206 shares outstanding $ 11.51
===============
+++ Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated
Investor A, Investor B, Investor C1 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statement of Operations BlackRock Bond Fund
For the Year Ended September 30, 2006
Investment Income
Net investment income allocated from the Master Portfolio:
Interest $ 96,545,875
Securities lending--net 513,405
Dividends 474,392
Expenses (2,250,376)
---------------
Total income 95,283,296
---------------
Expenses
Investment advisory fees $ 7,170,155
Account maintenance and distribution fees--Class C* 3,149,400
Account maintenance and distribution fees--Class B* 2,066,698
Account maintenance fees--Class A* 1,399,581
Transfer agent fees--Class I* 1,158,128
Transfer agent fees--Class A* 969,921
Transfer agent fees--Class C* 775,824
Transfer agent fees--Class B* 545,228
Account maintenance and distribution fees--Class R 166,103
Printing and shareholder reports 137,665
Registration fees 118,347
Transfer agent fees--Class R 57,373
Professional fees 32,303
Other 20,057
---------------
Total expenses before waiver 17,766,783
Waiver of expenses (1,283,411)
---------------
Total expenses after waiver 16,483,372
---------------
Investment income--net 78,799,924
---------------
Realized & Unrealized Gain (Loss) Allocated from the Master Portfolio--Net
Realized loss on investments, financial futures contracts, swaps, foreign
currency transactions, short sales and options written--net (25,215,213)
Change in unrealized appreciation/depreciation on investments, financial
futures contracts, swaps, foreign currency transactions and options written--net 4,743,094
---------------
Total realized and unrealized loss--net (20,472,119)
---------------
Net Increase in Net Assets Resulting from Operations $ 58,327,805
===============
* Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated
Investor A, Investor B, Investor C1 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statements of Changes in Net Assets BlackRock Bond Fund
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 78,799,924 $ 54,578,615
Realized gain (loss)--net (25,215,213) 10,753,875
Change in unrealized appreciation/depreciation--net 4,743,094 (23,100,353)
--------------- ---------------
Net increase in net assets resulting from operations 58,327,805 42,232,137
--------------- ---------------
Dividends to Shareholders**
Investment income--net:
Class A (25,610,838) (18,788,805)
Class B (11,168,766) (10,552,895)
Class C (15,660,465) (8,357,501)
Class I (32,593,771) (27,408,790)
Class R (1,426,041) (706,809)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (86,459,881) (65,814,800)
--------------- ---------------
Capital Share Transactions
Net increase in net assets derived from capital share transactions 129,269,937 300,568,513
--------------- ---------------
Net Assets
Total increase in net assets 101,137,861 276,985,850
Beginning of year 1,933,923,030 1,656,937,180
--------------- ---------------
End of year* $ 2,035,060,891 $ 1,933,923,030
=============== ===============
* Undistributed (accumulated distributions in excess of) investment income--net $ (4,103,401) $ 7,388,887
=============== ===============
** Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated
Investor A, Investor B, Investor C1 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Financial Highlights BlackRock Bond Fund
The following per
share data and ratios
have been derived
from information Class A** Class B**
provided in the
financial For the Year Ended September 30, For the Year Ended September 30,
statements. 2006 2005 2004++++ 2003 2002 2006 2005 2004++++ 2003 2002
Per Share Operating Performance
Net asset
value,
beginning
of year $ 11.68 $ 11.83 $ 11.73 $ 11.52 $ 11.21 $ 11.67 $ 11.83 $ 11.73 $ 11.52 $ 11.21
----------------------------------------------------------- ----------------------------------------------------------
Investment
income--net .47++ .37++ .34++ .39++ .50 .41++ .30++ .27++ .34++ .44
Realized and
unrealized
gain
(loss)--net (.07) (.08) .07 .23 .31 (.07) (.11) .08 .22 .31
----------------------------------------------------------- ----------------------------------------------------------
Total from
investment
operations .40 .29 .41 .62 .81 .34 .19 .35 .56 .75
----------------------------------------------------------- ----------------------------------------------------------
Less dividends
from investment
income--net (.57) (.44) (.31) (.41) (.50) (.51) (.35) (.25) (.35) (.44)
----------------------------------------------------------- ----------------------------------------------------------
Net asset
value, end
of year $ 11.51 $ 11.68 $ 11.83 $ 11.73 $ 11.52 $ 11.50 $ 11.67 $ 11.83 $ 11.73 $ 11.52
=========================================================== ==========================================================
Total Investment Return*
Based on net
asset value
per share 3.13% 2.46% 3.58% 5.51% 7.44% 2.60% 1.84% 3.04% 4.96% 6.89%
=========================================================== ==========================================================
Ratios to Average Net Assets
Expenses, net
of waiver .86%+++ .85%+++ .85%+++ .85% .84% 1.38%+++ 1.37%+++ 1.36%+++ 1.36% 1.36%
=========================================================== ==========================================================
Expenses .92%+++ .92%+++ .89%+++ .85% .84% 1.45%+++ 1.44%+++ 1.47%+++ 1.36% 1.36%
=========================================================== ==========================================================
Investment
income--net 4.17%+++ 3.08%+++ 2.65%+++ 3.39% 4.43% 3.60%+++ 2.54%+++ 2.14%+++ 2.94% 3.93%
=========================================================== ==========================================================
Supplemental Data
Net assets, end
of year (in
thousands)$ 600,847 $ 563,606 $ 426,393 $ 484,030 $ 286,726 $ 249,403 $ 308,944 $ 344,585 $449,985 $487,746
=========================================================== ==========================================================
Portfolio
turnover 207.94%+++++ 234.92%+++++ 258.01%+++++ 287.00% 281.67% 207.94%+++++ 234.92%+++++ 258.01%+++++ 287.00% 281.67%
=========================================================== ==========================================================
* Total investment returns exclude the effects of sales charges.
** Effective October 2, 2006, Class A and Class B Shares were redesignated Investor A and Investor B Shares, respectively.
++ Based on average shares outstanding.
++++ On October 1, 2003, the Fund converted from a stand-alone investment company to a "feeder" fund that seeks to
achieve its investment objective by investing all of its assets in the Master Portfolio, which has the same
investment objective as the Fund. All investments will be made at the Master Portfolio level. This structure is
sometimes called a "master/feeder" structure.
+++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income--net.
+++++ Portfolio turnover for the Master Portfolio.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Financial Highlights (continued) BlackRock Bond Fund
The following per
share data and ratios
have been derived
from information Class C** Class I**
provided in the
financial For the Year Ended September 30, For the Year Ended September 30,
statements. 2006 2005 2004++++ 2003 2002 2006 2005 2004++++ 2003 2002
Per Share Operating Performance
Net asset
value,
beginning
of year $ 11.68 $ 11.83 $ 11.73 $ 11.52 $ 11.21 $ 11.67 $ 11.83 $ 11.73 $ 11.52 $ 11.21
----------------------------------------------------------- ----------------------------------------------------------
Investment
income--net .41++ .30++ .26++ .33++ .43 .50++ .39++ .37++ .43++ .53
Realized and
unrealized gain
(loss)--net (.09) (.08) .09 .23 .31 (.07) (.07) .07 .22 .31
----------------------------------------------------------- ----------------------------------------------------------
Total from
Investment
operations .32 .22 .35 .56 .74 .43 .32 .44 .65 .84
----------------------------------------------------------- ----------------------------------------------------------
Less dividends
from investment
income--net (.50) (.37) (.25) (.35) (.43) (.60) (.48) (.34) (.44) (.53)
----------------------------------------------------------- ----------------------------------------------------------
Net asset
value, end
of year $ 11.50 $ 11.68 $ 11.83 $ 11.73 $ 11.52 $ 11.50 $ 11.67 $ 11.83 $ 11.73 $ 11.52
=========================================================== ==========================================================
Total Investment Return*
Based on net
asset value
per share 2.46% 1.88% 2.99% 4.91% 6.83% 3.39% 2.63% 3.84% 5.77% 7.71%
=========================================================== ==========================================================
Ratios to Average Net Assets
Expenses, net
of waiver 1.43%+++ 1.42%+++ 1.39%+++ 1.42% 1.42% .61%+++ .60%+++ .60%+++ .60% .59%
=========================================================== ==========================================================
Expenses 1.50%+++ 1.49%+++ 1.39%+++ 1.42% 1.42% .67%+++ .67%+++ .68%+++ .60% .59%
=========================================================== ==========================================================
Investment
income--net 3.63%+++ 2.52%+++ 2.12%+++ 2.86% 3.85% 4.42%+++ 3.32%+++ 2.90%+++ 3.67% 4.68%
=========================================================== ==========================================================
Supplemental Data
Net assets, end
of year (in
thousands)$ 446,870 $ 343,060 $ 188,416 $ 131,739 $ 110,065 $ 700,103 $ 690,854 $ 683,828 $ 823,981 $ 645,820
=========================================================== ==========================================================
Portfolio
turnover 207.94%+++++ 234.92%+++++ 258.01%+++++ 287.00% 281.67% 207.94%+++++ 234.92%+++++ 258.01%+++++ 287.00% 281.67%
=========================================================== ==========================================================
* Total investment returns exclude the effects of sales charges. Effective December 28, 2005,
Class I Shares are no longer subject to any front-end sales charges.
** Effective October 2, 2006, Class C and Class I Shares were redesignated Investor C1 and
Institutional Shares, respectively.
++ Based on average shares outstanding.
++++ On October 1, 2003, the Fund converted from a stand-alone investment company to a "feeder" fund
that seeks to achieve its investment objective by investing all of its assets in the Master Portfolio,
which has the same investment objective as the Fund. All investments will be made at the Master
Portfolio level. This structure is sometimes called a "master/feeder" structure.
+++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income--net.
+++++ Portfolio turnover for the Master Portfolio.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Financial Highlights (concluded) BlackRock Bond Fund
Class R
For the Period
January 3,
2003++ to
The following per share data and ratios have been derived For the Year Ended September 30, September 30,
from information provided in the financial statements. 2006 2005 2004++++ 2003
Per Share Operating Performance
Net asset value, beginning of period $ 11.68 $ 11.84 $ 11.74 $ 11.49
--------------- --------------- --------------- ---------------
Investment income--net** .45 .34 .32 .21
Realized and unrealized gain (loss)--net (.07) (.08) .07 .35
--------------- --------------- --------------- ---------------
Total from investment operations .38 .26 .39 .56
--------------- --------------- --------------- ---------------
Less dividends from investment income--net (.55) (.42) (.29) (.31)
--------------- --------------- --------------- ---------------
Net asset value, end of period $ 11.51 $ 11.68 $ 11.84 $ 11.74
=============== =============== =============== ===============
Total Investment Return
Based on net asset value per share 2.88% 2.12% 3.39% 4.97%+++
=============== =============== =============== ===============
Ratios to Average Net Assets
Expenses, net of waiver 1.11%+++++ 1.10%+++++ .78%+++++ 1.11%*
=============== =============== =============== ===============
Expenses 1.17%+++++ 1.17%+++++ .78%+++++ 1.11%*
=============== =============== =============== ===============
Investment income--net 3.96%+++++ 2.85%+++++ 2.70%+++++ 2.37%*
=============== =============== =============== ===============
Supplemental Data
Net assets, end of period (in thousands) $ 37,838 $ 27,460 $ 13,716 $ 46
=============== =============== =============== ===============
Portfolio turnover 207.94%++++++++ 234.92%++++++++ 258.01%++++++++ 287.00%
=============== =============== =============== ===============
* Annualized.
** Based on average shares outstanding.
++ Commencement of operations.
++++ On October 1, 2003, the Fund converted from a stand-alone investment company to a "feeder" fund that
seeks to achieve its investment objective by investing all of its assets in the Master Portfolio,
which has the same investment objective as the Fund. All investments will be made at the Master
Portfolio level. This structure is sometimes called a "master/feeder" structure.
+++ Aggregate total investment return.
+++++ Includes the Fund's share of the Master Portfolio's allocated expenses and/or investment income--net.
++++++++ Portfolio turnover for the Master Portfolio.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements BlackRock Bond Fund
1. Significant Accounting Policies:
On September 29, 2006, Core Bond Portfolio (the "ML Fund") and Merrill Lynch
Bond Fund, Inc., which the ML Fund is a part of, were renamed BlackRock Bond
Fund (the "Fund") and BlackRock Bond Fund, Inc. (the "Bond Fund"),
respectively. The Bond 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 by investing all of its
assets in Master Core Bond Portfolio which was renamed on September 29, 2006,
Master Bond Portfolio (the "Master Portfolio"), of Master Bond Trust, a mutual
fund that has the same investment objective and strategies as the Fund. 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
performance of the Fund is directly affected by the performance of the Master
Portfolio. The financial statements of the Master Portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. 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 percentage of the Master
Portfolio owned by the Fund at September 30, 2006 was 70.3%. The Fund offers
multiple classes of shares. Class A Shares are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent deferred
sales charge. Class I Shares are sold only to certain eligible investors.
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 Class A, Class B, Class C and Class R
Shares bear certain expenses related to the account maintenance of such
shares, and Class B, Class 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 account maintenance and
distribution expenditures (except that Class B shareholders may vote on
certain changes to the Class A distribution plan). Effective October 2, 2006,
Class A, Class B, Class C and Class I Shares were redesignated Investor A,
Investor B, Investor C1 and Institutional Shares, respectively. Class R Shares
were not redesignated. 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 investment in the Master
Portfolio at fair value. Valuation of securities held by the Master Portfolio
is discussed in Note 1(a) of the Master Portfolio's Notes to Financial
Statements, which is included elsewhere in this report.
(b) Investment income and expenses--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.
(c) 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.
(d) Recent accounting pronouncement--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"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 fiscal years beginning after December 15,
2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
(e) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded
on the ex-dividend dates.
(g) Investment transactions--Investment transactions in the Master Portfolio
are accounted for on a trade date basis.
