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
Name of Fund: Intermediate Term Portfolio of BlackRock Bond Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Intermediate Term Portfolio of BlackRock Bond Fund, Inc., 800
Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box
9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (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 Intermediate Term 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)
It's Fast, Convenient, & Timely!
To sign up today, go to www.blackrock.com/edelivery.
BlackRock Intermediate Term Fund of
BlackRock Bond Fund, Inc.
Portfolio Information as of September 30, 2006
Percent of
Asset Mix Total Investments
Government & Agency Obligations 21.0%
Corporate Bonds 15.6
Asset-Backed Securities 13.6
Government Agency
Mortgage-Backed Securities 12.2
Non-Government Agency
Mortgage-Backed Securities 9.4
Foreign Government Obligations 1.6
Preferred Securities 1.2
Other* 25.4
* Includes portfolio holdings in short-term investments and options.
Quality Ratings by Percent of
S&P/Moody's Total Investments
AAA/Aaa 51.4%
AA/Aa 6.5
A/A 4.6
BBB/Baa 7.0
BB/Ba 0.8
B/B 0.6
N/R (Not Rated) 3.3
Other* 25.8
* Includes portfolio holdings in preferred stocks, short-term
investments and options.
Proxy Results
During the six-month period ended September 30, 2006, BlackRock Intermediate
Term Fund of BlackRock Bond Fund, Inc.'s shareholders voted on the following
proposals. On August 15, 2006 the meeting was adjourned with respect to
Proposals 1 and 3 until August 31, 2006, at which time they passed. 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. 17,281,265 268,036 308,087
3. To approve a contingent subadvisory agreement with
BlackRock Advisors, Inc. 17,255,651 281,050 320,687
BLACKROCK INTERMEDIATE TERM 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 INTERMEDIATE TERM 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 Intermediate Term
Fund of BlackRock Bond Fund, Inc.'s (formerly Intermediate Term 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%, +2.71%, +2.70%, +3.15% and +2.63%,
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 paid off 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 INTERMEDIATE TERM 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 Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A1, Investor B1, Investor C2 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 was reorganized into BlackRock Bond Fund of
BlackRock Bond Fund, Inc.
BLACKROCK INTERMEDIATE TERM 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 1%
and an account maintenance fee of 0.10% per year (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales charge of
1%, declining to 0% after three 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 0.25% 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 0.25% 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.
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* +3.39% +3.13% +71.64% 4.42%
Class B Shares* +3.18 +2.71 +64.70 4.05
Class C Shares* +3.17 +2.70 +64.56 4.04
Class I Shares* +3.35 +3.15 +73.19 4.56
Class R Shares* +3.10 +2.63 +65.63 4.06
Lehman Brothers Aggregate Bond Index** +3.73 +3.67 +86.31 --
* 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.
BLACKROCK INTERMEDIATE TERM 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++++. Values illustrated are as follows:
Class A Shares*++
Date Value
September 1996 $ 9,900.00
September 1997 $10,750.00
September 1998 $11,759.00
September 1999 $11,726.00
September 2000 $12,301.00
September 2001 $13,686.00
September 2002 $14,689.00
September 2003 $15,525.00
September 2004 $16,075.00
September 2005 $16,476.00
September 2006 $16,992.00
Class B Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,813.00
September 1998 $11,780.00
September 1999 $11,698.00
September 2000 $12,221.00
September 2001 $13,541.00
September 2002 $14,485.00
September 2003 $15,234.00
September 2004 $15,709.00
September 2005 $16,035.00
September 2006 $16,470.00
Class C Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,799.00
September 1998 $11,774.00
September 1999 $11,692.00
September 2000 $12,214.00
September 2001 $13,533.00
September 2002 $14,476.00
September 2003 $15,224.00
September 2004 $15,698.00
September 2005 $16,023.00
September 2006 $16,456.00
Class I Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,860.00
September 1998 $11,902.00
September 1999 $11,880.00
September 2000 $12,475.00
September 2001 $13,894.00
September 2002 $14,926.00
September 2003 $15,790.00
September 2004 $16,365.00
September 2005 $16,791.00
September 2006 $17,319.00
Class R Shares*++
Date Value
September 1996 $10,000.00
September 1997 $10,806.00
September 1998 $11,784.00
September 1999 $11,704.00
September 2000 $12,229.00
September 2001 $13,552.00
September 2002 $14,487.00
September 2003 $15,310.00
September 2004 $15,807.00
September 2005 $16,137.00
September 2006 $16,563.00
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
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
++ The Fund invests primarily in bonds rated in the four highest rating
categories (Baa or higher by Moody's Investors Service, Inc. or BBB or
higher by Standard & Poor's Corp.), with an average remaining maturity
of three to ten years, depending on market conditions.
++++ 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.
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% +2.10%
Five Years Ended 9/30/06 +4.42 +4.21
Ten Years Ended 9/30/06 +5.55 +5.44
Return Return
Without CDSC With CDSC++++++
Class B Shares++
One Year Ended 9/30/06 +2.71% +1.73%
Five Years Ended 9/30/06 +3.99 +3.99
Ten Years Ended 9/30/06 +5.12 +5.12
Return Return
Without CDSC With CDSC++++++
Class C Shares++++
One Year Ended 9/30/06 +2.70% +1.72%
Five Years Ended 9/30/06 +3.99 +3.99
Ten Years Ended 9/30/06 +5.11 +5.11
Class I Shares Return
One Year Ended 9/30/06 +3.15%
Five Years Ended 9/30/06 +4.51
Ten Years Ended 9/30/06 +5.65
Class R Shares Return
One Year Ended 9/30/06 +2.63%
Five Years Ended 9/30/06 +4.09
Ten Years Ended 9/30/06 +5.18
* Maximum sales charge is 1%.
** Assuming maximum sales charge.
++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after three 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 INTERMEDIATE TERM 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 $1,033.90 $4.26
Class B $1,000 $1,031.80 $6.33
Class C $1,000 $1,031.70 $6.33
Class I $1,000 $1,033.50 $3.75
Class R $1,000 $1,031.00 $6.28
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,020.71 $4.23
Class B $1,000 $1,018.67 $6.29
Class C $1,000 $1,018.67 $6.29
Class I $1,000 $1,021.21 $3.73
Class R $1,000 $1,018.72 $6.24
* For each class of the Fund, expenses are equal to the expense ratio for the class (.84% for Class A,
1.25% for Class B, 1.25% for Class C, .74% for Class I and 1.24% for Class R), multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most
recent fiscal half year divided by 365.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
ACE Securities Corp. (c):
USD 202,198 Series 2003-OP1 Class A2, 5.69%
due 12/25/2033 $ 202,340
1,550,000 Series 2005-ASP1 Class M1, 6.01%
due 9/25/2035 1,562,275
3,950,000 Series 2005-HE6 Class A2B, 5.53%
due 10/25/2035 3,951,538
78,141 Aegis Asset Backed Securities Trust Series 2004-1
Class A, 5.68% due 4/25/2034 (c) 78,154
700,800 Altius Funding Ltd. Series 2005-2A Class D,
8.071% due 12/05/2040 (c)(h) 700,800
Ameriquest Mortgage Securities, Inc. (c):
1,450,000 Series 2003-7 Class M1, 6.18%
due 8/25/2033 1,463,604
1,250,000 Series 2004-R1 Class M2, 5.91%
due 2/25/2034 1,254,286
514,697 Argent Securities, Inc. Series 2004-W11 Class A3,
5.69% due 11/25/2034 (c) 514,921
Bear Stearns Asset Backed Securities, Inc. (c):
259,788 Series 2004-HE9 Class 1A2, 5.70%
due 3/25/2032 259,898
1,807,530 Series 2005-4 Class A, 5.66% due 1/25/2036 1,808,497
4,000,000 Series 2005-HE10 Class A2, 5.62%
due 8/25/2035 4,010,764
1,550,000 Series 2005-SD1 Class 1A2, 5.63%
due 7/25/2027 1,553,737
400,000 Buckingham CDO Ltd. Series 2005-2A Class E,
8.321% due 4/05/2041 (c)(h) 396,000
Capital Auto Receivables Asset Trust:
171,072 Series 2003-2 Class B, 5.61%
due 1/15/2009 (c) 171,090
700,000 Series 2004-2 Class D, 5.82%
due 5/15/2012 (h) 690,768
Countrywide Asset Backed Certificates (c):
1,300,173 Series 2003-2 Class M1, 6.028%
due 6/26/2033 1,302,130
140,164 Series 2003-BC3 Class A2, 5.64%
due 9/25/2033 140,255
633,819 Series 2004-5 Class A, 5.78%
due 10/25/2034 639,537
1,200,000 Series 2004-5 Class M2, 6%
due 7/25/2034 1,209,533
1,350,000 Series 2004-13 Class AF4, 4.583%
due 1/25/2033 1,330,380
1,350,000 Series 2004-13 Class MF1, 5.071%
due 12/25/2034 1,320,160
1,500,000 Credit-Based Asset Servicing and Securitization
Series 2005-CB2 Class AV2, 5.53%
due 4/25/2036 (c) 1,500,527
Face
Amount Asset-Backed Securities++ Value
USD 750,000 Duke Funding High Grade II-S/EGAM, Ltd.
