-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F6w1uNfDogmxSjdH/pqyDslsFJ/cjSPdodAwOGqt72oPopT/XF3MvAUgKWc86s/E lCf6r897Vj61lTnV7GUyBw== 0000900092-07-000082.txt : 20070309 0000900092-07-000082.hdr.sgml : 20070309 20070309155313 ACCESSION NUMBER: 0000900092-07-000082 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070309 DATE AS OF CHANGE: 20070309 EFFECTIVENESS DATE: 20070309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK MUNICIPAL BOND FUND, INC. CENTRAL INDEX KEY: 0000225635 IRS NUMBER: 132896246 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02688 FILM NUMBER: 07684475 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092822026 MAIL ADDRESS: STREET 1: P.O. BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH MUNICIPAL BOND FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ONE LIBERTY MUNICIPAL BOND FUND INC DATE OF NAME CHANGE: 19780622 0000225635 S000002332 BlackRock Municipal Insured Fund C000006110 Investor A C000006111 Investor B C000006112 Investor C1 C000006113 Institutional C000038032 Investor C 0000225635 S000002334 BlackRock National Municipal Fund C000006118 Investor A C000006119 Investor B C000006120 Investor C1 C000006121 Institutional C000038033 Investor C 0000225635 S000002335 BlackRock Short-Term Municipal Fund C000006122 Investor A1 C000006123 Investor B C000006124 Investor C C000006125 Institutional C000038034 Investor A C000038035 BlackRock C000038044 Service 0000225635 S000011867 BlackRock High Yield Municipal Fund C000032425 Investor A C000032427 Investor C C000032428 Institutional N-CSRS 1 br7463.txt BLACKROCK MUNICIPAL BOND FUND, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-02688 Name of Fund: BlackRock Municipal 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, BlackRock Municipal 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: 06/30/07 Date of reporting period: 07/01/06 - 12/31/06 Item 1 - Report to Stockholders ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY REAL ESTATE BlackRock Municipal Bond Fund, Inc. SEMI-ANNUAL REPORT DECEMBER 31, 2006 (BLACKROCK logo) NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund's current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment 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. (GO PAPERLESS... logo) It's Fast, Convenient, & Timely! To sign up today, go to www.blackrock.com/edelivery. BlackRock Municipal Bond Fund, Inc. Portfolio Information as of December 31, 2006 Percent of Total BlackRock Short-Term Municipal Fund Investments General Obligation & Tax Revenue Bonds 72.2% Prerefunded Bonds 18.1 Other Revenue Bonds 9.7 Percent of Total BlackRock National Municipal Fund Investments Other Revenue Bonds 68.6% General Obligation & Tax Revenue Bonds 20.0 Prerefunded Bonds 11.4 Percent of Total BlackRock Municipal Insured Fund Investments Other Revenue Bonds 57.9% General Obligation & Tax Revenue Bonds 31.7 Prerefunded Bonds 10.4 Percent of Total BlackRock High Yield Municipal Fund Investments Other Revenue Bonds 88.9% General Obligation & Tax Revenue Bonds 11.1 Officers and Directors Robert C. Doll, Jr., President and Director Ronald W. Forbes, Director Cynthia A. Montgomery, Director Jean Margo Reid, Director Roscoe S. Suddarth, Director Richard R. West, Director Donald C. Burke, Vice President and Treasurer John M. Loffredo, Senior Vice President Peter J. Hayes, Vice President Robert A. DiMella, Vice President Theodore R. Jaeckel, Jr., Vice President Walter C. O'Connor, Vice President Jeffrey Hiller, Fund Chief Compliance Officer Alice A. Pellegrino, Secretary Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent PFPC Inc. Wilmington, DE 19809 Fund Address BlackRock Municipal Bond Fund, Inc. P.O. Box 9011 Princeton, NJ 08543-9011 Effective January 1, 2007, Edward D. Zinbarg retired as a Director of BlackRock Municipal Bond Fund, Inc. The Fund's Board of Directors wishes Mr. Zinbarg well in his retirement. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 A Letter to Shareholders Dear Shareholder As 2007 begins, we are able to look back on 2006 as a volatile, but ultimately, a positive year for most major markets. Returns for the annual and semi-annual periods ended December 31, 2006 were as follows:
Total Returns as of December 31, 2006 6-month 12-month U.S. equities (Standard & Poor's 500 Index) +12.74% +15.79% Small cap U.S. equities (Russell 2000 Index) + 9.38 +18.37 International equities (MSCI Europe, Australasia, Far East Index) +14.69 +26.34 Fixed income (Lehman Brothers Aggregate Bond Index) + 5.09 + 4.33 Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 4.55 + 4.84 High yield bonds (Credit Suisse High Yield Index) + 8.14 +11.92