(h) Expenses--Certain expenses have been allocated to the individual funds in
the Bond Fund on a pro rata basis based upon the respective aggregate net
asset value of each fund included in the Bond Fund.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) BlackRock Bond Fund
(i) Reclassification--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, $3,832,331 has been reclassified between accumulated
distributions in excess of net investment income and accumulated net realized
capital losses allocated from the Master Portfolio as a result of permanent
differences attributable to accounting for swap agreements, accounting for
principal paydowns, foreign currency transactions and amortization methods on
fixed income securities. This reclassification has no effect on net assets or
net asset values per share.
2. Transactions with Affiliates:
The Bond Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton
Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch
& Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for
the management of the Funds and provides the necessary personnel, facilities,
equipment and certain other services necessary to the operations of the Bond
Fund. For such services, FAM receives, at the end of each month, a fee with
respect to each Fund at the annual rates set forth below which are based upon
the aggregate average daily value of the Bond Fund's net assets at the
following annual rates: .50% of the Bond Fund's average daily net assets
not exceeding $250 million; .45% of the average daily net assets in excess of
$250 million but not exceeding $500 million; .40% of average daily net assets
in excess of $500 million but not exceeding $750 million; and .35% of average
daily net assets in excess of $750 million. For the year ended September 30,
2006, the aggregate average daily net assets of the Bond Fund, including the
Bond Fund's BlackRock High Income Fund (formerly High Income Portfolio of
Merrill Lynch Bond Fund, Inc.) and BlackRock Intermediate Term Fund (formerly
Intermediate Bond Fund of Merrill Lynch Bond Fund, Inc.) was approximately
$3,794,317,000.
FAM has contractually agreed to waive the Fund's investment advisory fee in
the amount of the Fund's share of the investment advisory fee paid by the
Master Portfolio. For the year ended September 30, 2006, FAM earned fees of
$7,170,155 of which $1,283,411 were waived. FAM has entered into a Sub-
Advisory Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM
U.K."), an affiliate of FAM, pursuant to which MLAM U.K. provides investment
advisory services to FAM with respect to the Bond Fund. There is no increase
in the aggregate fees paid by the Bond Fund for these services.
The Bond Fund has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Bond 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
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .50%
Class C .25% .55%
Class R .25% .25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, also provides
account maintenance and distribution services to the Bond Fund. The ongoing
account maintenance fee compensates the Distributor and MLPF&S for providing
account maintenance services to Class A, Class B, Class C and Class R
shareholders. The ongoing distribution fee compensates the Distributor and
MLPF&S for providing shareholder and distribution-related services to Class B,
Class C and Class R shareholders.
For the year ended September 30, 2006, FAMD earned underwriting discounts and
direct commissions and MLPF&S earned dealer concessions on sales of the Fund's
Class A and Class I Shares as follows:
FAMD MLPF&S
Class A $ 90,953 $ 855,400
Class I $ 20,247 $ 123,393
For the year ended September 30, 2006, MLPF&S received contingent deferred
sales charges of $191,479 and $84,238 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $305 relating to transactions subject to front-end sales
charge waivers in Class A Shares.
Financial Data Services, Inc. ("FDS"), a wholly owned subsidiary of ML & Co.,
is the Fund's transfer agent.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) BlackRock Bond Fund
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction closed on
September 29, 2006.
On August 15, 2006, shareholders of the Fund approved a new Investment
Advisory Agreement for the Bond Fund and the Master Portfolio, with BlackRock
Advisors, Inc. (the "Manager"), a wholly owned subsidiary of BlackRock, Inc.
BlackRock Advisors, Inc. was reorganized into BlackRock Advisors, LLC. The new
advisory agreement became effective on September 29, 2006 and the investment
advisory fee is unchanged.
In connection with the closing, the Fund's Transfer Agent became PFPC, Inc.,
an affiliate of the Manager. In addition, BlackRock Distributors, Inc., an
affiliate of BlackRock, Inc., became an additional distributor.
Prior to the closing, certain officers and/or directors of the Bond Fund are
officers and/or directors of FAM, PSI, MLAM UK, FAMD, FDS, and/or ML & Co.
Commencing September 29, 2006, certain officers and/or directors of the Bond
Fund are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$129,269,937 and $300,568,513 for the years ended September 30, 2006 and
September 30, 2005, respectively.
Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were
redesignated Investor A, Investor B, Investor C1 and Institutional Shares,
respectively. Class R Shares were not redesignated.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 16,972,405 $ 194,072,215
Automatic conversion of shares 1,870,912 21,438,141
Shares issued to shareholders in
reinvestment of dividends 1,579,698 18,086,007
--------------- ---------------
Total issued 20,423,015 233,596,363
Shares redeemed (16,453,089) (188,159,675)
--------------- ---------------
Net increase 3,969,926 $ 45,436,688
=============== ===============
Class A Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 20,905,660 $ 245,781,409
Automatic conversion of shares 1,447,307 17,058,681
Shares issued to shareholders in
reinvestment of dividends 1,085,827 12,794,431
--------------- ---------------
Total issued 23,438,794 275,634,521
Shares redeemed (11,219,888) (132,159,272)
--------------- ---------------
Net increase 12,218,906 $ 143,475,249
=============== ===============
Class B Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 4,599,227 $ 52,626,057
Shares issued to shareholders in
reinvestment of dividends 751,108 8,596,874
--------------- ---------------
Total issued 5,350,335 61,222,931
--------------- ---------------
Automatic conversion of shares (1,872,112) (21,438,141)
Shares redeemed (8,254,583) (94,409,523)
--------------- ---------------
Total redeemed (10,126,695) (115,847,664)
--------------- ---------------
Net decrease (4,776,360) $ (54,624,733)
=============== ===============
Class B Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 6,699,065 $ 78,957,081
Shares issued to shareholders in
reinvestment of dividends 663,930 7,822,569
--------------- ---------------
Total issued 7,362,995 86,779,650
--------------- ---------------
Automatic conversion of shares (1,448,349) (17,058,681)
Shares redeemed (8,586,115) (101,193,823)
--------------- ---------------
Total redeemed (10,034,464) (118,252,504)
--------------- ---------------
Net decrease (2,671,469) $ (31,472,854)
=============== ===============
Class C Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 15,402,885 $ 176,203,833
Shares issued to shareholders in
reinvestment of dividends 1,142,653 13,067,235
--------------- ---------------
Total issued 16,545,538 189,271,068
Shares redeemed (7,071,636) (80,734,523)
--------------- ---------------
Net increase 9,473,902 $ 108,536,545
=============== ===============
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (concluded) BlackRock Bond Fund
Class C Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 17,528,641 $ 206,659,943
Shares issued to shareholders in
reinvestment of dividends 557,630 6,568,541
--------------- ---------------
Total issued 18,086,271 213,228,484
Shares redeemed (4,638,791) (54,689,966)
--------------- ---------------
Net increase 13,447,480 $ 158,538,518
=============== ===============
Class I Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 15,640,780 $ 178,724,066
Shares issued to shareholders in
reinvestment of dividends 911,041 10,418,819
--------------- ---------------
Total issued 16,551,821 189,142,885
Shares redeemed (14,848,369) (170,034,152)
--------------- ---------------
Net increase 1,703,452 $ 19,108,733
=============== ===============
Class I Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 13,599,517 $ 160,238,065
Shares issued to shareholders in
reinvestment of dividends 736,001 8,671,445
--------------- ---------------
Total issued 14,335,518 168,909,510
Shares redeemed (12,978,398) (152,923,772)
--------------- ---------------
Net increase 1,357,120 $ 15,985,738
=============== ===============
Class R Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 2,071,808 $ 23,789,947
Shares issued to shareholders in
reinvestment of dividends 116,456 1,332,089
--------------- ---------------
Total issued 2,188,264 25,122,036
Shares redeemed (1,250,270) (14,309,332)
--------------- ---------------
Net increase 937,994 $ 10,812,704
=============== ===============
Class R Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 1,981,579 $ 23,372,004
Shares issued to shareholders in
reinvestment of dividends 55,175 650,293
--------------- ---------------
Total issued 2,036,754 24,022,297
Shares redeemed (845,469) (9,980,435)
--------------- ---------------
Net increase 1,191,285 $ 14,041,862
=============== ===============
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended
September 30, 2006 and September 30, 2005 was as follows:
9/30/2006 9/30/2005
Distributions paid from:
Ordinary income $ 86,459,881 $ 65,814,800
--------------- ---------------
Total taxable distributions $ 86,459,881 $ 65,814,800
=============== ===============
As of September 30, 2006, the components of accumulated losses on a
tax basis were as follows:
Accumulated distributions in excess of
investment income--net $ (698,268)
Undistributed long-term capital gains--net --
---------------
Accumulated distributions in excess of
investment income--net (698,268)
Capital loss carryforward (15,296,383)*
Unrealized gains--net (22,402,566)**
---------------
Total accumulated losses--net $ (38,397,217)
===============
* On September 30, 2006, the Fund had a net capital loss carry-
forward of $15,296,383, of which $2,086,933 expires in 2007,
$392,843 expires in 2008 and $12,816,607 expires in 2009.
This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized
losses 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, the realization for tax purposes of unrealized
gains on investments in passive foreign investment companies, the
deferral of post-October capital losses for tax purposes and other
book/tax temporary differences.
5. Acquisition of BlackRock Intermediate Term Fund of BlackRock Bond
Fund, Inc.:
On October 16, 2006, the Fund acquired all of the net assets of BlackRock
Intermediate Term Fund of BlackRock Bond Fund, Inc. pursuant to a plan of
reorganization.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Report of Independent Registered Public Accounting Firm BlackRock Bond Fund
To the Shareholders and Board of Directors of
BlackRock Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
BlackRock Bond Fund, one of the portfolios constituting BlackRock Bond Fund,
Inc. (the "Fund"), formerly Core Bond Portfolio of Merrill Lynch Bond Fund,
Inc., as of September 30, 2006 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
five years in the period then ended. 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. 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 Bond Fund of BlackRock Bond Fund, Inc. as of September 30, 2006, 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 five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 2006
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Portfolio Information as of September 30, 2006 Master Bond Portfolio
Percent of
Total
Asset Mix Investments
Government & Agency Obligations 18.1%
Corporate Bonds 14.3
Asset-Backed Securities 11.9
Government Agency Mortgage-Backed
Securities 11.4
Non-Government Agency Mortgage-Backed
Securities 8.5
Foreign Government Obligations 1.2
Preferred Securities 1.1
Other* 33.5
* Includes portfolio holdings in short-term investments and options.
Percent of
Quality Ratings by Total
S&P/Moody's Investments
AAA/Aaa 46.4%
AA/Aa 5.8
A/A 4.4
BBB/Baa 6.5
BB/Ba 0.8
B/B 0.5
NR (Not Rated) 1.8
Other* 33.8
* Includes portfolio holdings in preferred stocks, options and
short-term investments.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments Master Bond Portfolio (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
ACE Securities Corp. (b):
USD 1,165,298 Series 2003-OP1 Class A2, 5.69%
due 12/25/2033 $ 1,166,118
9,653,000 Series 2005-ASP1 Class M1, 6.01%
due 9/25/2035 9,729,444
25,050,000 Series 2005-HE6 Class A2B, 5.53%
due 10/25/2035 25,059,754
457,010 Aegis Asset Backed Securities Trust
Series 2004-1 Class A, 5.68% due
4/25/2034 (b) 457,083
4,339,200 Altius Funding Ltd. Series 2005-2A Class D,
8.071% due 12/05/2040 (a)(b) 4,339,200
Ameriquest Mortgage Securities, Inc. (b):
10,075,000 Series 2003-7 Class M1, 6.18%
due 8/25/2033 10,169,526
7,550,000 Series 2004-R1 Class M2, 5.91%
due 2/25/2034 7,575,889
3,472,164 Argent Securities, Inc. Series 2004-W11
Class A3, 5.69% due 11/25/2034 (b) 3,473,677
Bear Stearns Asset Backed Securities, Inc. (b):
1,661,634 Series 2004-HE9 Class 1A2, 5.70%
due 3/25/2032 1,662,337
12,381,708 Series 2005-4 Class A, 5.66% due 1/25/2036 12,388,332
25,300,000 Series 2005-HE10 Class A2, 5.62%
due 8/25/2035 25,368,085
9,857,000 Series 2005-SD1 Class 1A2, 5.63%
due 7/25/2027 9,880,765
2,630,000 Buckingham CDO Ltd. Series 2005-2A Class E,
8.321% due 4/05/2041 (a)(b) 2,603,700
Capital Auto Receivables Asset Trust:
576,576 Series 2003-2 Class B, 5.61%
due 1/15/2009 (b) 576,636
4,150,000 Series 2004-2 Class D, 5.82%
due 5/15/2012 (a) 4,095,267
Countrywide Asset Backed Certificates (b):
7,963,561 Series 2003-2 Class M1, 6.028%
due 6/26/2033 7,975,544
769,233 Series 2003-BC3 Class A2, 5.64%
due 9/25/2033 769,734
3,866,299 Series 2004-5 Class A, 5.78%
due 10/25/2034 3,901,174
7,550,000 Series 2004-5 Class M2, 6% due 7/25/2034 7,609,976
8,950,000 Series 2004-13 Class AF4, 4.583%
due 1/25/2033 8,819,924
9,365,000 Series 2004-13 Class MF1, 5.071%
due 12/25/2034 9,158,000
9,200,000 Credit-Based Asset Servicing and Securitization
Series 2005-CB2 Class AV2, 5.53%
due 4/25/2036 (b) 9,203,230
5,400,000 Duke Funding High Grade II-S/EGAM, Ltd.