Series 2006-1A Class D, 8.32%
due 10/04/2050 (c)(h) $ 750,000
2,050,000 Equifirst Mortgage Loan Trust Series 2004-2
Class M1, 5.88% due 7/25/2034 (c) 2,062,981
First Franklin Mortgage Loan Asset-Backed
Certificates (c):
40,444 Series 2003-FF5 Class A2, 6.052%
due 3/25/2034 40,301
1,942,911 Series 2004-FF10 Class A2, 5.73%
due 12/25/2032 1,947,341
3,243,865 Series 2005-FF10 Class A6, 5.68%
due 11/25/2035 3,246,744
Home Equity Asset Trust (c):
1,258,707 Series 2005-1 Class A2, 5.61% due 5/25/2035 1,261,196
848,538 Series 2005-3 Class 1A2, 5.58%
due 8/25/2035 848,925
1,241,403 Irwin Home Equity Series 2005-C Class 1A1,
5.59% due 4/25/2030 (c) 1,241,854
Long Beach Mortgage Loan Trust (c):
245,289 Series 2002-4 Class 2A, 5.79%
due 11/26/2032 245,433
122,515 Series 2004-1 Class A3, 5.63% due 2/25/2034 122,543
Morgan Stanley ABS Capital I, Inc. (c):
789,085 Series 2003-NC5 Class M2, 7.33%
due 4/25/2033 792,648
182,176 Series 2004-NC1 Class A2, 5.70%
due 12/27/2033 182,236
1,623,947 Series 2005-HE1 Class A2MZ, 5.63%
due 12/25/2034 1,627,622
498,478 Series 2005-NC2 Class A1MZ, 5.58%
due 3/25/2035 498,739
508,749 Series 2005-NC2 Class A2MZ, 5.58%
due 3/25/2035 509,015
New Century Home Equity Loan Trust (c):
766,487 Series 2004-3 Class A3, 5.72%
due 11/25/2034 767,147
1,595,174 Series 2005-2 Class A2MZ, 5.59%
due 6/25/2035 1,597,464
Option One Mortgage Loan Trust (c):
451,295 Series 2003-4 Class A2, 5.65%
due 7/25/2033 452,471
500,000 Series 2005-1 Class M5, 6.58%
due 2/25/2035 504,894
Park Place Securities, Inc. Series 2005-WCH1 (c):
679,626 Class A1B, 5.63% due 1/25/2035 680,680
574,712 Class A3D, 5.67% due 1/25/2035 575,650
550,000 Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class M2, 5.507%
due 5/25/2035 539,695
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Asset-Backed Securities++ Value
USD 2,828,332 RAAC Series 2005-SP2 Class 2A, 5.63%
due 6/25/2044 (c) $ 2,831,227
Residential Asset Mortgage Products, Inc. (c):
2,342,723 Series 2004-RS11 Class A2, 5.60%
due 12/25/2033 2,348,067
1,950,000 Series 2005-RS3 Class AI2, 5.50%
due 3/25/2035 1,954,052
598,365 Residential Asset Securities Corp. Series
2003-KS5 Class AIIB, 5.62% due 7/25/2033 (c) 598,616
3,400,000 Soundview Home Equity Loan Trust
Series 2005-OPT3 Class A4, 5.63%
due 11/25/2035 (c) 3,408,674
Structured Asset Investment Loan Trust (c):
2,300,000 Series 2003-BC6 Class M1, 6.08%
due 7/25/2033 2,308,649
2,150,000 Series 2003-BC7 Class M1, 6.08%
due 7/25/2033 2,158,013
840,000 Series 2004-8 Class M4, 6.33%
due 9/25/2034 844,756
771,299 Structured Asset Securities Corp. Series
2004-23XS Class 2A1, 4.55% due 1/25/2035 (c) 773,171
1,169,748 Wells Fargo Home Equity Trust Series 2004-2
Class A32, 5.67% due 2/25/2032 (c) 1,171,771
137,153 Whole Auto Loan Trust Series 2004-1 Class D,
5.60% due 3/15/2011 136,818
Total Asset-Backed Securities
(Cost--$65,093,477)--16.6% 65,090,587
Government & Agency Obligations
Fannie Mae:
7,980,000 4% due 2/28/2007 7,937,746
3,900,000 7.125% due 1/15/2030 4,933,102
2,400,000 Federal Home Loan Bank System, 2.75%
due 11/15/2006 2,392,522
U.S. Treasury Bonds:
500,000 7.50% due 11/15/2016 612,500
310,000 8.125% due 8/15/2019 408,813
1,070,000 7.25% due 8/15/2022 (a) 1,354,302
220,000 6.25% due 8/15/2023 255,424
220,000 6.625% due 2/15/2027 270,531
6,785,000 5.375% due 2/15/2031 7,328,329
3,010,000 4.50% due 2/15/2036 2,884,191
U.S. Treasury Inflation Indexed Bonds:
2,818,666 3.875% due 1/15/2009 2,899,593
2,459,597 3.50% due 1/15/2011 2,576,236
5,114,592 1.625% due 1/15/2015 4,864,857
U.S. Treasury Notes:
24,000,000 4% due 8/31/2007 (f) 23,796,552
1,680,000 4.625% due 2/29/2008 1,675,931
160,000 3.75% due 5/15/2008 157,506
3,595,000 4.50% due 2/15/2009 3,582,220
Face
Amount Government & Agency Obligations Value
U.S. Treasury Notes (concluded):
USD 960,000 4.875% due 5/15/2009 $ 965,550
500,000 4.875% due 8/15/2009 503,399
250,000 3.875% due 5/15/2010 244,111
480,000 3.625% due 6/15/2010 464,606
95,000 4.25% due 10/15/2010 93,820
6,665,000 4.25% due 1/15/2011 (f) 6,574,136
90,000 5% due 2/15/2011 91,593
1,580,000 4.50% due 2/28/2011 1,574,075
4,095,000 4.625% due 8/31/2011 (f) 4,099,480
880,000 3.625% due 5/15/2013 831,463
6,420,000 4.50% due 11/15/2015 (f) 6,357,803
4,850,000 4.50% due 2/15/2016 4,801,311
380,000 5.125% due 5/15/2016 394,191
5,695,000 4.875% due 8/15/2016 (f) 5,802,670
Total Government & Agency Obligations
(Cost--$99,547,346)--25.6% 100,728,563
Government Agency
Mortgage-Backed Securities++
Fannie Mae Guaranteed Pass-Through Certificates:
2,374,609 5.00% due 11/01/2035 2,283,227
9,186,000 5.50% due 10/15/2036 (d) 9,048,210
1,829,142 6.00% due 11/01/2035 - 10/01/2036 1,837,723
809,861 6.50% due 6/01/2032 - 9/01/2036 827,026
Freddie Mac Mortgage Participation Certificates:
18,878,860 5.00% due 10/15/2036 (d) 18,153,194
5,745,203 5.50% due 6/01/2020 - 1/01/2021 5,744,147
18,960,773 5.50% due12/01/2034 - 10/15/2036 (d) 18,698,061
365,747 6.50% due 10/01/2033 373,379
523,349 7.00% due 9/01/2031 - 4/01/2032 539,176
851,329 Ginnie Mae MBS Certificates, 6.50% due
6/15/2031 - 4/15/2032 874,445
Total Government Agency Mortgage-Backed
Securities (Cost--$58,172,136)--14.8% 58,378,588
Non-Government Agency
Mortgage-Backed Securities++
Collateralized Mortgage Obligations--3.8%
Impac Secured Assets CMN Owner Trust (c):
1,265,073 Series 2004-3 Class 1A4, 5.73%
due 11/25/2034 1,268,793
1,650,000 Series 2004-3 Class M1, 5.93%
due 11/25/2034 1,656,081
2,138,704 JPMorgan Mortgage Trust Series 2005-A2
Class 4A1, 5.209% due 4/25/2035 (c) 2,092,262
1,940,964 Morgan Stanley ABS Capital I, Inc.
Series 2006-3AR Class 2A3, 5.907%
due 3/25/2036 (c) 1,958,502
1,686,874 RMAC Plc Series 2003-NS2A Class A2C, 5.79%
due 9/12/2035 (c) 1,690,592
3,198,778 Residential Accredit Loans, Inc. Series 2005-QS12
Class A8, 5.669% due 8/25/2035 (c) 3,200,579
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Face Non-Government Agency
Amount Mortgage-Backed Securities++ Value
Collateralized Mortgage Obligations (concluded)
Structured Asset Securities Corp. (c):
USD 670,785 Series 2005-GEL2 Class A, 5.61%
due 4/25/2035 $ 671,154
1,483,426 Series 2005-OPT1 Class A4M, 5.68%
due 11/25/2035 1,484,193
847,673 Washington Mutual Series 2005-AR2 Class B4,
6.23% due 1/25/2045 (c) 844,891
--------------
14,867,047
Commercial Mortgage-Backed Securities--7.7%
4,500,000 Banc of America Commercial Mortgage, Inc.
Series 2006-2 Class A4, 5.741%
due 5/10/2045 (c) 4,659,216
1,000,000 Bear Stearns Commercial Mortgage Security
Series 2002-FL1A Class D, 5.772%
due 8/03/2014 (c)(h) 1,000,000
4,500,000 Credit Suisse Mortgage Capital Certificates
Series 2006-C3 Class A3, 6.022%
due 6/15/2038 (c) 4,677,779
2,350,000 GS Mortgage Securities Corp. II Series 2006-GG6
Class A2, 5.506% due 4/10/2038 (c) 2,377,969
Greenwich Capital Commercial Funding Corp.