After raising the target short-term interest rate 17 times between June 2004 and June 2006, the Federal Reserve Board (the Fed) finally opted to pause on August 8, 2006. This left the federal funds rate at 5.25%, where it remained through year-end. In interrupting its two-year interest rate-hiking campaign, the Fed acknowledged that economic growth is slowing, led by a downturn in the housing market, but has maintained a cautionary view on inflation. Overall, it was a good 12 months for U.S. equities, despite a significant correction in the middle of the year that was largely triggered by rising interest rates, inflation fears, elevated oil prices and geopolitical uncertainties. Nevertheless, strong corporate earnings, abundant liquidity and record merger-and-acquisition activity provided a solid backdrop for stocks. Many international equity markets (with the notable exception of Japan) performed even better, outpacing U.S. stocks for the fifth consecutive year. Strength was especially notable in European equities and select emerging markets. Bonds experienced a more modest annual return than stocks. Interest rates and bond yields moved higher for much of the year as bond prices, which move opposite of yields, declined. Prices began to improve in the summer as the economy showed signs of weakening and the Fed paused. Notably, the Treasury curve remained inverted for much of 2006. The 10-year Treasury yield ended December at 4.71%, well below the federal funds rate. As we begin a new year, investors are left with a few key questions: Will the U.S. economy achieve a soft landing, will the Fed reverse its prior policy and cut interest rates and how might these outcomes impact the investment climate. As you navigate the uncertainties inherent in the financial markets, we encourage you to start the year by reviewing your investment goals with your financial professional and making portfolio changes, as needed. For more reflection on 2006 and our thoughts on the year ahead, please ask your financial professional for a copy of "What's Ahead in 2007: An Investment Perspective," or view it online at www.blackrock.com/funds. We thank you for trusting BlackRock with your investment assets, and we look forward to continuing to serve you in the new year and beyond. Sincerely, (Robert C. Doll, Jr.) Robert C. Doll, Jr. President and Director BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 A Discussion With Your Funds' Portfolio Managers The tax-exempt market's strong technical position allowed municipal bonds to outperform their taxable counterparts during the six-month period. Describe the recent market environment relative to municipal bonds. Long-term bond yields generally moved lower during the past six months as their prices, which move in the opposite direction, increased. The municipal market's strong technical position allowed municipal bond yields to decline more than taxable yields. The strength in bond prices came amid a slowdown in U.S. economic growth and the Federal Reserve Board's (the Fed) decision at its August 8 meeting to refrain from raising its target interest rate after 17 consecutive increases since June 2004. Bond prices found additional support in moderating oil prices. Between June 30 and November 30, 30-year Treasury bond yields had declined 73 basis points (.73%) to 4.56%. However, stronger-than-expected economic releases and year-end profit taking pushed yields higher during December. For the six-month period overall, 30-year U.S. Treasury bond yields fell 38 basis points to 4.81% and 10-year Treasury note yields declined 44 basis points to 4.71%. The tax-exempt bond market outperformed the U.S. Treasury market as investor demand outstripped a resurgent new-issue calendar. For the six-month period ended December 31, 2006, as reported by Municipal Market Data, yields on 30- year, AAA-rated municipal issues declined 56 basis points to 4.07%. Yields on 10-year, AAA-rated tax-exempt bonds declined 44 basis points to 3.68%. Investor demand for municipal product remained strong throughout the period. The latest available statistics from the Investment Company Institute note that, through November, long-term municipal bond funds had net new cash flows of nearly $14 billion, an increase of more than 120% versus the same 11 months of 2005. As reported by AMG Data, weekly average cash flows exceeded $400 million throughout the fourth quarter of 2006, representing a solid increase from the $241 million weekly average seen for the full year. The fourth quarter increase is especially impressive, as holiday spending often results in reduced cash flows into mutual funds at year-end. New-issue municipal volume surged in the fourth quarter as municipalities rushed to take advantage of low market yields and solid investor demand. More than $121 billion in new long-term tax-exempt bonds was issued over the last three months of 2006, a 23.4% increase compared to fourth quarter 2005. Issuance in December, which totaled over $43 billion, was the highest December monthly volume since 1985. That year, municipalities scurried to issue bonds in anticipation of a more stringent underwriting environment resulting from the Tax Reform Act of 1986. The increased issuance in the final quarter of the year pushed 2006's annual total volume to over $383 billion, just 6% off last year's record issuance and close to initial annual issuance estimates. The recent increase in issuance has made the municipal market's outperformance even more impressive. Looking ahead, the tax-exempt bond market's technical