Series 2006-1A Class D, 8.32%
due 10/04/2050 (a)(b) 5,400,000
13,036,000 Equifirst Mortgage Loan Trust Series 2004-2
Class M1, 5.88% due 7/25/2034 (b) 13,118,549
Face
Amount Asset-Backed Securities++ Value
First Franklin Mortgage Loan Asset Backed
Certificates (b):
USD 225,332 Series 2003-FF5 Class A2, 6.052%
due 3/25/2034 $ 224,532
11,087,547 Series 2004-FF10 Class A2, 5.73%
due 12/25/2032 11,112,827
20,517,437 Series 2005-FF10 Class A6, 5.68%
due 11/25/2035 20,535,645
13,500,000 GE Dealer Floorplan Master Note Trust
Series 2004-2 Class B, 5.62%
due 7/20/2009 (b) 13,516,218
Home Equity Asset Trust (b):
7,850,919 Series 2005-1 Class A2, 5.61%
due 5/25/2035 7,866,443
5,352,317 Series 2005-3 Class 1A2, 5.58%
due 8/25/2035 5,354,759
7,931,182 Irwin Home Equity Series 2005-C Class 1A1,
5.59% due 4/25/2030 (b) 7,934,065
Long Beach Mortgage Loan Trust (b):
1,574,413 Series 2002-4 Class 2A, 5.79%
due 11/26/2032 1,575,341
716,979 Series 2004-1 Class A3, 5.63%
due 2/25/2034 717,144
Morgan Stanley ABS Capital I, Inc. (b):
4,892,329 Series 2003-NC5 Class M2, 7.33%
due 4/25/2033 4,914,421
1,639,584 Series 2004-NC1 Class A2, 5.70%
due 12/27/2033 1,640,126
9,888,032 Series 2005-HE1 Class A2MZ, 5.63%
due 12/25/2034 9,910,411
3,162,755 Series 2005-NC2 Class A1MZ, 5.58%
due 3/25/2035 3,164,416
3,227,927 Series 2005-NC2 Class A2MZ, 5.58%
due 3/25/2035 3,229,614
New Century Home Equity Loan Trust (b):
4,598,925 Series 2004-3 Class A3, 5.72%
due 11/25/2034 4,602,885
10,213,876 Series 2005-2 Class A2MZ, 5.59%
due 6/25/2035 10,228,538
Option One Mortgage Loan Trust (b):
2,446,930 Series 2003-4 Class A2, 5.65%
due 7/25/2033 2,453,305
3,050,000 Series 2005-1 Class M5, 6.58%
due 2/25/2035 3,079,852
Park Place Securities, Inc. Series 2005-WCH1 (b):
4,145,722 Class A1B, 5.63% due 1/25/2035 4,152,146
3,465,175 Class A3D, 5.67% due 1/25/2035 3,470,831
3,470,000 Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class M2, 5.507%
due 5/25/2035 3,404,985
17,889,198 RAAC Series 2005-SP2 Class 2A, 5.63%
due 6/25/2044 (b) 17,907,510
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
Residential Asset Mortgage Products, Inc. (b):
USD 14,695,265 Series 2004-RS11 Class A2, 5.60%
due 12/25/2033 $ 14,728,783
12,300,000 Series 2005-RS3 Class AI2, 5.50%
due 3/25/2035 12,325,561
3,244,031 Residential Asset Securities Corp. Series
2003-KS5 Class AIIB, 5.62% due 7/25/2033 (b) 3,245,391
21,500,000 Soundview Home Equity Loan Trust Series
2005-OPT3 Class A4, 5.63%
due 11/25/2035 (b) 21,554,851
Structured Asset Investment Loan Trust (b):
14,750,000 Series 2003-BC6 Class M1, 6.08%
due 7/25/2033 14,805,464
14,550,000 Series 2003-BC7 Class M1, 6.08%
due 7/25/2033 14,604,226
4,897,000 Series 2004-8 Class M4, 6.33%
due 9/25/2034 4,924,724
4,855,994 Structured Asset Securities Corp. Series
2004-23XS Class 2A1, 4.55% due 1/25/2035 (b) 4,867,779
6,970,748 Wells Fargo Home Equity Trust Series 2004-2
Class A32, 5.67% due 2/25/2032 (b) 6,982,799
836,632 Whole Auto Loan Trust Series 2004-1 Class D,
5.60% due 3/15/2011 834,590
Total Asset-Backed Securities
(Cost--$424,347,280)--14.6% 424,372,126
Government & Agency Obligations
Fannie Mae:
46,913,000 4% due 2/28/2007 46,664,596
21,400,000 7.125% due 1/15/2030 27,068,817
15,400,000 Federal Home Loan Bank System, 2.75%
due 11/15/2006 15,352,014
U.S. Treasury Bonds:
3,175,000 7.50% due 11/15/2016 3,889,375
1,935,000 8.125% due 8/15/2019 2,551,781
6,745,000 7.25% due 8/15/2022 (i) 8,537,167
1,395,000 6.25% due 8/15/2023 1,619,617
1,395,000 6.625% due 2/15/2027 1,715,415
45,120,000 5.375% due 2/15/2031 (j) 48,733,119
19,060,000 4.50% due 2/15/2036 (j) 18,263,349
U.S. Treasury Inflation Indexed Bonds:
15,651,536 3.875% due 1/15/2009 16,100,907
13,706,642 3.50% due 1/15/2011 14,356,639
32,605,524 1.625% due 1/15/2015 31,013,461
U.S. Treasury Notes:
205,000,000 4% due 8/31/2007 (j) 203,262,215
386,000 4.375% due 1/31/2008 383,708
995,000 3.75% due 5/15/2008 979,492
6,425,000 4.50% due 2/15/2009 (j) 6,402,159
5,190,000 4.875% due 5/15/2009 5,220,003
3,300,000 4.875% due 8/15/2009 3,322,430
Face
Amount Government & Agency Obligations Value
U.S. Treasury Notes (concluded):
USD 1,580,000 3.875% due 5/15/2010 $ 1,542,783
3,030,000 3.625% due 6/15/2010 2,932,828
685,000 4.125% due 8/15/2010 673,735
583,000 4.25% due 10/15/2010 575,758
43,160,000 4.25% due 1/15/2011 (j) 42,571,600
550,000 5% due 2/15/2011 559,732
10,190,000 4.50% due 2/28/2011 (j) 10,151,788
29,395,000 4.625% due 8/31/2011 (j) 29,427,158
6,320,000 3.625% due 5/15/2013 5,971,414
30,690,000 4.50% due 11/15/2015 (j) 30,392,675
28,155,000 4.50% due 2/15/2016 27,872,352
80,000 5.125% due 5/15/2016 82,988
40,025,000 4.875% due 8/15/2016 (j) 40,781,713
Total Government & Agency Obligations
(Cost--$642,237,078)--22.4% 648,972,788
Government Agency
Mortgage-Backed Securities++
Fannie Mae Guaranteed Pass-Through
Certificates:
12,688,468 5.00% due 9/01/2035 - 10/01/2035 12,200,177
79,409,000 5.50% due 10/15/2036 (k) 78,217,865
18,600,000 6.00% due 10/01/2036 18,685,785
8,935,852 6.50% due 12/01/2028 - 9/01/2036 9,126,065
Freddie Mac Mortgage Participation
Certificates:
135,701,467 5.00% due 10/15/2036 (k) 130,485,374
38,811,289 5.50% due 1/01/2021 - 2/01/2021 38,798,645
113,508,828 5.50% due 1/01/2035 - 10/15/2036 (k) 111,938,326
906,010 6.00% due 5/01/2035 910,987
3,085,518 7.00% due 2/01/2031 - 4/01/2032 3,178,722
Ginnie Mae MBS Certificates:
2,818,331 6.50% due 4/15/2032 2,894,529
644,315 7.50% due 4/15/2031 - 3/15/2032 670,649
Total Government Agency
Mortgage-Backed Securities
(Cost--$405,858,455)--14.0% 407,107,124
Non-Government Agency
Mortgage-Backed Securities++
Collateralized Mortgage Obligations--3.4%
16,336 BlackRock Capital Finance LP Series 1997-R2
Class AP, 8.017% due 12/25/2035 (a)(b)(d) 16,336
29,909 Collateralized Mortgage Obligation Trust
Series 57 Class D, 9.90% due 2/01/2019 30,110
Impac Secured Assets CMN Owner Trust
Series 2004-3 (b):
8,172,078 Class 1A4, 5.73% due 11/25/2034 8,196,113
10,300,000 Class M1, 5.93% due 11/25/2034 10,337,961
15,398,669 JPMorgan Mortgage Trust Series 2005-A2
Class 4A1, 5.209% due 4/25/2035 (b) 15,064,287
13,586,747 Morgan Stanley Mortgage Loan Trust Series
2006-3AR Class 2A3, 5.907%
due 3/25/2036 (b) 13,709,517
59,915 Ocwen Residential MBS Corp. Series 1998-R2
Class AP, 8.36% due 11/25/2034 (a)(b) 47,932
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Face Non-Government Agency
Amount Mortgage-Backed Securities++ Value
Collateralized Mortgage Obligations (concluded)
USD 8,946,457 RMAC Plc Series 2003-NS2A Class A2C, 5.79%
due 9/12/2035 (b) $ 8,966,177
20,206,916 Residential Accredit Loans, Inc.
Series 2005-QS12 Class A8, 5.669% due
8/25/2035 (b) 20,218,291
Structured Asset Securities Corp. (b):
4,256,017 Series 2005-GEL2 Class A, 5.61%
due 4/25/2035 4,258,353
12,055,313 Series 2005-OPT1 Class A4M, 5.68%
due 11/25/2035 12,061,542
Washington Mutual (b):
1,158 Series 2000-1 Class B1, 9.33%
due 1/25/2040 (a) 1,156
5,036,174 Series 2005-AR2 Class B4, 6.23%
due 1/25/2045 5,019,649
--------------
97,927,424
Commercial Mortgage-Backed Securities--7.1%
32,000,000 Banc of America Commercial Mortgage, Inc.
Series 2006-2 Class A4, 5.93%
due 5/10/2045 (b) 33,132,202
6,350,000 Bear Stearns Commercial Mortgage Security
Series 2002-FL1A Class D, 5.772%
due 8/03/2014 (b) 6,350,000
33,000,000 Credit Suisse Mortgage Capital Certificates
Series 2006-C3 Class A3, 6.022%
due 6/15/2038 (b) 34,303,711
700,000 GMAC Commercial Mortgage Securities, Inc.
Series 2004-C3 Class AAB, 4.702%
due 12/10/2041 678,467
16,300,000 GS Mortgage Securities Corp. II Series
2006-GG6 Class A2, 5.506%
due 4/10/2038 (b) 16,493,998
Greenwich Capital Commercial Funding Corp.:
16,000,000 Series 2004-GG1 Class A4, 4.755%
due 6/10/2036 15,820,981
19,700,000 Series 2006-GG7 Class A4, 6.11%
due 7/10/2038 (b) 20,625,498
JPMorgan Chase Commercial Mortgage
Securities Corp. (b):
35,200,000 Series 2006-CB15 Class A4, 5.814%
due 6/12/2043 36,395,952
28,200,000 Series 2006-LDP7 Class A4, 6.066%
due 4/15/2045 29,456,316
13,700,000 LB-UBS Commercial Mortgage Trust Series
2005-C3 Class A5, 4.739% due 7/15/2030 13,144,233
--------------
206,401,358
Total Non-Government Agency
Mortgage-Backed Securities
(Cost--$299,508,068)--10.5% 304,328,782
Corporate Bonds
Aerospace & Defense--0.6%
8,188,000 Goodrich Corp., 6.29% due 7/01/2016 (a) 8,451,564
3,640,000 Honeywell International, Inc., 5.70%
due 3/15/2036 3,655,412
5,015,000 Raytheon Co., 8.30% due 3/01/2010 5,479,198
--------------
17,586,174
Face
Amount Corporate Bonds Value
Airlines--0.2%
USD 2,359,574 American Airlines, Inc. Series 2003-1,
3.857% due 1/09/2012 $ 2,235,460
2,080,000 Continental Airlines, Inc. Series 2002-1,
6.563% due 8/15/2013 2,164,513
2,380,000 Southwest Airlines Co., 7.875% due 9/01/2007 2,427,281
--------------
6,827,254
Beverages--0.2%
Anheuser-Busch Cos., Inc.:
1,810,000 5.95% due 1/15/2033 1,878,632
3,070,000 5.75% due 4/01/2036 3,091,775
185,000 Diageo Capital Plc, 3.50% due 11/19/2007 181,375
--------------
5,151,782
Capital Markets--1.3%
6,560,000 Credit Suisse First Boston USA, Inc., 4.70%
due 6/01/2009 6,489,309
4,325,000 FBG Finance Ltd., 5.875% due 6/15/2035 (a) 4,019,378
Goldman Sachs Group, Inc.:
11,820,000 5.70% due 9/01/2012 12,021,023
6,170,000 5.25% due 10/15/2013 6,088,778
Mellon Funding Corp.:
885,000 4.875% due 6/15/2007 882,123
250,000 6.40% due 5/14/2011 261,195
6,570,000 Morgan Stanley, 5.30% due 3/01/2013 6,559,895
2,035,000 State Street Bank & Trust Co., 5.30%
due 1/15/2016 2,022,957
--------------
38,344,658
Commercial Banks--0.9%
2,705,000 Bank One Corp., 8% due 4/29/2027 3,331,832
5,690,000 Barclays Bank Plc, 8.55% (a)(c) 6,395,497
4,435,000 Corporacion Andina de Fomento, 6.875%
due 3/15/2012 4,725,155
4,995,000 HSBC Bank USA NA, 5.875% due 11/01/2034 4,964,136
2,340,000 Popular North America, Inc., 3.875%
due 10/01/2008 2,275,608
4,395,000 Shinsei Finance II (Cayman) Ltd.,
7.16% (a)(b)(c) 4,386,759
--------------
26,078,987
Commercial Services & Supplies--0.1%
2,355,000 Aramark Services, Inc., 6.375% due 2/15/2008 2,363,126
Communications Equipment--0.1%
1,535,000 Harris Corp., 5% due 10/01/2015 1,446,807
Construction Materials--0.2%
5,280,000 Lafarge SA, 6.15% due 7/15/2011 5,393,356
Consumer Finance--0.8%
6,410,000 American Express Co., 6.80% due 9/01/2066 (b) 6,767,331
HSBC Finance Corp.:
4,695,000 6.50% due 11/15/2008 4,812,849
1,905,000 5.875% due 2/01/2009 1,936,486
3,135,000 MBNA America Bank NA, 4.625%
due 8/03/2009 3,094,439
MBNA Corp.:
3,240,000 6.25% due 1/17/2007 3,247,656
870,000 5.625% due 11/30/2007 872,858
2,750,000 4.625% due 9/15/2008 2,719,313
--------------
23,450,932