Class A4:
3,400,000 Series 2004-GG1, 4.755% due 6/10/2036 3,361,958
2,800,000 Series 2006-GG7, 6.111% due 7/10/2038 (c) 2,931,543
JPMorgan Chase Commercial Mortgage Securities
Corp. Class A4 (c):
4,900,000 Series 2006-CB15, 5.814%
due 6/12/2043 5,066,482
4,000,000 Series 2006-LDP7, 6.066%
due 4/15/2045 4,178,201
2,150,000 LB-UBS Commercial Mortgage Trust Series
2005-C3 Class A5, 4.739% due 7/15/2030 2,062,781
--------------
30,315,929
Total Non-Government Agency
Mortgage-Backed Securities
(Cost--$44,530,546)--11.5% 45,182,976
Corporate Bonds
Aerospace & Defense--0.8%
1,335,000 Goodrich Corp., 6.29% due 7/01/2016 (h) 1,377,972
525,000 Honeywell International, Inc., 5.70%
due 3/15/2036 527,223
1,130,000 Raytheon Co., 8.30% due 3/01/2010 1,234,595
--------------
3,139,790
Airlines--0.4%
433,691 American Airlines, Inc. Series 2003-1, 3.857%
due 1/09/2012 410,879
475,000 Continental Airlines, Inc. Series 2002-1, 6.563%
due 8/15/2013 494,300
630,000 Southwest Airlines Co., 7.875% due 9/01/2007 642,516
--------------
1,547,695
Face
Amount Corporate Bonds Value
Beverages--0.2%
Anheuser-Busch Cos., Inc.:
USD 265,000 5.95% due 1/15/2033 $ 275,049
445,000 5.75% due 4/01/2036 448,156
--------------
723,205
Capital Markets--1.6%
1,090,000 Credit Suisse First Boston USA, Inc., 4.70%
due 6/01/2009 1,078,254
640,000 FBG Finance Ltd., 5.875% due 6/15/2035 (h) 594,775
Goldman Sachs Group, Inc.:
1,920,000 5.70% due 9/01/2012 1,952,653
1,030,000 5.25% due 10/15/2013 1,016,441
110,000 Mellon Funding Corp., 6.40% due 5/14/2011 114,926
1,030,000 Morgan Stanley, 5.30% due 3/01/2013 1,028,416
400,000 State Street Bank & Trust Co., 5.30%
due 1/15/2016 397,633
--------------
6,183,098
Commercial Banks--0.9%
460,000 Bank One Corp., 8% due 4/29/2027 566,596
970,000 Barclays Bank Plc, 8.55% (c)(g)(h) 1,090,269
690,000 Corporacion Andina de Fomento, 6.875%
due 3/15/2012 735,143
680,000 HSBC Bank USA NA, 5.875% due 11/01/2034 675,798
635,000 Shinsei Finance II (Cayman) Ltd., 7.16% (c)(g)(h) 633,809
--------------
3,701,615
Communications Equipment--0.1%
240,000 Harris Corp., 5% due 10/01/2015 226,212
Construction Materials--0.2%
735,000 Lafarge SA, 6.15% due 7/15/2011 750,780
Consumer Finance--0.4%
890,000 American Express Co., 6.80% due 9/01/2066 (c) 939,614
680,000 HSBC Finance Corp., 6.50% due 11/15/2008 697,069
--------------
1,636,683
Containers & Packaging--0.2%
855,000 Sealed Air Corp., 5.625% due 7/15/2013 (h) 841,285
Diversified Financial Services--3.7%
930,000 Bank of America Corp., 4.875% due 9/15/2012 914,369
Citigroup, Inc.:
1,440,000 5.625% due 8/27/2012 1,466,204
405,000 5.85% due 12/11/2034 408,317
1,230,000 General Electric Capital Corp., 6.75%
due 3/15/2032 1,405,939
JPMorgan Chase & Co.:
960,000 5.75% due 1/02/2013 981,710
770,000 4.75% due 3/01/2015 734,491
425,000 4.891% due 9/01/2015 (c) 417,463
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
Diversified Financial Services (concluded)
Links Finance Corp. (c):
USD 1,000,000 5.64% due 9/15/2010 $ 1,000,750
1,000,000 Series 54, 5.64% due 9/15/2010 1,000,750
1,000,000 Series 55, 5.64% due 9/15/2010 999,003
Sigma Finance Corp. (e):
3,400,000 7.405% due 8/15/2011 3,400,000
1,700,000 5.372% due 3/31/2014 (c) 1,704,670
--------------
14,433,666
Diversified Telecommunication Services--1.1%
485,000 BellSouth Corp., 6% due 11/15/2034 455,252
435,000 Deutsche Telekom International Finance BV,
8.25% due 6/15/2030 531,435
1,010,000 GTE Corp., 6.84% due 4/15/2018 1,068,383
790,000 SBC Communications, Inc., 6.45% due 6/15/2034 793,362
865,000 TELUS Corp., 7.50% due 6/01/2007 876,283
570,000 Telecom Italia Capital SA, 6% due 9/30/2034 509,613
--------------
4,234,328
Electric Utilities--1.1%
835,000 AEP Texas Central Co. Series D, 5.50%
due 2/15/2013 830,387
240,000 Jersey Central Power & Light, 6.40%
due 5/15/2036 (h) 250,943
475,000 Nevada Power Co., 6.65% due 4/01/2036 (h) 490,910
500,000 Progress Energy, Inc., 5.625% due 1/15/2016 499,666
640,000 SPI Electricity & Gas Australia Holdings Pty Ltd.,
6.15% due 11/15/2013 (h) 664,821
650,000 Sierra Pacific Power Co., 6% due 5/15/2016 (h) 651,690
600,000 Southern California Edison Co., 5.625%
due 2/01/2036 582,267
465,000 Westar Energy, Inc., 6% due 7/01/2014 476,713
--------------
4,447,397
Energy Equipment & Services--0.1%
415,000 Weatherford International Ltd., 5.50%
due 2/15/2016 408,714
Food Products--0.2%
645,000 Tyson Foods, Inc., 6.60% due 4/01/2016 664,127
Health Care Providers & Services--0.3%
440,000 UnitedHealth Group, Inc., 5.80% due 3/15/2036 432,062
645,000 WellPoint, Inc., 5.85% due 1/15/2036 625,612
--------------
1,057,674
Hotels, Restaurants & Leisure--0.1%
435,000 Harrah's Operating Co., Inc., 5.625%
due 6/01/2015 404,339
Industrial Conglomerates--0.2%
640,000 Hutchison Whampoa International (03/33) Ltd.,
7.45% due 11/24/2033 (h) 725,386
Face
Amount Corporate Bonds Value
Insurance--0.7%
USD 665,000 American International Group, Inc., 6.25%
due 5/01/2036 $ 698,696
865,000 Fund American Cos., Inc., 5.875% due 5/15/2013 854,986
1,335,000 Montpelier Re Holdings Ltd., 6.125%
due 8/15/2013 1,289,686
--------------
2,843,368
Media--1.0%
865,000 Comcast Corp., 6.50% due 1/15/2017 902,922
460,000 Cox Communications, Inc., 7.125%
due 10/01/2012 490,234
News America, Inc.:
710,000 6.40% due 12/15/2035 696,320
435,000 6.75% due 1/09/2038 450,646
1,355,000 Time Warner Companies, Inc., 9.125%
due 1/15/2013 1,578,823
--------------
4,118,945
Metals & Mining--0.3%
430,000 Alcan, Inc., 5.75% due 6/01/2035 407,474
880,000 Vale Overseas Ltd., 6.25% due 1/11/2016 873,400
--------------
1,280,874
Multi-Utilities--0.3%
390,000 Consolidated Edison Co. of New York, 5.85%
due 3/15/2036 389,658
445,000 Puget Energy, Inc., 5.483% due 6/01/2035 408,218
300,000 Xcel Energy, Inc., 6.50% due 7/01/2036 316,513
--------------
1,114,389
Office Electronics--0.4%
1,385,000 Xerox Corp., 6.40% due 3/15/2016 1,378,075
Oil, Gas & Consumable Fuels--2.1%
490,000 Consolidated Natural Gas Co., 5%
due 12/01/2014 465,287
590,000 Enterprise Products Operating LP Series B, 5.75%
due 3/01/2035 531,541
763,200 Kern River Funding Corp., 4.893%
due 4/30/2018 (h) 739,319
400,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (h) 396,371
810,000 Northwest Pipeline Corp., 7% due 6/15/2016 (h) 828,225
2,500,000 Pemex Project Funding Master Trust, 6.69%
due 6/15/2010 (c)(h) 2,555,000
625,000 Petrol-Canada, 5.95% due 5/15/2035 596,431
505,000 Talisman Energy, Inc., 5.85% due 2/01/2037 470,773
1,665,000 Ultramar Diamond Shamrock Corp., 6.75%
due 10/15/2037 1,800,120
--------------
8,383,067
Pharmaceuticals--0.2%
640,000 Wyeth, 6% due 2/15/2036 647,034
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
Real Estate Investment Trusts (REITs)--0.5%
Developers Diversified Realty Corp.:
USD 410,000 5.375% due 10/15/2012 $ 405,804
300,000 5.50% due 5/01/2015 294,512
550,000 Nationwide Health Properties, Inc., 6.59%
due 7/07/2038 561,173
780,000 Westfield Capital Corp. Ltd., 5.125%
due 11/15/2014 (h) 756,896
--------------
2,018,385
Road & Rail--0.3%
Canadian National Railway Co.:
325,000 6.90% due 7/15/2028 373,444
340,000 6.20% due 6/01/2036 363,346
480,000 Norfolk Southern Corp., 7.05% due 5/01/2037 559,547
--------------
1,296,337
Semiconductors & Semiconductor Equipment--0.7%
2,719,000 International Rectifier Corp., 4.25%
due 7/15/2007 (b) 2,685,013
Software--0.2%
925,000 Oracle Corp. and Ozark Holding, Inc., 5.25%
due 1/15/2016 910,263
Thrifts & Mortgage Finance--0.4%
795,000 Countrywide Financial Corp., 6.25%
due 5/15/2016 806,831
915,000 Washington Mutual Bank, 6.75% due 5/20/2036 982,780
--------------
1,789,611
Wireless Telecommunication Services--0.3%
427,000 AT&T Wireless Services, Inc., 8.75%
due 3/01/2031 545,877
430,000 Sprint Capital Corp., 8.75% due 3/15/2032 524,385
--------------
1,070,262
Total Corporate Bonds
(Cost--$74,783,691)--19.0% 74,661,617
Foreign Government Obligations
EUR 4,500,000 Bundesobligation Series 143, 3.50%
due 10/10/2008 5,694,174
Mexico Government International Bond:
USD 1,330,000 9.875% due 2/01/2010 1,517,530
292,000 6.375% due 1/16/2013 307,038
395,000 5.875% due 1/15/2014 403,888
Total Foreign Government Obligations
(Cost--$7,681,597)--2.0% 7,922,630
Face
Amount Preferred Securities Value