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Face
Amount Corporate Bonds Value
Containers & Packaging--0.2%
USD 6,125,000 Sealed Air Corp., 5.625% due 7/15/2013 (a) $ 6,026,749
Diversified Financial Services--3.0%
4,625,000 Bank of America Corp., 4.875% due 9/15/2012 4,547,263
Citigroup, Inc.:
8,865,000 5.625% due 8/27/2012 9,026,316
4,730,000 5.85% due 12/11/2034 4,768,743
8,605,000 General Electric Capital Corp., 6.75%
due 3/15/2032 9,835,859
JPMorgan Chase & Co.:
10,000 4.50% due 11/15/2010 9,754
5,915,000 5.75% due 1/02/2013 6,048,768
4,760,000 4.75% due 3/01/2015 4,540,488
2,745,000 4.891% due 9/01/2015 (b) 2,696,317
Links Finance Corp. (b):
6,300,000 5.64% due 9/15/2010 6,304,738
6,300,000 Series 54, 5.64% due 9/15/2010 6,304,738
3,300,000 Series 55, 5.64% due 9/15/2010 3,296,710
Sigma Finance Corp. (b)(h):
21,350,000 7.405% due 8/15/2011 21,350,000
9,600,000 5.372% due 3/31/2014 9,626,371
--------------
88,356,065
Diversified Telecommunication Services--0.9%
2,760,000 BellSouth Corp., 6% due 11/15/2034 2,590,710
2,740,000 Deutsche Telekom International Finance BV,
8.25% due 6/15/2030 3,347,431
7,020,000 GTE Corp., 6.84% due 4/15/2018 7,425,791
5,070,000 SBC Communications, Inc., 6.45% due 6/15/2034 5,091,578
4,960,000 TELUS Corp., 7.50% due 6/01/2007 5,024,698
3,865,000 Telecom Italia Capital SA, 6% due 9/30/2034 3,455,534
--------------
26,935,742
Electric Utilities--1.1%
4,655,000 AEP Texas Central Co. Series D, 5.50%
due 2/15/2013 4,629,281
1,695,000 Jersey Central Power & Light, 6.40%
due 5/15/2036 (a) 1,772,284
3,280,000 Nevada Power Co., 6.65% due 4/01/2036 (a) 3,389,887
3,350,000 Progress Energy, Inc., 5.625% due 1/15/2016 3,347,762
3,905,000 Public Service Co. of New Mexico, 4.40%
due 9/15/2008 3,828,278
4,225,000 SPI Electricity & Gas Australia Holdings Pty Ltd.,
6.15% due 11/15/2013 (a) 4,388,858
4,480,000 Sierra Pacific Power Co., 6% due 5/15/2016 (a) 4,491,648
4,050,000 Southern California Edison Co., 5.625%
due 2/01/2036 3,930,302
2,855,000 Westar Energy, Inc., 6% due 7/01/2014 2,926,915
--------------
32,705,215
Energy Equipment & Services--0.1%
2,870,000 Weatherford International Ltd., 5.50%
due 2/15/2016 2,826,531
Food Products--0.4%
6,005,000 Cadbury Schweppes US Finance LLC, 3.875%
due 10/01/2008 (a) 5,840,913
4,470,000 Tyson Foods, Inc., 6.60% due 4/01/2016 4,602,553
--------------
10,443,466
Face
Amount Corporate Bonds Value
Gas Utilities--0.1%
USD 3,980,000 Panhandle Eastern Pipe Line Series B,
2.75% due 3/15/2007 $ 3,931,416
Health Care Providers & Services--0.2%
3,025,000 UnitedHealth Group, Inc., 5.80% due 3/15/2036 2,970,429
4,375,000 WellPoint, Inc., 5.85% due 1/15/2036 4,243,492
--------------
7,213,921
Hotels, Restaurants & Leisure--0.1%
2,760,000 Harrah's Operating Co., Inc., 5.625%
due 6/01/2015 2,565,459
350,000 Hilton Hotels Corp., 7.625% due 12/01/2012 372,313
--------------
2,937,772
Industrial Conglomerates--0.2%
4,330,000 Hutchison Whampoa International (03/33) Ltd.,
7.45% due 11/24/2033 (a) 4,907,687
Insurance--0.7%
4,590,000 American International Group, Inc., 6.25%
due 5/01/2036 4,822,580
5,520,000 Fund American Cos., Inc., 5.875%
due 5/15/2013 5,456,095
8,335,000 Montpelier Re Holdings Ltd., 6.125%
due 8/15/2013 8,052,085
735,000 Principal Life Global Funding I, 3.625%
due 4/30/2008 (a) 716,050
1,450,000 Prudential Financial, Inc., 4.104%
due 11/15/2006 1,448,092
--------------
20,494,902
Media--1.0%
6,185,000 Comcast Corp., 6.50% due 1/15/2017 6,456,157
3,435,000 Cox Communications, Inc., 7.125%
due 10/01/2012 3,660,765
News America, Inc.:
4,500,000 6.40% due 12/15/2035 4,413,294
4,625,000 6.75% due 1/09/2038 4,791,352
8,360,000 Time Warner Companies, Inc., 9.125%
due 1/15/2013 9,740,930
--------------
29,062,498
Metals & Mining--0.3%
2,745,000 Alcan, Inc., 5.75% due 6/01/2035 2,601,198
5,935,000 Vale Overseas Ltd., 6.25% due 1/11/2016 5,890,488
--------------
8,491,686
Multi-Utilities--0.3%
750,000 Ameren Corp., 4.263% due 5/15/2007 744,786
2,695,000 Consolidated Edison Co. of New York, 5.85%
due 3/15/2036 2,692,636
2,835,000 Puget Energy, Inc., 5.483% due 6/01/2035 2,600,667
2,145,000 Xcel Energy, Inc., 6.50% due 7/01/2036 2,263,065
--------------
8,301,154
Office Electronics--0.3%
9,570,000 Xerox Corp., 6.40% due 3/15/2016 9,522,150
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Face
Amount Corporate Bonds Value
Oil, Gas & Consumable Fuels--1.8%
Consolidated Natural Gas Co.:
USD 2,875,000 5% due 12/01/2014 $ 2,729,999
230,000 Series B, 5.375% due 11/01/2006 229,962
3,980,000 Enterprise Products Operating LP Series B,
5.75% due 3/01/2035 3,585,650
4,176,400 Kern River Funding Corp., 4.893%
due 4/30/2018 (a) 4,045,720
2,410,000 Motiva Enterprises LLC, 5.20%
due 9/15/2012 (a) 2,388,137
5,825,000 Northwest Pipeline Corp., 7% due 6/15/2016 (a) 5,956,063
15,500,000 Pemex Project Funding Master Trust, 6.69%
due 6/15/2010 (a)(b) 15,841,000
4,230,000 Petro-Canada, 5.95% due 5/15/2035 4,036,642
3,410,000 Talisman Energy, Inc., 5.85% due 2/01/2037 3,178,884
8,610,000 Ultramar Diamond Shamrock Corp., 6.75%
due 10/15/2037 9,308,727
--------------
51,300,784
Pharmaceuticals--0.2%
84,000 Eli Lilly & Co., 7.125% due 6/01/2025 98,490
4,325,000 Wyeth, 6% due 2/15/2036 4,372,532
--------------
4,471,022
Real Estate Investment Trusts (REITs)--0.5%
Developers Diversified Realty Corp.:
2,075,000 6.625% due 1/15/2008 2,103,689
2,752,000 5.375% due 10/15/2012 2,723,833
2,000,000 5.50% due 5/01/2015 1,963,412
1,545,000 Highwoods Properties, Inc., 7% due 12/01/2006 1,547,766
1,913,000 Nationwide Health Properties, Inc., 6.59%
due 7/07/2038 1,951,861
4,250,000 Westfield Capital Corp. Ltd., 5.125%
due 11/15/2014 (a) 4,124,111
--------------
14,414,672
Road & Rail--0.3%
Canadian National Railway Co.:
2,085,000 6.90% due 7/15/2028 2,395,784
2,395,000 6.20% due 6/01/2036 2,559,450
3,080,000 Norfolk Southern Corp., 7.05% due 5/01/2037 3,590,424
--------------
8,545,658
Semiconductors & Semiconductor Equipment--0.7%
19,081,000 International Rectifier Corp., 4.25%
due 7/15/2007 (e) 18,842,488
Software--0.2%
5,990,000 Oracle Corp. and Ozark Holding, Inc., 5.25%
due 1/15/2016 5,894,567
Thrifts & Mortgage Finance--0.4%
5,605,000 Countrywide Financial Corp., 6.25%
due 5/15/2016 5,688,414
6,420,000 Washington Mutual Bank, 6.75%
due 5/20/2036 6,895,574
--------------
12,583,988
Wireless Telecommunication Services--0.2%
2,298,000 AT&T Wireless Services, Inc., 8.75%
due 3/01/2031 2,937,763
2,710,000 Sprint Capital Corp., 8.75% due 3/15/2032 3,304,842
--------------
6,242,605
Total Corporate Bonds
(Cost--$513,188,012)--17.6% 511,095,814
Face
Amount Foreign Government Obligations Value
EUR 23,840,000 Bundesobligation Series 143, 3.50%
due 10/10/2008 $ 30,166,469
Mexico Government International Bond:
USD 7,180,000 9.875% due 2/01/2010 8,192,380
2,086,000 6.375% due 1/16/2013 2,193,429
2,380,000 5.875% due 1/15/2014 2,433,550
Total Foreign Government Obligations
(Cost--$41,824,555)--1.5% 42,985,828
Preferred Securities
Capital Trusts
Commercial Banks--0.6%
3,060,000 BAC Capital Trust VI, 5.625% due 3/08/2035 2,837,587
4,395,000 MUFG Capital Finance 1 Ltd., 6.346% (b)(c) 4,430,648
3,200,000 RBS Capital Trust I, 5.512% (b)(c) 3,109,299
6,410,000 USB Capital IX, 6.189% (b)(c) 6,482,786
--------------
16,860,320
Commercial Services & Supplies--0.1%
3,200,000 ILFC E-Capital Trust II, 6.25%
due 12/21/2065 (a)(b) 3,198,957
Electric Utilities--0.1%
1,485,000 Alabama Power Capital Trust V, 5.50%
due 10/01/2042 (b) 1,481,800
Oil, Gas & Consumable Fuels--0.1%
3,055,000 Pemex Project Funding Master Trust, 7.375%
due 12/15/2014 3,302,455
Total Capital Trusts
(Cost--$24,569,715)--0.9% 24,843,532
Shares
Held Preferred Stocks
Commercial Banks--0.1%
3,190,000 Barclays Bank Plc, 6.278% 3,047,567
Electric Utilities--0.0%
9,000 Duquesne Light Co., 6.50% 445,545
Thrifts & Mortgage Finance--0.3%
183,800 Fannie Mae, 7.085% (b) 9,729,913
Total Preferred Stocks
(Cost--$13,568,177)--0.4% 13,223,025
Total Preferred Securities
(Cost--$38,137,892)--1.3% 38,066,557
Face
Amount Short-Term Securities
Commercial Paper**--19.5%
USD 75,480,000 Barton Capital Corp., 5.25% due 10/18/2006 75,303,880
50,000,000 CBA (Delaware) Finance Inc., 5.24%
due 10/18/2006 49,883,556
50,000,000 E.I. du Pont de Nemours & Co., 5.20%
due 10/25/2006 49,833,889
100,000,000 IXIS Commercial Paper Corp., 5.24%
due 10/16/2006 99,796,222
40,000,000 Old Line Funding, LLC, 5.26% due 10/24/2006 39,871,422
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Face
Amount Short-Term Securities Value
Commercial Paper** (concluded)
Rabobank USA Financial Corp.:
USD 50,000,000 5.35% due 10/02/2006 $ 50,000,000
100,000,000 5.225% due 10/12/2006 99,854,861
100,000,000 Wal-Mart Stores, Inc., 5.18% due 10/17/2006 99,784,167
--------------
564,327,997
U.S. Government Agency Obligations**--7.8%
Federal Home Loan Bank System:
107,000,000 4.40% due 10/02/2006 107,000,000
120,300,000 5.12% due 10/16/2006 120,060,469
--------------
227,060,469
Beneficial
Interest
USD 403,300,250 BlackRock Liquidity Series, LLC Money Market
Series, 5.33% (d)(f)(g) 403,300,250
Total Short-Term Securities
(Cost--$1,194,688,716)--41.2% 1,194,688,716
Number of
Contracts Options Purchased Value
1,311 U.S. Treasury Bonds, expiring October 2006
at USD 107 $ 1,556,813
Total Options Purchased
(Premiums Paid--$659,853)--0.0% 1,556,813
Total Investments
(Cost--$3,560,449,909)--123.1% 3,573,174,548
Options Written
1,311 U.S. Treasury Bonds, expiring October 2006
at USD 105 (20,484)
Total Options Written
(Premiums Received--$528,241)--(0.0%) (20,484)
Total Investments, Net of Options Written
(Cost--$3,559,921,668*)--123.1% 3,573,154,064
Liabilities in Excess of Other Assets--(23.1%) (670,917,429)
--------------
Net Assets--100.0% $2,902,236,635
==============
* The cost and unrealized appreciation (depreciation) of investments,
net of options written, as of September 30, 2006, as computed for
federal income tax purposes, were as follows:
Aggregate cost $ 3,565,527,762
================
Gross unrealized appreciation $ 23,712,134
Gross unrealized depreciation (16,085,832)
----------------
Net unrealized appreciation $ 7,626,302
================
** Commercial Paper and certain U.S. Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase.
++ Asset-Backed and Mortgage-Backed Securities are subject to principal
paydowns. As a result of prepayments or refinancings of the underlying
instruments, the average life may be substantially less than the
original maturity.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Floating rate security.
(c) The security is a perpetual bond and has no stated maturity date.
(d) Investments in companies considered to be an affiliate of the Master
Portfolio, for purposes of Section 2(a)(3) of the Investment Company
Act of 1940, were as follows:
Net Interest
Affiliate Activity Income
BlackRock Capital Finance LP Series 1997-R2
Class AP, 8.017% due 12/25/2035 $ (7,762) $ 1,467
BlackRock Liquidity Series, LLC
Money Market Series $17,233,875 $743,882
(e) Convertible security.
(f) Represents the current yield as of September 30, 2006.
(g) Security was purchased with the cash proceeds from securities loans.
(h) Restricted securities as to resale, representing approximately 1.1%
of net assets, were as follows:
Acquisition
Issue Date Cost Value
Sigma Finance Corp., 7.405%
due 8/15/2011 2/13/2004 $ 21,350,000 $ 21,350,000
Sigma Finance Corp., 5.372%
due 3/31/2014 3/26/2004 9,600,000 9,626,371
------------ ------------
Total $ 30,950,000 $ 30,976,371
============ ============
(i) All or a portion of security held as collateral in connection with open
financial futures contracts.
(j) Security, or a portion of security, is on loan.
(k) Represents or includes a "to-be-announced" transaction. The Master
Portfolio has committed to purchasing securities for which all specific
information is not available at this time.
o For Master Portfolio compliance purposes, the Master Portfolio'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 Master
Portfolio 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.
o Financial futures contracts purchased as of September 30, 2006
were as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
1,285 5-Year U.S.
Treasury Note December 2006 $134,677,261 $ 910,317
o Financial futures contracts sold as of September 30, 2006
were as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
593 2-Year U.S.
Treasury Note December 2006 $120,886,759 $ (381,741)
2,650 10-Year U.S.
Treasury Note December 2006 $284,190,228 (2,175,397)
943 30-Year U.S.
Treasury Bond December 2006 $104,258,061 (1,741,033)
-------------
Total Unrealized Depreciation $ (4,298,171)
=============
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
o Swaps outstanding as of September 30, 2006 were as follows:
Unrealized
Notional Appreciation
Amount (Depreciation)
Receive (pay) a variable return
based on the change in the since
inception return of the U.S. Agency
Index and pay a floating rate based
on 1-month LIBOR minus 0.05%
Broker, Lehman Brothers
Special Finance
Expires October 2006 $ 79,600,000 --
Receive (pay) a variable return
based on the change in the since
inception return of the Lehman
Brothers MBS Fixed Rate Index
and pay a floating rate based on
1-month LIBOR minus 0.035%
Broker, UBS Warburg
Expires October 2006 $150,900,000 --
Receive (pay) a variable return
based on the change in the since
inception return of the Lehman
Brothers U.S. Treasury Index and
pay a floating rate based on
1-month LIBOR minus 0.12%
Broker, Lehman Brothers
Special Finance
Expires November 2006 $139,100,000 --
Receive (pay) a variable return
based on the change in the since
inception return of the Lehman
Brothers MBS Fixed Rate Index
and pay a floating rate based on
1-month LIBOR minus 0.06%
Broker, UBS Warburg
Expires December 2006 $377,200,000 --
Receive (pay) a variable return
based on the change in the since
inception return of the Lehman
Brothers U.S. Treasury Index and
pay a floating rate based on
1-month LIBOR minus 0.13%
Broker, Lehman Brothers
Special Finance
Expires January 2007 $ 86,300,000 --
Receive (pay) a variable return
rate based on the change in the
since inception return of the
Lehman Brothers U.S. Treasury
Index and pay a floating rate
based on 1-month LIBOR minus 0.13%
Broker, Lehman Brothers
Special Finance
Expires February 2007 $130,000,000 --
Receive a fixed rate of 5.3225%
and pay a floating rate based
on 3-month LIBOR
Broker, Lehman Brothers
Special Finance
Expires April 2007 $582,000,000 $ (628,333)
Unrealized
Notional Appreciation
Amount (Depreciation)
Receive a fixed rate of 4.095%
and pay a floating rate based
on 3-month LIBOR
Broker, Citibank, N.A.
Expires September 2007 $152,000,000 $ (1,704,334)
Sold credit default protection
on Sprint Capital Corp. and
receive 1.50%
Broker, Morgan Stanley
Capital Services Inc.
Expires September 2008 $ 5,490,000 137,772
Sold credit default protection on
Comcast Cable Communications,
Inc. and receive 1.15%
Broker, Morgan Stanley
Capital Services Inc.
Expires September 2008 $ 5,490,000 108,806
Receive a fixed rate of 3.401%
and pay 3.875% on Treasury
Inflation Protected Securities (TIPS)
adjusted principal
Broker, JPMorgan Chase
Expires January 2009 $ 16,302,000 (314,145)
Sold credit default protection on
Raytheon Co. and receive 0.73%
Broker, JPMorgan Chase
Expires March 2009 $ 3,165,000 47,968
Sold credit default protection on
Nextel Communications, Inc.
Class A and receive 1.72%
Broker, JPMorgan Chase
Expires September 2009 $ 6,360,000 257,415
Bought credit default protection
on Valero Energy Corp. and
pay 1.03%
Broker, Deutsche Bank
AG London
Expires June 2010 $ 3,250,000 (84,305)
Sold credit default protection on
BellSouth Corp. and receive 0.26%
Broker, Lehman Brothers
Special Finance
Expires June 2010 $ 3,155,000 6,518
Bought credit default protection
on Valero Energy Corp. and
pay 1.00%
Broker, Lehman Brothers
Special Finance
Expires June 2010 $ 3,250,000 (84,305)
Sold credit default protection
on CSX Corp. and receive 0.34%
Broker, JPMorgan Chase
Expires December 2010 $ 6,555,000 35,115
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Bond Portfolio (in U.S. dollars)
Swaps outstanding as of September 30, 2006 were as follows (continued):
Unrealized
Notional Appreciation
Amount (Depreciation)
Bought credit default protection
on Sara Lee Corp. and pay 0.57%
Broker, Lehman Brothers
Special Finance
Expires December 2010 $ 6,555,000 $ (50,008)
Bought credit default protection
on Brunswick Corp. and
pay 0.60%
Broker, JPMorgan Chase
Expires December 2010 $ 6,590,000 (2,590)
Bought credit default protection
on ConAgra Foods, Inc. and
pay 0.57%
Broker, Lehman Brothers
Special Finance
Expires December 2010 $ 6,555,000 (90,210)
Bought credit default protection
on HJ Heinz Co. and pay 0.37%
Broker, UBS Warburg
Expires December 2010 $ 6,555,000 (20,052)
Bought credit default protection
on CVS Corp. and pay 0.48%
Broker, Morgan Stanley Capital
Services Inc.
Expires December 2010 $ 6,590,000 (70,546)
Sold credit default protection
on Goodrich Corp. and
receive 0.44%
Broker, UBS Warburg
Expires December 2010 $ 6,555,000 52,886
Bought credit default protection
on RadioShack Corp. and
pay 1.16%
Broker, UBS Warburg
Expires December 2010 $ 6,590,000 (39,771)
Bought credit default protection
on Campbell Soup Co. and
pay 0.26%
Broker, UBS Warburg
Expires December 2010 $ 6,555,000 (40,182)
Bought credit default protection
on Kohl's Corp. and pay 0.39%
Broker, Morgan Stanley Capital
Services Inc.
Expires December 2010 $ 6,590,000 (50,414)
Bought credit default protection
on TJX Cos., Inc. and pay 0.57%
Broker, Morgan Stanley Capital
Services Inc.
Expires December 2010 $ 6,590,000 (98,283)
Unrealized
Notional Appreciation
Amount (Depreciation)
Bought credit default protection
on Limited Brands, Inc. and
pay 1.065%
Broker, UBS Warburg
Expires December 2010 $ 6,590,000 $ (149,165)
Sold credit default protection
on Lehman Brothers Holdings, Inc.
and receive 0.271%
Broker, UBS Warburg
Expires December 2010 $ 6,555,000 22,831
Sold credit default protection
on Dow Jones CDX North America
Investment Grade Index Series 5
and receive 0.45%
Broker, Deutsche Bank AG London
Expires December 2010 $ 33,735,000 130,289
Sold credit default protection on
Dow Jones CDX North America
Investment Grade Index Series 5
and receive 0.45%
Broker, Lehman Brothers
Special Finance
Expires December 2010 $ 32,960,000 141,638
Sold credit default protection on
Dow Jones CDX North America
Investment Grade High Volatility
Index Series 5 and receive 0.85%
Broker, JPMorgan Chase
Expires December 2010 $ 16,480,000 221,291
Receive a fixed rate of 4.17%
and pay 3.50% on Treasury
Inflation Protected Securities (TIPS)
adjusted principal
Broker, Morgan Stanley
Capital Services Inc.
Expires January 2011 $ 14,075,000 (673,822)
Bought credit default protection
on Kohl's Corp. and pay 0.43%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 6,725,000 (60,222)
Bought credit default protection
on Campbell Soup Co. and
pay 0.25%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 6,725,000 (38,305)
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (concluded) Master Bond Portfolio (in U.S. dollars)
Swaps outstanding as of September 30, 2006 were as follows (concluded):
Unrealized
Notional Appreciation
Amount (Depreciation)
Bought credit default protection
on Sara Lee Corp. and
pay 0.604%
Broker, JPMorgan Chase
Expires March 2011 $ 6,725,000 $ (54,513)
Bought credit default protection
on Limited Brands, Inc. and
pay 0.73%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 6,725,000 (56,356)
Sold credit default protection
on Federated Department
Stores, Inc. and receive 0.38%
Broker, JPMorgan Chase
Expires March 2011 $ 6,745,000 (29,294)
Bought credit default protection
on Tyson Foods, Inc. and
pay 1.185%
Broker, JPMorgan Chase
Expires June 2011 $ 7,300,000 (31,010)
Bought credit default protection
on Computer Sciences Corp.
and pay 0.88%
Broker, Morgan Stanley
Capital Services Inc.
Expires June 2011 $ 6,790,000 (144,131)
Sold credit default protection
on Dow Jones CDX North
America Investment Grade
Crossover Index Series 6 and
receive 1.90%
Broker, JPMorgan Chase
Expires June 2011 $ 16,485,000 72,986
Sold credit default protection
on Dow Jones CDX North
America Investment Grade
Crossover Index Series 6 and
receive 1.90%
Broker, Morgan Stanley
Capital Services Inc.
Expires June 2011 $ 24,850,000 104,960
Sold credit default protection
on Dow Jones CDX North
America Investment Grade Index
Series 6 and receive 0.40%
Broker, Lehman Brothers
Special Finance
Expires June 2011 $ 16,485,000 22,529
Unrealized
Notional Appreciation
Amount (Depreciation)
Sold credit default protection on
Dow Jones CDX North America
Investment Grade Index Series 6
and receive 0.40%
Broker, JPMorgan Chase
Expires June 2011 $ 65,945,000 $ 241,340
Sold credit default protection on
Dow Jones CDX North America
Investment Grade High Volatility
Index Series 6 and receive 0.75%
Broker, Lehman Brothers
Special Finance
Expires June 2011 $ 20,150,000 50,964
Sold credit default protection
on Dow Jones CDX North
America Investment Grade
High Volatility Index Series 6 and
receive 0.75%
Broker, Lehman Brothers
Special Finance
Expires June 2011 $ 32,975,000 55,929
Sold credit default protection
on Dow Jones CDX North
America Investment Grade
High Volatility Index Series 6 and
receive 0.75%
Broker, JPMorgan Chase
Expires June 2011 $ 66,265,000 28,631
Receive a floating rate based on
1-month LIBOR plus 0.47%,
which is capped at a fixed coupon
of 6.0%, and pay a floating rate
based on 1-month LIBOR
Broker, CS First Boston
International
Expires June 2011 $146,250,000 (40,040)
Bought credit default protection
on MeadWestvaco Corp. and
pay 0.85%
Broker, Morgan Stanley
Capital Services Inc.
Expires September 2013 $ 6,845,000 479
Bought credit default protection
on Eastman Chemical Co. and
pay 0.68%
Broker, Morgan Stanley
Capital Services Inc.
Expires September 2013 $ 6,845,000 (43,829)
------------
Total $(2,857,818)
============
o Currency Abbreviations:
EUR Euro
USD U.S. Dollar
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statement of Assets and Liabilities Master Bond Portfolio
As of September 30, 2006
Assets
Investments in unaffiliated securities, at value (including securities loaned
of $392,479,100) (identified cost--$3,156,473,569) $ 3,168,301,149
Investments in affiliated securities, at value (identified cost--$403,316,487) 403,316,586
Options purchased, at value (premiums paid--$659,853) 1,556,813
Unrealized appreciation on swaps 1,740,347
Swap premiums paid 11,105
Cash 410,486
Receivables:
Interest $ 15,799,631
Swaps 15,497,100
Contributions 15,245,229
Variation margin 195,922
Dividends 180,893
Securities lending 27,102
Principal paydowns 19,700 46,965,577
---------------
Prepaid expenses 42,533
---------------
Total assets 3,622,344,596
---------------
Liabilities
Collateral on securities loaned, at value 403,300,250
Options written, at value (premiums received--$528,241) 20,484
Unrealized depreciation on swaps 4,598,165
Swap premiums received 376,324
Payables:
Securities purchased 303,765,232
Swaps 4,558,183
Withdrawals 3,065,198
Investment adviser 140,093
Other affiliates 13,791 311,542,497
---------------
Accrued expenses 270,241
---------------
Total liabilities 720,107,961
---------------
Net Assets
Net assets $ 2,902,236,635
===============
Net Assets Consist of
Investors' capital $ 2,895,233,435
Unrealized appreciation--net 7,003,200
---------------
Net Assets $ 2,902,236,635
===============
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statement of Operations Master Bond Portfolio
For the Year Ended September 30, 2006
Investment Income
Interest (including $1,467 from affiliates) $ 139,677,452
Securities lending--net 743,882
Dividends 686,795
---------------
Total income 141,108,129
---------------
Expenses
Investment advisory fees $ 1,857,632
Accounting services 643,095
Interest from securities sold short 381,528
Custodian fees 130,023
Professional fees 75,802
Pricing fees 43,940
Trustees' fees and expenses 34,471
Printing and shareholder reports 2,242
Other 92,798
---------------
Total expenses 3,261,531
---------------
Investment income--net 137,846,598
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments (including $(15) from affiliates)--net (40,385,336)
Financial futures contracts and swaps--net 1,287,101
Short sales--net 1,822,309
Options written--net (535,607)
Foreign currency transactions--net 179,845 (37,631,688)
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 11,896,243
Financial futures contracts and swaps--net (5,218,994)
Options written--net 535,157
Foreign currency transactions--net (332,085) 6,880,321
--------------- ---------------
Total realized and unrealized loss--net (30,751,367)
---------------
Net Increase in Net Assets Resulting from Operations $ 107,095,231
===============
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Statements of Changes in Net Assets Master Bond Portfolio
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 137,846,598 $ 107,950,389
Realized gain (loss)--net (37,631,688) 14,824,889
Change in unrealized appreciation/depreciation--net 6,880,321 (33,001,657)
--------------- ---------------
Net increase in net assets resulting from operations 107,095,231 89,773,621
--------------- ---------------
Capital Transactions
Proceeds from contributions 636,922,287 715,008,502
Fair value of withdrawals (713,610,950) (659,703,618)
--------------- ---------------
Net increase (decrease) in net assets derived from capital transactions (76,688,663) 55,304,884
--------------- ---------------
Net Assets
Total increase in net assets 30,406,568 145,078,505
Beginning of year 2,871,830,067 2,726,751,562
--------------- ---------------
End of year $ 2,902,236,635 $ 2,871,830,067
=============== ===============
See Notes to Financial Statements.