Capital Trusts
Commercial Banks--0.6%
USD 495,000 BAC Capital Trust VI, 5.625% due 3/08/2035 $ 459,021
635,000 MUFG Capital Finance 1 Ltd., 6.346% (c)(g) 640,150
445,000 RBS Capital Trust I, 5.512% (c)(g) 432,387
890,000 USB Capital IX, 6.189% (c)(g) 900,106
--------------
2,431,664
Commercial Services & Supplies--0.1%
445,000 ILFC E-Capital Trust II, 6.25%
due 12/21/2065 (c)(h) 444,855
Electric Utilities--0.1%
420,000 Alabama Power Capital Trust V, 5.50%
due 10/01/2042 (c) 419,095
Oil, Gas & Consumable Fuels--0.2%
500,000 Pemex Project Funding Master Trust, 7.375%
due 12/15/2014 540,500
Total Capital Trusts
(Cost--$3,799,759)--1.0% 3,836,114
Shares
Held Preferred Stocks
Commercial Banks--0.1%
450,000 Barclays Bank Plc, 6.278% 429,908
Thrifts & Mortgage Finance--0.4%
30,400 Fannie Mae, 7.085% (c) 1,609,300
Total Preferred Stocks
(Cost--$2,099,287)--0.5% 2,039,208
Total Preferred Securities
(Cost--$5,899,046)--1.5% 5,875,322
Face
Amount Short-Term Securities
Commercial Paper**--4.8%
USD 19,000,000 UBS Finance (Delaware) LLC, 5.25%
due 10/02/2006 19,000,000
U.S. Government Agency Obligations**--14.4%
4,600,000 Federal Home Loan Bank System, 4.40%
due 10/02/2006 4,600,000
52,256,000 Freddie Mac, 5.143% due 10/24/2006 52,091,762
--------------
56,691,762
Beneficial
Interest
USD 45,997,500 BlackRock Liquidity Series, LLC Money Market
Series, 5.33% (i)(j)(k) 45,997,500
Total Short-Term Securities
(Cost--$121,689,262)--30.9% 121,689,262
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Number of
Contracts Options Purchased Value
Call Options Purchased--0.1%
187 10-Year U.S. Treasury Note, expiring
October 2006 at USD 107 $ 222,062
Total Options Purchased
(Premiums Paid--$94,121)--0.1% 222,062
Total Investments
(Cost--$477,491,222)--122.0% 479,751,607
Number of
Contracts Options Written Value
Put Options Written--0.0%
187 10-Year U.S. Treasury Note, expiring
October 2006 at USD 105 $ (2,922)
Total Options Written
(Premiums Received--$75,348)--(0.0%) (2,922)
Total Investments, Net of Options Written
(Cost--$477,415,874*)--122.0% 479,748,685
Liabilities in Excess of Other Assets--(22.0%) (86,407,122)
--------------
Net Assets--100.0% $ 393,341,563
==============
* 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 $ 478,340,963
================
Gross unrealized appreciation $ 3,852,664
Gross unrealized depreciation (2,444,942)
----------------
Net unrealized appreciation $ 1,407,722
================
** 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 refinancing of the underlying
instruments, the average life may be substantially less than the
original maturity.
(a) All or a portion of security held as collateral in connection with open
financial futures contracts.
(b) Convertible security.
(c) Floating rate security.
(d) All or a portion of security represents or includes a "to-be-announced"
transaction. The Fund has committed to purchasing securities for which all
specific information is not available at this time.
(e) Restricted securities as to resale, representing 1.3% of net assets,
were as follows:
Acquisition
Issue Date Cost Value
Sigma Finance Corp.:
7.405% due 8/15/2011 2/13/2004 $ 3,400,000 $ 3,400,000
5.372% due 3/31/2014 3/26/2004 1,700,000 1,704,670
----------- -----------
Total $ 5,100,000 $ 5,104,670
=========== ===========
(f) Security, or a portion of security, is on loan.
(g) The security is a perpetual bond and has no stated maturity date.
(h) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(i) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investments Company Act of 1940,
were as follows:
Net Interest
Affiliate Activity Income
BlackRock Liquidity Series, LLC
Money Market Series $ 16,381,000 $ 81,108
(j) Security was purchased with cash proceeds from securities loans.
(k) Represents the current yield as of September 30, 2006.
o For Fund compliance purposes, the Fund's industry classifications
refer to any one or more of the industry sub-classifications used by
one or more widely recognized market indexes or ratings group indexes,
and/or as defined by Fund management. This definition may not apply for
purposes of this report, which may combine industry sub-classifications
for reporting ease. Industries are shown as a percentage 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
89 5-Year U.S. December
Treasury Note 2006 $ 9,327,842 $ 63,049
o Financial futures contracts sold as of September 30, 2006 were as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
101 2-Year U.S.
Treasury Note December 2006 $20,589,482 $ (65,018)
285 10-Year U.S.
Treasury Note December 2006 $30,593,048 (204,765)
181 30-Year U.S.
Treasury Bond December 2006 $20,011,356 (334,175)
------------
Total Unrealized Depreciation $ (603,958)
============
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (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 $12,600,000 --
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 $14,975,000 --
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 $13,400,000 --
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 $56,800,000 --
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 $14,200,000 --
Unrealized
Notional Appreciation
Amount (Depreciation)
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 $72,000,000 $ (77,732)
Receive a fixed rate of 4.095%
and pay a floating rate based on
3-month LIBOR
Broker, Citibank N.A.
Expires September 2007 $25,000,000 (280,318)
Sold credit default protection
on Sprint Capital Corp. and
receive 1.50%
Broker, Morgan Stanley
Capital Services, Inc.
Expires September 2008 $ 1,625,000 40,779
Sold credit default protection on
Comcast Cable Communications,
Inc. and receive 1.15%
Broker, Morgan Stanley
Capital Services, Inc.
Expires September 2008 $ 1,625,000 32,205
Receive a fixed rate of 3.401%
and pay 3.875% on Treasury
Inflation Protected Securities (TIPS)
adjusted principal
Broker, JPMorgan Chase Bank
Expires January 2009 $ 2,937,000 (56,342)
Sold credit default protection on
Raytheon Co. and receive 0.73%
Broker, JPMorgan Chase Bank
Expires March 2009 $ 550,000 8,336
Sold credit default protection on
Nextel Communications, Inc.
Class A and receive 1.72%
Broker, JPMorgan Chase Bank
Expires September 2009 $ 1,035,000 41,890
Bought credit default protection on
Valero Energy Corp. and pay 1.03%
Broker, Deutsche Bank AG
Expires June 2010 $ 510,000 (13,229)
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Swaps outstanding as of September 30, 2006 were as follows (continued):
Unrealized
Notional Appreciation
Amount (Depreciation)
Sold credit default protection on
BellSouth Corp. and receive 0.26%
Broker, Lehman Brothers
Special Finance
Expires June 2010 $ 500,000 $ 1,033
Bought credit default protection on
Valero Energy Corp. and pay 1.00%
Broker, Lehman Brothers
Special Finance
Expires June 2010 $ 510,000 (13,229)
Sold credit default protection on
CSX Corp. and receive 0.34%
Broker, JPMorgan Chase Bank
Expires December 2010 $ 1,025,000 5,491
Bought credit default protection on
Sara Lee Corp. and pay 0.57%
Broker, Lehman Brothers
Special Finance
Expires December 2010 $ 1,025,000 (7,820)
Bought credit default protection on
Brunswick Corp. and pay 0.60%
Broker, JPMorgan Chase Bank
Expires December 2010 $ 1,035,000 (407)
Bought credit default protection on
ConAgra Foods, Inc. and pay 0.57%
Broker, Lehman Brothers
Special Finance
Expires December 2010 $ 1,025,000 (14,106)
Bought credit default protection on
HJ Heinz Co. and pay 0.37%
Broker, UBS Warburg
Expires December 2010 $ 1,025,000 (3,136)
Bought credit default protection on
CVS Corp. and pay 0.48%
Broker, Morgan Stanley
Capital Services, Inc.
Expires December 2010 $ 1,035,000 (11,080)
Sold credit default protection on
Goodrich Corp. and receive 0.44%
Broker, UBS Warburg
Expires December 2010 $ 1,025,000 8,270
Unrealized
Notional Appreciation
Amount (Depreciation)
Bought credit default protection on
RadioShack Corp. and pay 1.16%
Broker, UBS Warburg
Expires December 2010 $ 1,035,000 $ (6,246)
Bought credit default protection on
Campbell Soup Co. and pay 0.26%
Broker, UBS Warburg
Expires December 2010 $ 1,025,000 (6,283)
Bought credit default protection on
Kohl's Corp. and pay 0.39%
Broker, Morgan Stanley
Capital Services, Inc.
Expires December 2010 $ 1,035,000 (7,918)
Bought credit default protection on
TJX Cos., Inc. and pay 0.57%
Broker, Morgan Stanley
Capital Services, Inc.
Expires December 2010 $ 1,035,000 (15,436)
Bought credit default protection on
Limited Brands, Inc. and pay 1.065%
Broker, UBS Warburg
Expires December 2010 $ 1,035,000 (23,427)
Sold credit default protection on
Lehman Brothers Holdings, Inc.
and receive 0.271%
Broker, UBS Warburg
Expires December 2010 $ 1,025,000 3,570
Sold credit default protection on
Dow Jones CDX North America
Investment Grade Index Series 5
and receive 0.45%
Broker, Deutsche Bank AG
Expires December 2010 $ 4,925,000 19,021
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 $ 5,175,000 22,238
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (continued) (in U.S. dollars)
Swaps outstanding as of September 30, 2006 were as follows (continued):
Unrealized
Notional Appreciation
Amount (Depreciation)
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 $ 2,525,000 $ (120,786)
Bought credit default protection on
Kohl's Corp. and pay 0.43%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 995,000 (8,910)
Bought credit default protection on
Campbell Soup Co. and pay 0.25%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 995,000 (5,667)
Bought credit default protection on
Sara Lee Corp. and pay 0.604%
Broker, JPMorgan Chase Bank
Expires March 2011 $ 995,000 (8,065)
Bought credit default protection on
Limited Brands, Inc. and pay 0.73%
Broker, Lehman Brothers
Special Finance
Expires March 2011 $ 995,000 (8,338)
Sold credit default protection on
Federated Department Stores, Inc.
and receive 0.38%
Broker, JPMorgan Chase Bank
Expires March 2011 $ 985,000 (4,278)
Bought credit default protection on
Tyson Foods, Inc. and pay 1.185%
Broker, JPMorgan Chase Bank
Expires June 2011 $ 1,055,000 (4,482)
Bought credit default protection on
Computer Sciences Corp. and
pay 0.88%
Broker, Morgan Stanley
Capital Services, Inc.
Expires June 2011 $ 980,000 (20,802)
Unrealized
Notional Appreciation
Amount (Depreciation)
Sold credit default protection on
Dow Jones CDX North America
Investment Grade Crossover Index
Series 6 and receive 1.90%
Broker, JPMorgan Chase Bank
Expires June 2011 $ 2,300,000 $ 10,183
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 $ 2,300,000 3,143
Sold credit default protection on
Dow Jones CDX North America
Investment Grade Index Series 6
and receive 0.40%
Broker, JPMorgan Chase Bank
Expires June 2011 $ 9,205,000 33,688
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 $ 4,600,000 7,802
Sold credit default protection on
Dow Jones CDX North America
Investment Grade High Volatility
Index Series 6 and receive 0.75%
Broker, JPMorgan Chase Bank
Expires June 2011 $ 9,220,000 3,984
Receive a floating rate based on
1-month LIBOR plus 0.47%, which
is capped at a fixed coupon of 6%,
and pay a floating rate based on
1-month LIBOR
Broker, Credit Suisse
First Boston
Expires June 2011 $23,000,000 (6,297)
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Schedule of Investments (concluded) (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
MeadWestvaco Corp. and pay 0.85%
Broker, Morgan Stanley
Capital Services, Inc.
Expires September 2013 $ 955,000 $ 67
Bought credit default protection on
Eastman Chemical Co. and
pay 0.68%
Broker, Morgan Stanley
Capital Services, Inc.
Expires September 2013 $ 955,000 (6,115)
------------
Total $ (488,749)
============
o Currency Abbreviations:
EUR Euro
USD U.S. Dollar
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Statement of Assets and Liabilities
As of September 30, 2006
Assets
Investments in unaffiliated securities, at value (identified cost--$431,399,601)
(including securities loaned of $44,755,360) $ 433,532,045
Investments in affiliated securities, at value (identified cost--$45,997,500) 45,997,500
Options purchased, at value (premiums paid--$94,121) 222,062
Unrealized appreciation on swaps 241,700
Swap premiums paid 1,630
Cash 155,346
Receivables:
Interest $ 2,449,832
Swaps 1,313,715
Capital shares sold 544,747
Dividends 28,710
Variation margin 25,891
Principal paydowns 3,600
Securities lending 2,628 4,369,123
--------------- ---------------
Total assets 484,519,406
---------------
Liabilities
Collateral on securities loaned, at value 45,997,500
Options written, at value (premiums received--$75,348) 2,922
Unrealized depreciation on swaps 730,449
Swap premiums received 27,803
Payables:
Securities purchased 42,641,849
Capital shares redeemed 746,474
Dividends to shareholders 538,094
Other affiliates 153,408
Investment adviser 106,689
Distributor 58,026
Swaps 29,667 44,274,207
---------------
Accrued expenses and other liabilities 144,962
---------------
Total liabilities 91,177,843
---------------
Net Assets
Net assets $ 393,341,563
===============
Net Assets Consist of*
Class A Shares of Common Stock, $.10 par value, 50,000,000 shares authorized $ 1,494,682
Class B Shares of Common Stock, $.10 par value, 50,000,000 shares authorized 566,889
Class C Shares of Common Stock, $.10 par value, 50,000,000 shares authorized 225,358
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 1,019,487
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares authorized 68,464
Paid-in capital in excess of par 395,096,922
Accumulated distributions in excess of investment income--net $ (1,339,495)
Accumulated realized capital losses--net (5,096,859)
Unrealized appreciation--net 1,306,115
---------------
Total accumulated losses--net (5,130,239)
---------------
Net assets $ 393,341,563
===============
Net Asset Value*
Class A--Based on net assets of $174,205,976 and 14,946,817 shares outstanding $ 11.66
===============
Class B--Based on net assets of $66,074,005 and 5,668,888 shares outstanding $ 11.66
===============
Class C--Based on net assets of $26,272,643 and 2,253,579 shares outstanding $ 11.66
===============
Class I--Based on net assets of $118,812,244 and 10,194,865 shares outstanding $ 11.65
===============
Class R--Based on net assets of $7,976,695 and 684,635 shares outstanding $ 11.65
===============
* Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated Investor A1,
Investor B1, Investor C2 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Statement of Operations
For the Year Ended September 30, 2006
Investment Income
Interest $ 20,301,431
Dividends 108,756
Securities lending--net 81,108
---------------
Total income 20,491,295
---------------
Expenses
Investment advisory fees $ 1,501,797
Transfer agent fees--Class A* 404,054
Account maintenance and distribution fees--Class B* 399,179
Transfer agent fees--Class I* 315,656
Transfer agent fees--Class B* 202,072
Account maintenance fees--Class A* 168,087
Accounting services 143,062
Account maintenance and distribution fees--Class C* 120,529
Professional fees 93,344
Registration fees 81,636
Printing and shareholder reports 70,639
Transfer agent fees--Class C* 62,419
Interest on securities sold short 59,667
Pricing fees 38,316
Account maintenance and distribution fees--Class R 36,443
Custodian fees 36,228
Transfer agent fees--Class R 17,503
Directors' fees and expenses 6,129
Other 60,586
---------------
Total expenses 3,817,346
---------------
Investment income--net 16,673,949
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net (5,983,734)
Financial futures contracts and swaps--net 280,621
Options written--net (91,435)
Short sales--net 287,537
Foreign currency transactions--net 36,667 (5,470,344)
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 1,324,436
Financial futures contracts and swaps--net (919,689)
Options written--net 75,847
Foreign currency transactions--net (59,725) 420,869
--------------- ---------------
Total realized and unrealized loss--net (5,049,475)
---------------
Net Increase in Net Assets Resulting from Operations $ 11,624,474
===============
* Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated Investor A1,
Investor B1, Investor C2 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Statements of Changes in Net Assets
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 16,673,949 $ 14,067,265
Realized gain (loss)--net (5,470,344) 2,947,785
Change in unrealized appreciation/depreciation--net 420,869 (6,001,169)
--------------- ---------------
Net increase in net assets resulting from operations 11,624,474 11,013,881
--------------- ---------------
Dividends & Distributions to Shareholders**
Investment income--net:
Class A (7,084,815) (6,432,644)
Class B (3,006,889) (3,561,110)
Class C (916,122) (824,691)
Class I (5,584,635) (6,355,420)
Class R (279,770) (158,204)
Realized gain--net:
Class A (842,510) (299,540)
Class B (438,093) (187,720)
Class C (116,661) (42,023)
Class I (808,779) (283,716)
Class R (33,618) (6,523)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions to shareholders (19,111,892) (18,151,591)
--------------- ---------------
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions (52,155,732) 4,984,940
--------------- ---------------
Net Assets
Total decrease in net assets (59,643,150) (2,152,770)
Beginning of year 452,984,713 455,137,483
--------------- ---------------
End of year* $ 393,341,563 $ 452,984,713
=============== ===============
* Accumulated distributions in excess of investment income--net $ (1,339,495) $ (249,064)
=============== ===============
** Effective October 2, 2006, Class A, Class B, Class C and Class I Shares were redesignated Investor A1,
Investor B1, Investor C2 and Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Financial Highlights
The following per share data Class A+++ Class B+++
and ratios have been derived
from information provided in For the Year Ended September 30, For the Year Ended September 30,
the financial statements. 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning
of year $ 11.85 $ 12.04 $ 12.01 $ 11.77 $ 11.47 $ 11.85 $ 12.04 $ 12.01 $ 11.78 $ 11.47
---------------------------------------------- ----------------------------------------------
Investment income--net .48++ .38++ .34++ .41++ .51 .43++ .33++ .29++ .36++ .46
Realized and unrealized
gain (loss)--net (.12) (.05) .08 .25 .30 (.12) (.05) .08 .24 .31
---------------------------------------------- ----------------------------------------------
Total from investment operations .36 .33 .42 .66 .81 .31 .28 .37 .60 .77
---------------------------------------------- ----------------------------------------------
Less dividends and distributions:
Investment income--net (.49) (.50) (.39) (.42) (.51) (.44) (.45) (.34) (.37) (.46)
Realized gain--net (.06) (.02) -- -- -- (.06) (.02) -- -- --
---------------------------------------------- ----------------------------------------------
Total dividends and distributions (.55) (.52) (.39) (.42) (.51) (.50) (.47) (.34) (.37) (.46)
---------------------------------------------- ----------------------------------------------
Net asset value, end of year $ 11.66 $ 11.85 $ 12.04 $ 12.01 $ 11.77 $ 11.66 $ 11.85 $ 12.04 $ 12.01 $ 11.78
============================================== ==============================================
Total Investment Return*
Based on net asset value
per share 3.13% 2.50% 3.54% 5.69% 7.32% 2.71% 2.08% 3.12% 5.17% 6.97%
============================================== ==============================================
Ratios to Average Net Assets
Expenses .85% .81% .81% .77% .76% 1.26% 1.22% 1.22% 1.18% 1.17%
============================================== ==============================================
Investment income--net 4.16% 3.17% 2.83% 3.42% 4.47% 3.72% 2.76% 2.42% 3.02% 4.06%
============================================== ==============================================
Supplemental Data
Net assets, end of year
(in thousands) $ 174,206 $165,192 $163,221 $157,128 $139,659 $ 66,074 $ 94,934 $108,404 $142,522 $141,993
============================================== ==============================================
Portfolio turnover 214.77% 217.69% 239.14% 299.97% 314.59% 214.77% 217.69% 239.14% 299.97% 314.59%
============================================== ==============================================
* Total investment returns exclude the effects of sales charges.