Financial Highlights Master Bond Portfolio
For the Period
For the Year Ended October 1, 2003++
The following ratios have been derived from September 30, to September 30,
information provided in the financial statements. 2006 2005 2004
Total Investment Return
Total investment return 3.88% 3.13% 4.34%++++
=============== =============== ===============
Ratios to Average Net Assets
Expenses .12% .10% .10%
=============== =============== ===============
Investment income--net 4.90% 3.81% 3.39%
=============== =============== ===============
Supplemental Data
Net assets, end of period (in thousands) $ 2,902,237 $ 2,871,830 $ 2,726,752
=============== =============== ===============
Portfolio turnover 207.94% 234.92% 258.01%
=============== =============== ===============
++ Commencement of operations.
++++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements Master Bond Portfolio
1. Significant Accounting Policies:
On September 29, 2006, Master Core Bond Portfolio was renamed Master Bond
Portfolio (the "Master Portfolio"), which is part of Master Bond Trust (the
"Trust"). The Master Portfolio is registered under the Investment Company Act
of 1940, as amended, and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests
in the Master Portfolio, subject to certain limitations. The Master
Portfolio'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 following is a summary of significant accounting policies
followed by the Master Portfolio.
(a) Valuation of investments--Debt securities are traded primarily in the over-
the-counter ("OTC") markets and are valued at the last available bid price in
the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Trust under the general
direction of the Board of Trustees. Such valuations and procedures will be
reviewed periodically by the Board of Trustees of the Trust. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their closing prices as of the close of such exchanges. 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 OTC market, valuation is the
last asked price (options written) or the last bid price (options purchased).
Swap agreements are valued based upon quoted fair valuations received daily by
the Master Portfolio from a pricing service or counterparty. Short-term
investments with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Valuation of other short-term investment
vehicles is generally based on the net asset value of the underlying
investment vehicle or amortized cost. Repurchase agreements are valued at
cost plus accrued interest. Investments in open-end investment companies are
valued at their net asset value each business day. Securities and other 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 Trustees
of the Trust.
Equity securities that are held by the Master Portfolio, which are traded on
stock exchanges or the Nasdaq National 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 Trustees of the
Trust. Long positions traded in the OTC market, Nasdaq Small Cap or Bulletin
Board are valued at the last available bid price obtained from one or more
dealers or pricing services approved by the Board of Trustees of the Trust.
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.
Generally, trading in foreign securities 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 assets of
the Master Portfolio are determined as of such times. Foreign currency
exchange rates also are generally determined prior to the close of business on
the NYSE. As of October 2, 2006, foreign currency exchange rates will 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 Master Portfolio's
net assets. 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 may be valued
at their fair value as determined in good faith by the Trust's Board of
Trustees or by the Investment Adviser using a pricing service and/or
procedures approved by the Trust's Board of Trustees.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) Master Bond Portfolio
(b) Derivative financial instruments--The Master Portfolio may engage in
various portfolio investment strategies both to increase the return of the
Master Portfolio 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 or if the counterparty does not perform
under the contract.
* Financial futures contracts--The Master Portfolio may purchase or sell
financial futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon entering into
a contract, the Master Portfolio deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Master Portfolio agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin
and are recorded by the Master Portfolio as unrealized gains or losses. When
the contract is closed, the Master Portfolio records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
* Options--The Master Portfolio may purchase and write call and put options.
When the Master Portfolio writes an option, an amount equal to the premium
received by the Master Portfolio 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 Master Portfolio enters into a closing
transaction), the Master Portfolio realizes a gain or loss on the option to
the extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or
received).
Written and purchased options are non-income producing investments.
* Forward foreign exchange contracts--The Master Portfolio may enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. The contract is marked-to-market daily
and the change in market value is recorded by the Master Portfolio as an
unrealized gain or loss. When the contract is closed, the Master Portfolio
records a realized gain or loss equal to the difference between the value at
the time it was opened and the value at the time it was closed.
* Foreign currency options and futures--The Master Portfolio may also purchase
or sell listed or OTC foreign currency options, foreign currency futures and
related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-U.S. dollar-denominated securities
owned by the Master Portfolio, sold by the Master Portfolio but not yet
delivered, or committed or anticipated to be purchased by the Master
Portfolio.
* Swaps--The Master Portfolio may enter into swap agreements, which are OTC
contracts in which the Master Portfolio 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 predetermined 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 Master Portfolio are recorded in the accompanying
Statement of Operations as realized gains or losses, respectively. Gains or
losses are also 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.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) Master Bond Portfolio
(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 Master Portfolio 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--The Master Portfolio is classified as a partnership for
federal income tax purposes. As such, each investor in the Master Portfolio is
treated as owner of its proportionate share of the net assets, income,
expenses and realized and unrealized gains and losses of the Master Portfolio.
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. It is intended that the Master Portfolio's
assets will be managed so an investor in the Master Portfolio can satisfy the
requirements of Subchapter M of the Internal Revenue Code.
(e) Recent accounting pronouncement--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"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 fiscal years beginning after December 15,
2006. The impact on the Master Portfolio's financial statements, if any, is
currently being assessed.
(f) Security transactions and investment income--Security transactions are
accounted for on the date the securities are purchased or sold (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 Master Portfolio has determined the
ex-dividend date. Interest income is recognized on the accrual basis.
(g) Securities lending--The Master Portfolio 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 Master Portfolio and any additional required collateral is
delivered to the Master Portfolio on the next business day. Where the Master
Portfolio receives securities as collateral for the loaned securities, it
collects a fee from the borrower. The Master Portfolio typically receives the
income on the loaned securities but does not receive the income on the
collateral. Where the Master Portfolio 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 Master Portfolio may pay reasonable finder's,
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 Master Portfolio
could experience delays and costs in gaining access to the collateral. The
Master Portfolio 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.
(h) Short sales--When the Master Portfolio engages in a short sale, an amount
equal to the proceeds received by the Master Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the market value of the short sale. The Master
Portfolio maintains a segregated account of securities as collateral for the
short sales. The Master Portfolio is exposed to market risk based on the
amount, if any, that the market value of the security exceeds the market value
of the securities in the segregated account. The Master Portfolio is required
to repay the counterparty any dividends or interest received on the security
sold short.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) Master Bond Portfolio
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust, on behalf of the Master Portfolio, has entered into an Investment
Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general
partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
FAM is responsible for the management of the Master Portfolio's investments
and provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Master Portfolio. For such
services, the Master Portfolio pays a monthly fee with respect to the Master
Portfolio based upon the aggregate average daily value of the Master
Portfolio's net assets and BlackRock Bond Fund, Inc. (the "Fund") (formerly
Merrill Lynch Bond Fund, Inc.), BlackRock High Income and BlackRock
Intermediate Term Funds' (formerly High Income and Intermediate Portfolios,
respectively) net assets at an annual rate of .20% of the average daily net
assets not exceeding $250 million; .15% of average daily net assets in excess
of $250 million but less than $500 million; .10% of average daily net assets
in excess of $500 million but less than $750 million and .05% in excess of
$750 million. For the year ended September 30, 2006, the aggregate average
daily net assets of the Master Portfolio, including the Fund's High Income
Fund and Intermediate Term Fund, was approximately $4,670,883,000. FAM has
entered into a Sub-Advisory Agreement with Merrill Lynch Asset Management U.K.
Limited ("MLAM U.K."), an affiliate of FAM, pursuant to which MLAM U.K.
provides investment advisory services to MLIM with respect to the Master
Portfolio. There is no increase in the aggregate fees paid by the Master
Portfolio for these services.
The Master Portfolio has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or
its affiliates. As of September 30, 2006, the Master Portfolio lent securities
with a value of $91,721,300 to MLPF&S or its affiliates. Pursuant to that
order, the Master Portfolio also has retained Merrill Lynch Investment
Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending
agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Master Portfolio, invest cash
collateral received by the Trust for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM"), an
affiliate of FAM. For the year ended September 30, 2006, MLIM, LLC received
$317,937 in securities lending agent fees.
In addition, MLPF&S received $489 in commissions on the execution of portfolio
security transactions for the Master Portfolio for the year ended September
30, 2006.
For the year ended September 30, 2006, the Master Portfolio reimbursed FAM
$64,595 for certain accounting services.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction closed on
September 29, 2006.
On August 15, 2006, the shareholders of the investors of the Master Portfolio
approved a new Investment Advisory Agreement with BlackRock Advisors, Inc.,
(the "Manager") a wholly owned subsidiary of BlackRock, Inc. BlackRock
Advisors, Inc. was reorganized into BlackRock Advisors, LLC. The new advisory
agreement became effective on September 29, 2006 and the investment advisory
fee is unchanged. In addition, the Manager has entered into a sub-advisory
agreement with BlackRock Financial Management, Inc., an affiliate, under which
the Manager pays the Sub-Adviser for services it provides a fee equal to 59%
of the management fee paid to the Manager.
In connection with the closing, MLIM, LLC, the security lending agent, will
become BlackRock Investment Managers, LLC.
Prior to the closing, certain officers and/or trustees of the Trust are
officers and/or directors of FAM, PSI, MLAM U.K., ML & Co., MLIM, and/or MLIM,
LLC.
Commencing September 29, 2006, certain officers and/or trustees of the Trust
are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the year ended September 30, 2006 were $5,381,237,325 and
$5,527,724,533, respectively.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (concluded) Master Bond Portfolio
Transactions in call options written for the year ended September 30, 2006
were as follows:
Number of Premiums
Contracts* Received
Outstanding call options
written, beginning of year 2,872 $ 746,399
Options written -- --
Options closed (329) (398,300)
Options expired (2,543) (348,099)
--------------- ---------------
Outstanding call options
written, end of year -- $ --
=============== ===============
* Some contracts include a notional amount of $1,000,000.
Transactions in put options written for the year ended September 30, 2006
were as follows:
Number of Premiums
Contracts* Received
Outstanding put options
written, beginning of year 329 $ 992,250
Options written 2,720 2,407,271
Options closed (1,738) (2,871,280)
Options expired -- --
--------------- ---------------
Outstanding put options
written, end of year 1,311 $ 528,241
=============== ===============
* Some contracts include a notional amount of $1,000,000.
4. Short-Term Borrowings:
The Master Portfolio, along with certain other funds managed by FAM and its
affiliates, is a party to a $500,000,000 credit agreement with a group of
lenders, which expires November 26, 2006. The Master Portfolio may borrow
under the credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Master Portfolio may borrow up to
the maximum amount allowable under the Master Portfolio's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Master Portfolio pays a commitment fee
of .07% per annum based on the Master Portfolio'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 Master Portfolio's election, the
federal funds rate plus .50% or a base rate as defined in the credit
agreement. The Master Portfolio did not borrow under the credit agreement
during the year ended September 30, 2006.
5. Acquisition of BlackRock Intermediate Term Fund of BlackRock Bond Fund,
Inc.:
On October 16, 2006, an investor of the Master Portfolio acquired all of the
net assets of BlackRock Intermediate Term Fund of BlackRock Bond Fund, Inc.
pursuant to a plan of reorganization. As a result of the reorganization the
Master Portfolio received an in-kind contribution of portfolio securities.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Report of Independent Registered Public Accounting Firm Master Bond Portfolio
To the Investors and Board of Trustees of
Master Bond Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Master Bond Portfolio, formerly
Master Core Bond Portfolio, of Master Bond Trust (the "Trust") as of September
30, 2006 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 the respective periods then ended.
These financial statements and financial highlights are the responsibility of
the Trust'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 Trust 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
Trust'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, 2006
by correspondence with the custodian and brokers; where replies were not
received, we performed other auditing procedures. 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
Master Bond Portfolio of Master Bond Trust as of September 30, 2006, 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 the respective periods then ended, in conformity with U.S.
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 2006
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement--Matters Considered by the Boards
BlackRock Bond Fund (the "Fund") of BlackRock Bond Fund, Inc. is a "feeder"
fund that invests all its assets in Master Bond Portfolio of Master Bond Trust
(the "Trust"), which has the same investment objectives and strategies as the
Fund. All investments are made at the Trust level.
In connection with the combination of Merrill Lynch's investment advisory
business, including Fund Asset Management, L.P. (the "Previous Investment
Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a new
independent company ("New BlackRock") (the "Transaction"), the Board of
Trustees of the Trust considered and approved a new investment advisory
agreement between the Master Bond Trust, on behalf of the Master Bond
Portfolio, and BlackRock Advisors, LLC ("BlackRock Advisors"). The Fund's
shareholders subsequently approved the Trust's BlackRock investment advisory
agreement and it became effective on September 29, 2006, replacing the
investment advisory agreement with the Previous Investment Adviser.
In addition, in connection with the Transaction, the Board of Directors of the
Fund considered and approved a new investment advisory agreement between
BlackRock Bond Fund, Inc., on behalf of the Fund, and BlackRock Advisors
(together with the new advisory agreement for the Trust, the "BlackRock
Investment Advisory Agreements"). The Fund's shareholders subsequently
approved the Fund's BlackRock Investment Advisory Agreement and it became
effective on September 29, 2006, replacing the investment advisory agreement
with the Previous Investment Adviser (together with the Trust's investment
advisory agreement with the Previous Investment Adviser, the "Previous
Investment Advisory Agreements").
Each Board discussed the respective BlackRock Investment Advisory Agreement at
telephonic and in-person meetings held during April and May 2006. Each Board,
including the independent directors/trustees, approved the respective
BlackRock Investment Advisory Agreement at an in-person meeting held on May
12, 2006. The Fund's Board also approved the issuance of new classes of shares
and new distribution arrangements with respect to these new share classes,
including higher distribution fees for certain new share classes, to take
effect after the closing of the Transaction. The Fund's Board also approved
revised front-end sales charge schedules with respect to certain classes of
shares of the Fund.
To assist each Board in its consideration of the respective BlackRock
Investment Advisory Agreement, BlackRock provided materials and information
about BlackRock, including its financial condition and asset management
capabilities and organization, and Merrill Lynch provided materials and
information about the Transaction. The independent directors/trustees, through
their independent legal counsel, also requested and received additional
information from Merrill Lynch and BlackRock in connection with their
consideration of the respective BlackRock Investment Advisory Agreement. The
additional information was provided in advance of the May 12, 2006 meetings.
In addition, the independent directors consulted with their counsel and
counsel for the Fund and the Trust on numerous occasions, discussing, among
other things, the legal standards and certain other considerations relevant to
each Board's deliberations.
At each Board meeting, the directors/trustees discussed with Merrill Lynch
management and certain BlackRock representatives the Transaction, its
strategic rationale and BlackRock's general plans and intentions regarding the
Fund and the Trust. At these Board meetings, representatives of Merrill Lynch
and BlackRock made presentations to and responded to questions from each
Board. Each Board also inquired about the plans for and anticipated roles and
responsibilities of certain employees and officers of the Previous Investment
Adviser, and of its affiliates, to be transferred to BlackRock in connection
with the Transaction. The independent directors/trustees also conferred
separately and with their counsel about the Transaction, including a proposed
reorganization in which the Fund would acquire the assets and the liabilities
of the BlackRock Intermediate Term Portfolio of BlackRock Bond Fund, Inc., and
other matters related to the Transaction on a number of occasions, including
in connection with the April and May 2006 meetings. After the presentations
and after reviewing the written materials provided, the independent directors/
trustees met in executive sessions with their counsel to consider the BlackRock
Investment Advisory Agreements.
In connection with each Board's review of the respective BlackRock Investment
Advisory Agreement, Merrill Lynch and/or BlackRock advised the Boards about a
variety of matters. The advice included the following, among other matters:
* that there was not expected to be any diminution in the nature, quality and
extent of services provided to the Fund and the Trust and their shareholders
by BlackRock Advisors, including compliance services;
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
* that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented professionals;
* that the Fund and the Trust were expected to benefit from having access to
BlackRock's state of the art technology and risk management analytic tools,
including investment tools, provided under the BlackRock Solutions (R) brand
name;
* that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so in the future, it would seek the approval of
each Board before making any changes;
* that BlackRock and Merrill Lynch would enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill Lynch-
affiliated broker-dealers would continue to offer the Fund as an investment
product;
* that BlackRock Advisors would have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as was
currently being provided to the Previous Investment Adviser and that other
arrangements between the Previous Investment Adviser and Merrill Lynch
sales channels would be preserved;
* that the Fund would have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
* that in connection with the Transaction, Merrill Lynch and BlackRock had
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in compliance
with the conditions of Section 15(f) of the Investment Company Act of 1940
(the "1940 Act") in relation to any public funds advised by BlackRock or
the Previous Investment Adviser (or affiliates), respectively; and
* that, Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they had a financial interest in the
matters being considered that was different from that of Fund or Trust
shareholders.
Each Board considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
* the potential benefits to Fund and Trust shareholders from being part of a
combined fund family with BlackRock-sponsored funds, including possible
economies of scale and access to investment opportunities;
* the potential for expanding distribution of Fund shares through improved
access to third party distribution;
* the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength and
resources of New BlackRock;
* the compliance policies and procedures of BlackRock Advisors;
* the terms and conditions of the BlackRock Investment Advisory Agreements,
including the fact that the schedule of the Fund's/Trust's total advisory
fees would not increase under the BlackRock Investment Advisory Agreements,
but would remain the same;
* that in February 2006, each Board had performed a full annual review of
each respective Previous Investment Advisory Agreement, as required by the
1940 Act, and had determined that the Previous Investment Adviser had the
capabilities, resources and personnel necessary to provide the advisory and
administrative services that were then being provided to the Fund/Trust;
and that the advisory and/or management fees paid by the Fund/Trust, taking
into account any applicable agreed-upon fee waivers and breakpoints, had
represented reasonable compensation to the Previous Investment Adviser in
light of the services provided, the costs to the Previous Investment
Adviser of providing those services, economies of scale, the fees and other
expenses paid by similar funds (including information provided by Lipper
Inc. ["Lipper"]), and such other matters as the directors/trustees had
considered relevant in the exercise of their reasonable judgment; and
* that Merrill Lynch had agreed to pay all expenses of the Fund and Trust in
connection with the Board's consideration of the BlackRock Investment
Advisory Agreements and related agreements and all costs of shareholder
approval of the BlackRock Investment Advisory Agreements and as a result
the Fund and the Trust would bear no costs in obtaining shareholder
approval of the BlackRock Investment Advisory Agreements.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement (continued)
Certain of these considerations are discussed in more detail below.
In its review of the respective BlackRock Investment Advisory Agreements, each
Board assessed the nature, quality and scope of the services to be provided to
the Fund and the Trust by the personnel of BlackRock Advisors and its
affiliates, including administrative services, shareholder services, oversight
of fund accounting, marketing services and assistance in meeting legal and
regulatory requirements. In its review of the respective BlackRock Investment
Advisory Agreement, each Board also considered a range of information in
connection with its oversight of the services to be provided by BlackRock
Advisors and its affiliates. Among the matters considered were: (a) fees (in
addition to management fees) to be paid to BlackRock Advisors and its
affiliates by the Fund and the Trust; (b) Fund and Trust operating expenses
paid to third parties; (c) the resources devoted to and compliance reports
relating to the Fund's and the Trust's investment objective, policies and
restrictions, and their compliance with their Code of Ethics and BlackRock
Advisors' compliance policies and procedures; and (d) the nature, cost and
character of non-investment management services to be provided by BlackRock
Advisors and its affiliates.
In the period prior to the Board meetings to consider renewal of the Previous
Investment Advisory Agreements, each Board had requested and received
materials specifically relating to the Previous Investment Advisory
Agreements. These materials included (a) information compiled by Lipper on the
fees and expenses and the investment performance of the Fund as compared to a
comparable group of funds as classified by Lipper; (b) a discussion by the
Fund's/Trust's portfolio management team on investment strategies used by the
Fund/Trust during its most recent fiscal year; (c) information on the
profitability to the Previous Investment Adviser of the Previous Investment
Advisory Agreements and other payments received by the Previous Investment
Adviser and its affiliates from the Fund and the Trust; and (d) information
provided by the Previous Investment Adviser concerning services related to the
valuation and pricing of the Trust's portfolio holdings, allocation of Trust
brokerage fees, the Trust's portfolio turnover statistics, and direct and
indirect benefits to the Previous Investment Adviser and its affiliates from
their relationship with the Fund and the Trust.
In its deliberations, each Board considered information received in connection
with its most recent approval of the continuance of the respective Previous
Investment Advisory Agreement, in addition to information provided by BlackRock
and BlackRock Advisors in connection with their evaluation of the terms and
conditions of the BlackRock Investment Advisory Agreements. The directors/
trustees did not identify any particular information that was all-important
or controlling, and each director/trustee attributed different weights to the
various factors. The directors/trustees made their determinations separately
in respect of the Fund and the Trust. Each Board, including a majority of the
Board's independent directors/trustees, concluded that the terms of the
respective BlackRock Investment Advisory Agreement are appropriate, that the
fees to be paid are reasonable in light of the services to be provided to the
Fund/Trust, and that the BlackRock Investment Advisory Agreement should be
approved and recommended to Fund/Trust shareholders.
Nature, Quality and Extent of Services Provided--Each Board reviewed the
nature, quality and extent of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund and the Trust, as well as the nature, quality and
extent of services expected to be provided by BlackRock Advisors. Each Board
focused primarily on the Previous Investment Adviser's investment advisory
services and the investment performance of the Fund and the Trust, but also
considered certain areas in which both the Previous Investment Adviser and the
Fund/Trust received services as part of the Merrill Lynch complex. Each Board
compared the Fund's performance - both including and excluding the effects of
fees and expenses - to the performance of a comparable group of mutual funds,
and the performance of a relevant index or combination of indexes. While each
Board reviews performance data at least quarterly, consistent with the
Previous Investment Adviser's investment goals, the Board attaches more
importance to performance over relatively long periods of time, typically
three to five years.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the BlackRock Investment Advisory Agreements, each
Board considered, among other things, the expected impact of the Transaction
on the operations, facilities, organization and personnel of New BlackRock and
how it would affect the Fund and the Trust; the ability of BlackRock Advisors
to perform its duties after the Transaction; and any anticipated changes to
the investment and other practices of the Fund or the Trust. The directors/
trustees considered the fact that it was being proposed that the Fund acquire
the assets and liabilities of the BlackRock Intermediate Term Portfolio of
BlackRock Bond Fund, Inc., as part of a reorganization.
Each Board was given information with respect to the potential benefits to the
Fund and the Trust and their shareholders from having access to BlackRock's
state of the art technology and risk management analytic tools, including the
investment tools provided under the BlackRock Solutions brand name.
Each Board was advised that, as a result of Merrill Lynch's equity interest in
BlackRock after the Transaction, the Fund and the Trust would continue to be
subject to restrictions concerning certain transactions involving Merrill
Lynch affiliates (for example, transactions with a Merrill Lynch broker-dealer
acting as principal) absent revised or new regulatory relief. Each Board was
advised that a revision of existing regulatory relief with respect to these
restrictions was being sought from the Securities and Exchange Commission and
was advised of the possibility of receipt of such revised regulatory relief.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the directors/
trustees determined that the nature and quality of services to be provided to
the Fund/Trust under the BlackRock Investment Advisory Agreements were
expected to be as good as or better than that provided under the Previous
Investment Advisory Agreements. It was noted, however, that changes in
personnel were expected to follow the Transaction and the combination of the
operations of the Previous Investment Adviser and its affiliates with those of
BlackRock. The directors/trustees noted that if portfolio managers or other
personnel were to cease to be available prior to the closing of the
Transaction, each Board would consider all available options, including
seeking the investment advisory or other services of BlackRock affiliates.
Accordingly, each Board concluded that, overall, the Board was satisfied at
the present time with assurances from BlackRock and BlackRock Advisors as to
the expected nature, quality and extent of the services to be provided to the
Fund/Trust under the BlackRock Investment Advisory Agreements.
Costs of Services Provided and Profitability--It was noted that, in
conjunction with its recent review of the respective Previous Investment
Advisory Agreement, each Board had received, among other things, a report from
Lipper comparing the Fund's fees and expenses to those of a peer group
selected by Lipper, and information as to the fees charged by the Previous
Investment Adviser or its affiliates to other registered investment company
clients for investment management services. Each Board reviewed the
Fund's/Trust's contractual management fee rate and actual management fee rate
as a percentage of total assets at common asset levels - the actual rate
includes advisory fees and the effects of any fee waivers - compared to the
other funds in the Fund's Lipper category. Each Board also compared the
Fund's/Trust's total expenses to those of other comparable funds. The
information showed that the Fund/Trust had fees and expenses within the range
of fees and expenses of comparable funds. Each Board considered the services
to be provided by and the fees to be charged by BlackRock Advisors to other
funds with similar investment mandates and noted that the fees charged by
BlackRock Advisors in those cases, including fee waivers and expense
reimbursements, were generally comparable to those being charged to the
Fund/Trust. The Boards also noted that, as a general matter, according to the
information provided by BlackRock, fees charged to institutional clients were
lower than the fees charged to the Fund, but BlackRock Advisors provided less
extensive services to such clients. Each Board concluded that the
Fund's/Trust's management fee and fee rate and overall expense ratio are
reasonable compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the BlackRock Investment Advisory Agreements, each Board considered,
among other things, whether advisory fees or other expenses would change as a
result of the Transaction. Based on their review of the materials provided and
the fact that each BlackRock Investment Advisory Agreement is substantially
similar to the respective Previous Investment Advisory Agreement in all
material respects, including the rate of compensation, each Board determined
that the Transaction should not increase the total fees payable, including any
fee waivers and expense reimbursements, for advisory and administrative
services. Each Board noted that it was not possible to predict how the
Transaction would affect BlackRock Advisors' profitability from its
relationship with the Fund and the Trust.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement (concluded)
Each Board discussed with BlackRock Advisors its general methodology to be
used in determining New BlackRock's profitability with respect to its
relationship with the Fund and the Trust. The directors/trustees noted that
they expect to receive profitability information from BlackRock Advisors on at
least an annual basis and thus be in a position to evaluate whether any
adjustments in the Fund's/Trust's fees and/or fee breakpoints would be
appropriate.
Fees and Economies of Scale--Each Board considered the extent to which
economies of scale might be realized as the assets of the Fund and the Trust
increase and whether there should be changes in the management fee rate or
structure in order to enable the Fund and the Trust to participate in these
economies of scale. Each Board determined that changes were not currently
necessary.