++ Based on average shares outstanding.
+++ Effective October 2, 2006, Class A and Class B Shares were redesignated Investor A1 and
Investor B1 Shares, respectively.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Financial Highlights (continued)
The following per share data Class C+++ Class I+++
and ratios have been derived
from information provided in For the Year Ended September 30, For the Year Ended September 30,
the financial statements. 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning
of year $ 11.85 $ 12.04 $ 12.01 $ 11.78 $ 11.47 $ 11.85 $ 12.04 $ 12.01 $ 11.77 $ 11.47
---------------------------------------------- ----------------------------------------------
Investment income--net .43++ .33++ .29++ .35++ .46 .48++ .39++ .35++ .42++ .52
Realized and unrealized
gain (loss)--net (.12) (.05) .08 .25 .31 (.12) (.04) .07 .25 .30
---------------------------------------------- ----------------------------------------------
Total from investment operations .31 .28 .37 .60 .77 .36 .35 .42 .67 .82
---------------------------------------------- ----------------------------------------------
Less dividends and distributions:
Investment income--net (.44) (.45) (.34) (.37) (.46) (.50) (.52) (.39) (.43) (.52)
Realized gain--net (.06) (.02) -- -- -- (.06) (.02) -- -- --
---------------------------------------------- ----------------------------------------------
Total dividends and distributions (.50) (.47) (.34) (.37) (.46) (.56) (.54) (.39) (.43) (.52)
---------------------------------------------- ----------------------------------------------
Net asset value, end of year $ 11.66 $ 11.85 $ 12.04 $ 12.01 $ 11.78 $ 11.65 $ 11.85 $ 12.04 $ 12.01 $ 11.77
============================================== ==============================================
Total Investment Return*
Based on net asset value
per share 2.70% 2.07% 3.11% 5.16% 6.97% 3.15% 2.60% 3.65% 5.78% 7.43%
============================================== ==============================================
Ratios to Average Net Assets
Expenses 1.27% 1.23% 1.23% 1.19% 1.16% .75% .71% .71% .67% .66%
============================================== ==============================================
Investment income--net 3.75% 2.76% 2.41% 2.95% 4.02% 4.22% 3.28% 2.93% 3.52% 4.57%
============================================== ==============================================
Supplemental Data
Net assets, end of year
(in thousands) $ 26,273 $ 23,811 $ 23,701 $ 27,605 $ 12,535 $118,812 $162,729 $157,201 $218,281 $195,515
============================================== ==============================================
Portfolio turnover 214.77% 217.69% 239.14% 299.97% 314.59% 214.77% 217.69% 239.14% 299.97% 314.59%
============================================== ==============================================
* 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 charge.
++ Based on average shares outstanding.
+++ Effective October 2, 2006, Class C and Class I Shares were redesignated Investor C1 and
Institutional Shares, respectively.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Financial Highlights (concluded)
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 $ 11.85 $ 12.04 $ 12.01 $ 11.75
------------ ------------ ------------ ------------
Investment income--net++ .44 .34 .31 .20
Realized and unrealized gain (loss)--net (.14) (.06) .09 .37
------------ ------------ ------------ ------------
Total from investment operations .30 .28 .40 .57
------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.44) (.45) (.37) (.31)
Realized gain--net (.06) (.02) -- --
------------ ------------ ------------ ------------
Total dividends and distributions (.50) (.47) (.37) (.31)
------------ ------------ ------------ ------------
Net asset value, end of period $ 11.65 $ 11.85 $ 12.04 $ 12.01
============ ============ ============ ============
Total Investment Return
Based on net asset value per share 2.63% 2.09% 3.25% 4.90%+++
============ ============ ============ ============
Ratios to Average Net Assets
Expenses 1.25% 1.21% 1.14% 1.23%*
============ ============ ============ ============
Investment income--net 3.78% 2.81% 2.49% 2.46%*
============ ============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 7,977 $ 6,319 $ 2,611 $ 121
============ ============ ============ ============
Portfolio turnover 214.77% 217.69% 239.14% 299.97%
============ ============ ============ ============
* Annualized.
++ Based on average shares outstanding.
++++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Intermediate Term Portfolio (the "ML Fund") and Merrill
Lynch Bond Fund, Inc., which the ML Fund is a part of, were renamed BlackRock
Intermediate Term 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's financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The Fund offers multiple classes of shares. 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 A1, Investor B1,
Investor C2 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--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 Bond Fund under the general
direction of the Board of Directors. Such valuations and procedures will be
reviewed periodically by the Board of Directors of the Bond Fund. 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 Fund 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 Directors
of the Bond Fund.
Equity securities that are held by the Fund, 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 Directors of the Bond Fund.
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 Directors of the Bond Fund. Short
positions traded in the OTC market are valued at the last available asked
price. Portfolio securities that are traded both in the OTC market and on a
stock exchange are valued according to the broadest and most representative
market.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income 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 asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates also are
generally determined as of the close of business on the NYSE. As of October 2,
2006, foreign currency exchange rates will be determined at the close of
business on the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of business on the NYSE that may not be reflected
in the computation of the Fund's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of such
securities, those securities may be valued at their fair value as determined
in good faith by the Bond Fund's Board of Directors or by the Investment
Adviser using a pricing service and/or procedures approved by the Bond Fund's
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Financial futures contracts--The Fund 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 Fund deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund 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 Fund as
unrealized gains or losses. When the contract is closed, the Fund 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 Fund may purchase and write call and put options. When the Fund
writes an option, an amount equal to the premium received by the Fund is
reflected as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or loss or gain to the extent 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 Fund 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 Fund as an unrealized gain or loss. When the
contract is closed, the Fund 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.
* Swaps--The Fund may enter into swap agreements, which are OTC contracts in
which the Fund and a counterparty agree to make periodic net payments on a
specified notional amount. The net payments can be made for a set period of
time or may be triggered by a 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 Fund 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.
(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 and liabilities
expressed in foreign currencies into U.S. dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange rates
on investments. The Fund invests in foreign securities, which may involve a
number of risk factors and special considerations not present with investments
in securities of U.S. corporations.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(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 Fund's financial statements, if any, is currently
being assessed.
(f) Security transactions and investment income--Security transactions are
recorded on the dates the trans-actions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(g) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(h) 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.
(i) Securities lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The market
value of the loaned securities is determined at the close of business of the
Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income
on the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and
the borrower, after notice, is required to return borrowed securities within
five business days. The Fund may pay reasonable 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 Fund could experience
delays and costs in gaining access to the collateral. The Fund also could
suffer a loss where the value of the collateral falls below the market value
of the borrowed securities, in the event of borrower default or in the event
of losses on investments made with cash collateral.
(j) 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.
(k) Short sales--When the Fund engages in a short sale, an amount equal to the
proceeds received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the market value of the short sale. The Fund maintains a segregated
account of securities as collateral for the short sales. The Fund 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 Fund is required to repay the counterparty any dividends or interest
received on the security sold short.
(l) Reclassifications--U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the
current year, $894,863 has been reclassified between accumulated distributions
in excess of net investment income and accumulated net realized capital
losses, $2,714 has been reclassified between paid-in capital in excess of par
and accumulated distributions in excess of net investment income, and $33 has
been reclassified between paid-in capital in excess of par and accumulated net
realized capital losses as a result of permanent differences attributable to
swap agreements, the reclassification of distributions, accounting for pay
downs gains (losses), foreign currency transactions, amortization methods on
fixed income securities and non-deductible expenses. These reclassifications
have no effect on net assets or net asset values per share.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
2. Investment Advisory Agreement and 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. The Bond Fund has also
entered into a Distribution Agreement and Distribution Plans with FAM
Distributors, Inc. ("FAMD" or the "Distributor"), a wholly owned subsidiary of
Merrill Lynch Group, Inc. 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.