In reviewing the Transaction, each Board considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the BlackRock Investment Advisory
Agreements are substantially similar to the Previous Investment Advisory
Agreements in all material respects, including the rates of compensation, each
Board determined that as a result of the Transaction, the Fund's/Trust's total
advisory fees would be no higher than the fees under the Previous Investment
Advisory Agreements. Each Board noted that in conjunction with the most recent
deliberations concerning the Previous Investment Advisory Agreements, the
directors/trustees had determined that the total fees for advisory and
administrative services for the Fund and the Trust were reasonable in light of
the services provided. It was noted that in conjunction with the recent review
of the Previous Investment Advisory Agreements, the Boards had received, among
other things, a report from Lipper comparing the Fund's/Trust's fees, expenses
and performance to those of a peer group selected by Lipper, and information
as to the fees charged by the Previous Investment Adviser to other registered
investment company clients for investment management services. Each Board
concluded that because the rates for advisory fees for the Fund/Trust would be
no higher than the fee rates in effect at the time, the proposed management
fee structures, including any fee waivers, were reasonable and that no
additional changes were currently necessary.
Fall-Out Benefits--In evaluating the fall-out benefits to be received by
BlackRock Advisors under the BlackRock Investment Advisory Agreements, each
Board considered whether BlackRock Advisors would experience such benefits to
the same extent that the Previous Investment Adviser was experiencing such
benefits under the Previous Investment Advisory Agreements. Based on their
review of the materials provided, including materials received in connection
with their most recent approval of the continuance of the Previous Investment
Advisory Agreements, and their discussions with management of the Previous
Investment Adviser and BlackRock, the directors/trustees determined that
BlackRock Advisors' fall-out benefits could include increased ability for
BlackRock to distribute shares of its funds and other investment products and
to obtain research services using the Trust's portfolio transaction brokerage
commissions. Each Board noted that fall-out benefits were difficult to
quantify with certainty at this time, and indicated that the Board would
continue to evaluate them going forward.
Investment Performance--Each Board considered investment performance for the
Fund and the Trust. Each Board compared the Fund's/Trust's performance - both
including and excluding the effects of fees and expenses - to the performance
of a comparable group of mutual funds, and the performance of a relevant index
or combination of indexes. The comparative information received from Lipper
showed Fund performance at various levels within the range of performance of
comparable funds over different time periods. While each Board reviews
performance data at least quarterly, consistent with the Previous Investment
Adviser's investment goals, the Board attaches more importance over relatively
long periods of time, typically three to five years. Each Board believed the
Fund's performance was satisfactory. Also, each Board took into account the
investment performance of funds advised by BlackRock Advisors. Each Board
considered comparative information from Lipper which showed that the
performance of the funds advised by BlackRock Advisors was within the range of
performance of comparable funds over different time periods. Each Board noted
BlackRock's considerable investment management experience and capabilities,
but was unable to predict what effect, if any, consummation of the Transaction
would have on the future performance of the Fund.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Conclusion--After the independent directors of the Fund and the independent
trustees of the Trust deliberated in executive session, each entire Board,
including the independent directors/trustees, approved the respective
BlackRock Investment Advisory Agreement, concluding that the advisory fee rate
was reasonable in relation to the services provided and that the BlackRock
Investment Advisory Agreement was in the best interests of the Fund's/Trust's
shareholders. In approving the respective BlackRock Investment Advisory
Agreement, each Board noted that it anticipated reviewing the continuance of
the agreement in advance of the expiration of the initial two-year period.
New BlackRock Sub-Advisory Agreement--Matters Considered by the Boards
At an in-person meeting held on August 14-16, 2006, the Board of Directors of
the Fund, including the independent directors, and the Board of Trustees of
the Trust, including the independent trustees, discussed and approved the
respective sub-advisory agreement (each, a "BlackRock Sub-Advisory Agreement"
and, together, the "BlackRock Sub-Advisory Agreements") between BlackRock
Advisors and its affiliate, BlackRock Financial Management, Inc. (the "Sub-
Adviser") for each of the Fund and the Trust. The BlackRock Sub-Advisory
Agreements became effective on September 29, 2006, at the same time the
BlackRock Investment Advisory Agreements became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 59% of the advisory fee received
by BlackRock Advisors from the Fund and the Trust. BlackRock Advisors pays the
Sub-Adviser out of its own resources, and there is no increase in Fund or
Trust expenses as a result of the BlackRock Sub-Advisory Agreements.
In approving each respective BlackRock Sub-Advisory Agreement at the August in-
person meeting, each Board reviewed its considerations in connection with its
approval of the BlackRock Investment Advisory Agreements in May 2006. The
Boards relied on the same information and considered the same factors as those
discussed above in connection with the approval of the BlackRock Investment
Advisory Agreements, and came to the same conclusions. In reviewing the sub-
advisory fee rate provided in each BlackRock Sub-Advisory Agreement, each
Board noted the fact that both BlackRock Advisors and the Sub-Adviser have
significant responsibilities under their respective advisory agreements.
BlackRock Advisors remains responsible for oversight of the Fund's and the
Trust's operations and administration, and the Sub-Adviser provides advisory
services to the Fund/Trust and is responsible for the day-to-day management of
the Fund's/Trust's portfolio under the BlackRock Sub-Advisory Agreements. The
Boards also took into account the fact that there is no increase in total
advisory fees paid by the Fund or the Trust as a result of the BlackRock Sub-
Advisory Agreements. Under all of the circumstances, each Board concluded that
it was a reasonable allocation of fees for the Sub-Adviser to receive 59% of
the advisory fee paid to BlackRock Advisors.
After the independent directors of the Fund and the independent trustees of
the Trust deliberated in executive session, each entire Board, including the
independent directors/trustees, approved the respective BlackRock Sub-Advisory
Agreement, concluding that the sub-advisory fee was reasonable in relation to
the services provided and that the BlackRock Sub-Advisory Agreement was in the
best interests of Fund/Trust shareholders.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
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 nonpublic 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 nonpublic 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 nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated 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
nonpublic 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 nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
Officers and Directors/Trustees
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Director
Robert C. Doll, Jr.* President 2005 to Vice Chairman and Director of BlackRock, and 129 Funds None
P.O. Box 9011 and present Global Chief Investment Officer for Equities, 174 Portfolios
Princeton, Director/ Chairman of the BlackRock Private Client
NJ 08543-9011 Trustee Operating Committee, and member of the
Age: 52 BlackRock Executive Committee since 2006;
President of the Funds advised by Merrill Lynch
Investment Managers ("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") since 2001; 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 acts as investment adviser. Mr. Doll is
an "interested person," as described in the Investment Company Act, of the Fund
based on his current and former positions with BlackRock, Inc. and its affiliates.
Directors/Trustees 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/Trustees.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Officers and Directors/Trustees (continued)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Independent Directors/Trustees*
Ronald W. Forbes** Director/ 1981 to Professor Emeritus of Finance, School of 50 Funds None
P.O. Box 9095 Trustee present Business,State University of New York at 52 Portfolios
Princeton, Albany since 2000 and Professor thereof from
NJ 08543-9095 1989 to 2000; International Consultant, Urban
Age: 66 Institute, Washington, D.C. from 1995 to 1999.
Cynthia A. Montgomery Director/ 1994 to Professor, Harvard Business School since 1989; 50 Funds Newell
P.O. Box 9095 Trustee present Associate Professor, J.L. Kellogg Graduate School 52 Portfolios Rubbermaid, Inc.
Princeton, of Management, Northwestern University from (manufacturing)
NJ 08543-9095 1985 to 1989; Associate Professor, Graduate
Age: 54 School of Business Administration, University of
Michigan from 1979 to 1985; Director, Harvard
Business School Publishing since 2005; Director,
McLean Hospital since 2005.
Jean Margo Reid Director/ 2004 to Self-employed consultant since 2001; Counsel 50 Funds None
P.O. Box 9095 Trustee present of Alliance Capital Management (investment 52 Portfolios
Princeton, adviser) in 2000; General Counsel, Director and
NJ 08543-9095 Secretary of Sanford C. Bernstein & Co., Inc.
Age: 61 (investment adviser/broker-dealer) from 1997 to
2000; Secretary, Sanford C. Bernstein Fund, Inc.
from 1994 to 2000; Director and Secretary of
SCB, Inc. since 1998; Director and Secretary of
SCB Partners, Inc. since 2000; and Director of
Covenant House from 2001 to 2004.
Roscoe S. Suddarth Director/ 2000 to President, Middle East Institute, from 1995 to 50 Funds None
P.O. Box 9095 Trustee present 2001; Foreign Service Officer, United States 52 Portfolios
Princeton, Foreign Service, from 1961 to 1995 and Career
NJ 08543-9095 Minister from 1989 to 1995; Deputy Inspector
Age: 71 General, U.S. Department of State, from 1991
to 1994; U.S. Ambassador to the Hashemite
Kingdom of Jordan from 1987 to 1990.
Richard R. West Director/ 1980 to Professor of Finance from 1984 to 1995, Dean 50 Funds Bowne & Co.,
P.O. Box 9095 Trustee present from 1984 to 1993 and since 1995 Dean 52 Portfolios Inc. (financial
Princeton, Emeritus of New York University's Leonard N. printers);
NJ 08543-9095 Stern School of Business Administration. Vornado Realty
Age: 68 Trust (real estate
company);
Alexander's, Inc.
(real estate
company)
Edward D. Zinbarg Director/ 2000 to Self-employed financial consultant since 1994; 50 Funds None
P.O. Box 9095 Trustee present Executive Vice President of the Prudential 52 Portfolios
Princeton, Insurance Company of America from 1988 to
NJ 08543-9095 1994; Former Director of Prudential Reinsurance
Age: 71 Company and former Trustee of the Prudential
Foundation.
* Directors/Trustees 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/Trustees and the Audit Committee.
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Officers and Directors/Trustees (concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 1993 to Managing Director of BlackRock since 2006; Managing Director of MLIM and FAM
P.O. Box 9011 President present from 2006; First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer
Princeton, and and thereof from 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
NJ 08543-9011 Treasurer 1999 to
Age: 46 present
Jeffrey Hiller Fund Chief 2004 to Managing Director of BlackRock and Fund Chief Compliance Officer since 2006; Chief
P.O. Box 9011 Compliance present Compliance Officer of the MLIM/FAM-advised funds and First Vice President and Chief
Princeton, Officer Compliance Officer of MLIM (Americas Region) from 2004 to 2006; Chief Compliance
NJ 08543-9011 Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley
Age: 55 Investment Management from 2002 to 2004; Managing Director and Global Director
of Compliance at Citigroup Asset Management from 2000 to 2002; Chief Compliance
Officer at Soros Fund Management in 2000; Chief Compliance Officer at Prudential
Financial from 1995 to 2000; Senior Counsel in the Securities and Exchange
Commission's Division of Enforcement in Washington, D.C. from 1990 to 1995.
Alice A. Pellegrino Secretary 2004 to Director of BlackRock since 2006; Director (Legal Advisory) of MLIM from 2002 to
P.O. Box 9011 present 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM
Princeton, from 1997 to 2006; Secretary of MLIM, FAM, FAMD and Princeton Services from
NJ 08543-9011 2004 to 2006.
Age: 46
* Officers of the Fund serve at the pleasure of the Board of Directors/Trustees.
Further information about the Fund's Officers and Directors/Trustees is
available in the Fund's Statement of Additional Information, which can be
obtained without charge by calling 1-800-441-7762.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Pre Transaction
(Until September 29, 2006)
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Post Transaction
(After September 29, 2006)
PFPC Inc.
Wilmington, DE 19809
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. 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 adviser. 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) Log into your account
BLACKROCK BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio++
BlackRock Balanced Capital Fund++
BlackRock Basic Value Fund
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 Global Technology Fund
BlackRock Global Value 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 Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Legacy Portfolio
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 U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond 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
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government
Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
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
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio+++
BlackRock NC Municipal MM Portfolio+++
BlackRock NJ Municipal MM Portfolio+++
BlackRock OH Municipal MM Portfolio+++
BlackRock PA Municipal MM Portfolio+++
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio+++
* See the prospectus for information on specific limitations on investments
in the fund.
++ Mixed asset fund.
+++ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock 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 BOND FUND OF BLACKROCK BOND FUND, INC. SEPTEMBER 30, 2006
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of
the end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial
officer and principal accounting officer, or persons performing
similar functions. 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 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: (1)
Ronald W. Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg.
Item 4 - Principal Accountant Fees and Services
BlackRock Bond Fund
(a) Audit Fees - Fiscal Year Ending September 30, 2006 - $6,600
Fiscal Year Ending September 30, 2005 - $6,500
(b) Audit-Related Fees -
Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(c) Tax Fees - Fiscal Year Ending September 30, 2006 - $6,000
Fiscal Year Ending September 30, 2005 - $7,615
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees -
Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
Master Bond Trust
(a) Audit Fees - Fiscal Year Ending September 30, 2006 - $45,500
Fiscal Year Ending September 30, 2005 - $43,000
(b) Audit-Related Fees -
Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(c) Tax Fees - Fiscal Year Ending September 30, 2006 - $ 9,200
Fiscal Year Ending September 30, 2005 - $10,300
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees -
Fiscal Year Ending September 30, 2006 - $0
Fiscal Year Ending September 30, 2005 - $0
(e)(1) 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) 0%
(f) Not Applicable
(g) Fiscal Year Ending September 30, 2006 - $3,050,250
Fiscal Year Ending September 30, 2005 - $6,827,388
(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 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) - $1,739,500 , 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
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 sets 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 certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined
that the registrant's disclosure controls and procedures are
effective based on our evaluation of these controls and procedures
as of a date within 90 days prior to the filing date of this
report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal half-
year of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
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 Bond Fund of BlackRock Bond Fund, Inc. and Master Bond Trust
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Bond Fund of BlackRock Bond Fund, Inc. and Master Bond Trust
Date: November 17, 2006
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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Bond Fund of BlackRock Bond Fund, Inc. and Master Bond Trust
Date: November 17, 2006
By: /s/ Donald C. Burke
-----------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Bond Fund of BlackRock Bond Fund, Inc. and Master Bond Trust
Date: November 17, 2006