FAM is responsible for the management of the Fund and provides the necessary
personnel, facilities, equipment and certain other services necessary to the
operations of the Bond Fund. For such services, the Bond Fund pays a monthly
fee with respect to the Fund based upon the aggregate average daily value of
the Fund's net assets and the Bond Fund's BlackRock High Income Fund's
(formerly High Income Portfolio of Merrill Lynch Bond Fund, Inc.) and Master
Bond Portfolio (formerly Master Core Bond Portfolio) of Master Bond Trust's
net assets at the following annual rates: .50% of the Bond Fund's average
daily net assets not exceeding $250 million; .45% of 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 Fund,
including the Bond Fund's BlackRock High Income Fund and Master Bond
Portfolio, was approximately $4,670,883,000.
Pursuant to the Distribution Plans adopted by the Bond Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940, the Bond 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 of the Fund as follows:
Account
Maintenance Distribution
Fee Fee
Class A .10% --
Class B .25% .25%
Class C .25% .25%
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 $ 372 $ 4,640
Class I $ 1,854 $ 18,567
For the year ended September 30, 2006, MLPF&S received contingent deferred
sales charges of $16,027 and $1,341 relating to transactions in Class B and
Class C Shares, respectively.
The Fund received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. As of September 30, 2006, the Fund lent securities with a value of
$9,946,220 to MLPF&S or its affiliates. Pursuant to that order, the Fund 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 Fund, invest cash collateral received by the Fund 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 $34,722 in securities lending agent fees.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
In addition, MLPF&S received $71 in commissions on the execution of portfolio
security transactions for the Fund for the year ended September 30, 2006.
Financial Data Services, Inc. ("FDS"), a wholly owned subsidiary of ML & Co.,
is the Bond Fund's transfer agent.
For the year ended September 30, 2006, the Fund reimbursed MLIM $9,597 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 31, 2006, shareholders of the Fund 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 of the Manager, 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, 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. MLIM, LLC, the
security lending agent, became BlackRock Investment Management, LLC.
Prior to the closing, certain officers and/or directors of the Bond Fund are
officers and/or directors of FAM, PSI, FAMD, MLAM U.K., FDS, ML & Co., MLIM,
and/or MLIM, LLC.
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. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the years ended September 30, 2006 and September 30, 2005 were
$841,113,550 and $889,795,160, respectively.
Transactions in options written for the year ended September 30, 2006 were as
follows:
Number of Premiums
Contracts* Received
Outstanding call options written,
beginning of year 451 $ 116,754
Options closed (51) (62,000)
Options expired (400) (54,754)
--------------- ---------------
Outstanding call options written,
end of year -- $ --
=============== ===============
* One contract represents a notional amount of $1,000,000.
Number of Premiums
Contracts* Received
Outstanding put options written,
beginning of year 51 $ 153,925
Options written 390 361,286
Options closed (254) (439,863)
--------------- ---------------
Outstanding put options written,
end of year 187 $ 75,348
=============== ===============
* One contract represents a notional amount of $1,000,000.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was ($52,155,732) and $4,984,940 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 A1, Investor B1, Investor C2 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 4,216,055 $ 48,958,045
Automatic conversion of shares 1,096,847 12,712,296
Shares issued to shareholders in
reinvestment of dividends and
distributions 240,577 2,791,402
--------------- ---------------
Total issued 5,553,479 64,461,743
Shares redeemed (4,544,655) (52,707,531)
--------------- ---------------
Net increase 1,008,824 $ 11,754,212
=============== ===============
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (continued)
Class A Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 4,535,049 $ 54,302,513
Automatic conversion of shares 623,716 7,463,174
Shares issued to shareholders in
reinvestment of dividends and
distributions 183,976 2,201,594
--------------- ---------------
Total issued 5,342,741 63,967,281
Shares redeemed (4,961,286) (59,409,642)
--------------- ---------------
Net increase 381,455 $ 4,557,639
=============== ===============
Class B Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 1,518,883 $ 17,648,323
Shares issued to shareholders in
reinvestment of dividends and
distributions 244,489 2,839,590
--------------- ---------------
Total issued 1,763,372 20,487,913
--------------- ---------------
Automatic conversion of shares (1,096,770) (12,712,296)
Shares redeemed (3,007,797) (34,916,156)
--------------- ---------------
Total redeemed (4,104,567) (47,628,452)
--------------- ---------------
Net decrease (2,341,195) $ (27,140,539)
=============== ===============
Class B Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 2,130,652 $ 25,509,010
Shares issued to shareholders in
reinvestment of dividends and
distributions 254,743 3,048,821
--------------- ---------------
Total issued 2,385,395 28,557,831
Automatic conversion of shares (623,716) (7,463,174)
Shares redeemed (2,754,850) (32,987,080)
--------------- ---------------
Total redeemed (3,378,566) (40,450,254)
--------------- ---------------
Net decrease (993,171) $ (11,892,423)
=============== ===============
Class C Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 811,197 $ 9,401,610
Shares issued to shareholders in
reinvestment of dividends and
distributions 67,332 781,492
--------------- ---------------
Total issued 878,529 10,183,102
Shares redeemed (633,640) (7,355,845)
--------------- ---------------
Net increase 244,889 $ 2,827,257
=============== ===============
Class C Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 687,259 $ 8,228,008
Shares issued to shareholders in
reinvestment of dividends and
distributions 53,322 638,192
--------------- ---------------
Total issued 740,581 8,866,200
Shares redeemed (699,990) (8,384,441)
--------------- ---------------
Net increase 40,591 $ 481,759
=============== ===============
Class I Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 2,995,636 $ 34,799,687
Shares issued to shareholders in
reinvestment of dividends and
distributions 76,188 884,872
--------------- ---------------
Total issued 3,071,824 35,684,559
Shares redeemed (6,608,186) (77,037,636)
--------------- ---------------
Net decrease (3,536,362) $ (41,353,077)
=============== ===============
Class I Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 3,830,201 $ 45,826,919
Shares issued to shareholders in
reinvestment of dividends and
distributions 77,916 932,401
--------------- ---------------
Total issued 3,908,117 46,759,320
Shares redeemed (3,234,309) (38,706,228)
--------------- ---------------
Net increase 673,808 $ 8,053,092
=============== ===============
Class R Shares for the Year Dollar
Ended September 30, 2006 Shares Amount
Shares sold 479,520 $ 5,558,307
Shares issued to shareholders in
reinvestment of dividends 26,274 304,692
--------------- ---------------
Total issued 505,794 5,862,999
Shares redeemed (354,421) (4,106,584)
--------------- ---------------
Net increase 151,373 $ 1,756,415
=============== ===============
Class R Shares for the Year Dollar
Ended September 30, 2005 Shares Amount
Shares sold 388,856 $ 4,652,417
Shares issued to shareholders in
reinvestment of dividends and
distributions 13,568 162,217
--------------- ---------------
Total issued 402,424 4,814,634
Shares redeemed (86,138) (1,029,761)
--------------- ---------------
Net increase 316,286 $ 3,784,873
=============== ===============
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, 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 2006. The Fund may borrow under the credit agreement to fund
shareholder redemptions and for other lawful purposes other than for leverage.
The Fund may borrow up to the maximum amount allowable under the Fund's
current prospectus and statement of additional information, subject to various
other legal, regulatory or contractual limits. The Fund pays a commitment fee
of .07% per annum based on the Fund's pro rata share of the unused portion of
the credit agreement. Amounts borrowed under the credit agreement bear
interest at a rate equal to, at each Fund's election, the federal funds rate
plus .50% or a base rate as defined in the credit agreement. The Fund did not
borrow under the credit agreement during the year ended September 30, 2006.
6. 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 $ 16,872,231 $ 17,442,555
Net long-term capital gains 2,239,661 709,036
--------------- ---------------
Total taxable distributions $ 19,111,892 $ 18,151,591
=============== ===============
As of September 30, 2006, the components of accumulated earnings on a
tax basis were as follows:
Accumulated distributions in excess of
investment income--net $ (526,064)
Undistributed long-term capital gains--net --
---------------
Total accumulated distributions in excess of
investment income--net (526,064)
Capital loss carryforward --
Unrealized losses--net (4,604,175)*
---------------
Total accumulated losses--net $ (5,130,239)
===============
* 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 contracts,
the difference between book and tax amortization methods for
premiums and discounts on fixed income securities, the deferral
of post-October capital losses for tax purposes and other book/tax
temporary differences.
7. Acquisition by BlackRock Bond Fund of BlackRock Bond Fund, Inc.:
On October 16, 2006, BlackRock Bond Fund of BlackRock Bond Fund, Inc. acquired
all of the net assets of the Fund pursuant to a plan of reorganization.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Report of Independent Registered Public Accounting Firm
BlackRock Bond Fund, Inc.
To the Shareholders and Board of Directors of
BlackRock Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of BlackRock Intermediate Term Fund,
one of the portfolios constituting BlackRock Bond Fund, Inc. (the "Fund"),
formerly Intermediate Term 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. 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
BlackRock Intermediate Term Fund of BlackRock 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
Important Tax Information (unaudited)
The following information is provided with respect to the ordinary income
distributions paid by BlackRock Intermediate Term Fund of BlackRock Bond Fund,
Inc. for the fiscal year ended September 30, 2006:
Federal Obligation Interest
Month Paid: October 2005 - September 2006 7.76%*
Interest-Related Dividends for Non-U.S. Residents
Month Paid: October 2005 54.37%**
November 2005 - December 2005 91.72%**
January 2006 - September 2006 92.17%**
* 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.
Additionally, the Fund distributed long-term capital gains of $.058788 per
share to shareholders of record on December 20, 2005.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement--Matters Considered by the Board
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
Directors of the Fund considered and approved a new investment advisory
agreement (the "BlackRock Investment Advisory Agreement") between BlackRock
Bond Fund, Inc., on behalf of the Fund, and BlackRock Advisors, LLC
("BlackRock Advisors"). The Fund's shareholders subsequently approved the
BlackRock Investment Advisory Agreement and it became effective on September
29, 2006, replacing the investment advisory agreement with the Previous
Investment Adviser (the "Previous Investment Advisory Agreement").
The Board discussed the BlackRock Investment Advisory Agreement at telephonic
and in-person meetings held during April and May 2006. The Board, including
the independent directors, approved the BlackRock Investment Advisory
Agreement at an in-person meeting held on May 12, 2006. The directors also
noted the proposal that BlackRock Bond Fund of BlackRock Bond Fund, Inc.
("BlackRock Bond Fund") acquire the assets and liabilities of the Fund, as
part of a reorganization proposed to be closed in the fourth calendar quarter
of 2006.
To assist the Board in its consideration of the 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, through their independent legal
counsel, also requested and received additional information from Merrill Lynch
and BlackRock in connection with their consideration of the 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 on numerous occasions,
discussing, among other things, the legal standards and certain other
considerations relevant to the Board's deliberations.
At the Board meetings, the directors discussed with Merrill Lynch management
and certain BlackRock representatives the Transaction, its strategic rationale
and BlackRock's general plans and intentions regarding the Fund. At these
Board meetings, representatives of Merrill Lynch and BlackRock made
presentations to and responded to questions from the Board. The 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 also conferred separately and with their counsel
about the Transaction, including the proposed reorganization in which
BlackRock Bond Fund would acquire the assets and the liabilities of the Fund,
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 met in executive sessions with their counsel to consider
the BlackRock Investment Advisory Agreement.
In connection with the Board's review of the BlackRock Investment Advisory
Agreement, Merrill Lynch and/or BlackRock advised the Board 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 its shareholders by BlackRock
Advisors, including compliance services;
* that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented professionals;
* that the Fund was 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
the Board before making any changes;
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement (continued)
* that BlackRock and Merrill Lynch would enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter (or until any proposed Fund reorganization takes place), 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 shareholders.
The Board considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
* the potential benefits to Fund 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 (in the event the proposed
reorganization of the Fund does not take place);
* 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 Agreement,
including the fact that the schedule of the Fund's total advisory fees
would not increase under the BlackRock Investment Advisory Agreement, but
would remain the same;
* that in February 2006, the Board had performed a full annual review of the
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; and that the advisory
and/or management fees paid by the Fund, 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 had considered relevant in the exercise of
their reasonable judgment; and
* that Merrill Lynch had agreed to pay all expenses of the Fund in connection
with the Board's consideration of the BlackRock Investment Advisory
Agreement and related agreements and all costs of shareholder approval of
the BlackRock Investment Advisory Agreement and as a result the Fund would
bear no costs in obtaining shareholder approval of the BlackRock Investment
Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the BlackRock Investment Advisory Agreement, the Board
assessed the nature, quality and scope of the services to be provided to the
Fund 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 BlackRock Investment Advisory Agreement,
the 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; (b) Fund operating expenses paid to third parties; (c) the resources
devoted to and compliance reports relating to the Fund'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.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
In the period prior to the Board meetings to consider renewal of the Previous
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the Previous Investment Advisory Agreement. 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 portfolio
management team on investment strategies used by the Fund during its most
recent fiscal year; (c) information on the profitability to the Previous
Investment Adviser of the Previous Investment Advisory Agreement and other
payments received by the Previous Investment Adviser and its affiliates from
the Fund; and (d) information provided by the Previous Investment Adviser
concerning services related to the valuation and pricing of the Fund's
portfolio holdings, allocation of Fund brokerage fees, the Fund's portfolio
turnover statistics, and direct and indirect benefits to the Previous
Investment Adviser and its affiliates from their relationship with the Fund.
In its deliberations, the Board considered information received in connection
with its most recent approval of the continuance of the 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 Agreement. The directors did
not identify any particular information that was all-important or controlling,
and each director attributed different weights to the various factors. The
Board, including a majority of the Board's independent directors, concluded
that the terms of the 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, and that the BlackRock Investment Advisory Agreement
should be approved and recommended to Fund shareholders.
Nature, Quality and Extent of Services Provided--The 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, as well as the nature, quality and extent of services
expected to be provided by BlackRock Advisors. The Board focused primarily on
the Previous Investment Adviser's investment advisory services and the
investment performance of the Fund, but also considered certain areas in which
both the Previous Investment Adviser and the Fund received services as part of
the Merrill Lynch complex. The 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 the 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.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, the
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; 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. The directors also considered the proposed
reorganization in which BlackRock would acquire the assets and liabilities of
the Fund.
The Board was given information with respect to the potential benefits to the
Fund and its 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.
The Board was advised that, as a result of Merrill Lynch's equity interest in
BlackRock after the Transaction, the Fund 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. The 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.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Disclosure of New Investment Advisory Agreement (concluded)
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
determined that the nature and quality of services to be provided to the Fund
under the BlackRock Investment Advisory Agreement were expected to be as good
as or better than that provided under the Previous Investment Advisory
Agreement. 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
noted that if portfolio managers or other personnel were to cease to be
available prior to the closing of the Transaction, the Board would consider
all available options, including seeking the investment advisory or other
services of BlackRock affiliates. Accordingly, the 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 under the BlackRock Investment
Advisory Agreement.
Costs of Services Provided and Profitability--It was noted that, in
conjunction with its recent review of the Previous Investment Advisory
Agreement, the 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. The Board reviewed the Fund'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. The Board also compared the Fund's total expenses to those of other
comparable funds. The information showed that the Fund had fees and expenses
within the range of fees and expenses of comparable funds. The 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. The Board 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. The Board concluded that the
Fund'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 Agreement, the 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 the BlackRock Investment Advisory Agreement is substantially similar
to the Previous Investment Advisory Agreement in all material respects,
including the rate of compensation, the Board determined that the Transaction
should not increase the total fees payable, including any fee waivers and
expense reimbursements, for advisory and administrative services. The Board
noted that it was not possible to predict how the Transaction would affect
BlackRock Advisors' profitability from its relationship with the Fund.
The 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. The directors 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 fees and/or fee
breakpoints would be appropriate.
Fees and Economies of Scale--The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in
order to enable the Fund to participate in these economies of scale. The Board
determined that changes were not currently necessary.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
In reviewing the Transaction, the 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
Agreement is substantially similar to the Previous Investment Advisory
Agreement in all material respects, including the rates of compensation, the
Board determined that as a result of the Transaction, the Fund's total
advisory fees would be no higher than the fees under the Previous Investment
Advisory Agreement. The Board noted that in conjunction with the most recent
deliberations concerning the Previous Investment Advisory Agreement, the
directors had determined that the total fees for advisory and administrative
services for the Fund were reasonable in light of the services provided. It
was noted that in conjunction with the recent review of the Previous
Investment Advisory Agreement, the Board had received, among other things, a
report from Lipper comparing the Fund'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. The Board concluded that
because the rates for advisory fees for the Fund would be no higher than the
fee rates in effect at the time, the proposed management fee structure,
including any fee waivers, was 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 Agreement, the
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 Agreement. 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 Agreement, and their discussions with management of the Previous
Investment Adviser and BlackRock, the directors 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 Fund's portfolio transaction brokerage
commissions. The 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--The Board considered investment performance for the
Fund. The 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. 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 the 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. The Board believed the Fund's performance
was satisfactory. Also, the Board took into account the investment performance
of funds advised by BlackRock Advisors. The 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. The 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.
Conclusion--After the independent directors of the Fund deliberated in
executive session, the entire Board, including the independent directors,
approved the 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 shareholders. In approving the BlackRock Investment Advisory Agreement,
the Board noted that it anticipated reviewing the continuance of the agreement
in advance of the expiration of the initial two-year period.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Officers and Directors
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
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 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 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.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Officers and Directors (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Independent Directors*
Ronald W. Forbes** Director 1981 to Professor Emeritus of Finance, School of Business, 50 Funds None
P.O. Box 9095 present State University of New York at Albany since 52 Portfolios
Princeton, 2000 and Professor thereof from 1989 to 2000;
NJ 08543-9095 International Consultant, Urban Institute,
Age: 66 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 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 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 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 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 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 serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72.
** Chairman of the Board of Directors and the Audit Committee.
BLACKROCK INTERMEDIATE TERM FUND OF BLACKROCK BOND FUND, INC.
SEPTEMBER 30, 2006
Officers and Directors (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: 53 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.
Further information about the Fund's Officers and Directors is available in
the Fund's Statement of Additional Information, which can be obtained without
charge by calling 1-800-441-7762.
Custodian
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
BLACKROCK INTERMEDIATE TERM 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.
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 INTERMEDIATE TERM 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 INTERMEDIATE TERM 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
(a) Audit Fees - Fiscal Year Ending September 30, 2006 - $37,000
Fiscal Year Ending September 30, 2005 - $35,000
(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 - $6,000
Fiscal Year Ending September 30, 2005 - $8,715
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.
Intermediate Term Portfolio of BlackRock Bond Fund, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Intermediate Term Portfolio of BlackRock Bond Fund, Inc.
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
Intermediate Term Portfolio of BlackRock Bond Fund, Inc.
Date: November 17, 2006
By: /s/ Donald C. Burke
-----------------------
Donald C. Burke,
Chief Financial Officer of
Intermediate Term Portfolio of BlackRock Bond Fund, Inc.
Date: November 17, 2006