position is expected to remain supportive of continued strong performance. Attractive yield ratios, combined with a relatively steep municipal bond yield curve and manageable new issuance, should help to sustain investor demand for municipal product. BlackRock Short-Term Municipal Fund How did the Fund perform during the period in light of the existing market conditions? For the six-month period ended December 31, 2006, BlackRock Municipal Bond Fund, Inc. - BlackRock Short-Term Fund's (formerly Merrill Lynch Municipal Bond Fund, Inc. - Short-Term Portfolio) BlackRock, Institutional, Investor A, Investor A1, Investor B and Investor C Shares had total returns of +2.02%, +2.02%, +1.89%, +1.97%, +1.84% and +1.51%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 9 - 15 of this report to share-holders.) For the same period, the Fund's unmanaged benchmarks, the Lehman Brothers Municipal Bond 3-Year General Obligation Index and the Lehman Brothers Municipal Bond Index, had respective returns of +2.51% and +4.55%. The Fund's comparable Lipper category of Short Municipal Debt Funds posted an average return of +1.97% for the six-month period. (Funds in the Short Municipal Debt Funds category invest primarily in municipal debt issues with dollar-weighted average maturities of less than three years.) BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 During the six-month reporting period, the Fed moved from a policy of raising short-term interest rates to one of leaving rates unchanged. After one final rate hike on June 30, 2006 the central bankers paused on August 8 and at every meeting thereafter, preferring to wait and monitor its policy's effect on the domestic economy. Against this backdrop, market rates rose initially, then stabilized somewhat later in the period as the Fed moved to a stable monetary policy. Economic data and inflation readings were mixed throughout the period, with some indicating growth and rising prices and others showing slower growth with weak pricing power. Although this led to some volatility in the fixed income markets throughout the period, the short-term municipal market remained fairly stable. As a result, we maintained a relatively neutral approach to the market, with a portfolio duration of 1.42 years and minimal cash reserves. This was done with an eye toward our main strategy of maintaining a stable net asset value, while also seeking a yield advantage over traditional tax-exempt money market funds. Because of our positioning and belief that the market would remain stable, our neutral investment stance benefited performance for the recent period relative to our short-term municipal debt fund peers. What changes were made to the portfolio during the period? The most significant portfolio activity during the period involved drawing down our cash reserves and remaining fully invested. Most of our new investments were made in the two-year portion of the municipal yield curve, again based on our belief that the market would remain relatively stable given the Fed's stance. In addition, the municipal yield curve was extremely flat, with investments in the three-year and four-year range offering little or no yield advantage over those with one-year and two-year maturities. In terms of credit quality, the Fund continues to maintain an average rating of AA. How would you characterize the Fund's position at the close of the period? We continue to maintain a high-quality portfolio that we believe is well positioned for the prevailing environment. We will continue to assess the economic data in an effort to gauge the strength of the overall economy and the inflation picture in the United States. The Fed has indicated that it is "data dependent" in determining monetary policy, and we believe that this will cause a prolonged period of unchanged monetary policy. Peter J. Hayes Vice President and Portfolio Manager January 18, 2007 BlackRock Municipal Insured Fund How did the Fund perform during the period in light of the existing market conditions? For the six-month period ended December 31, 2006, BlackRock Municipal Bond Fund, Inc. - BlackRock Municipal Insured Fund's (formerly Merrill Lynch Municipal Bond Fund, Inc. - Insured Portfolio) Institutional, Investor A, Investor B, Investor C and Investor C1 Shares had total returns of +4.60%, +4.60%, +4.34%, +4.22% and +4.31%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 9 - 15 of this report to shareholders.) For the same period, the broad-market Lehman Brothers Municipal Bond Index returned +4.55%. Notably, the Index measures the performance of insured and uninsured municipal bonds throughout the nation, while the Fund focuses on higher-quality insured issues. The Fund outperformed its comparable Lipper category of Insured Municipal Debt Funds, which had an average return of +4.19% for the six-month period. (Funds in this Lipper category invest primarily in municipal debt issues insured as to timely payment.) For the most part, we attribute the portfolio's relative outperformance to our above-average income stream, yield curve positioning and our strategy of favoring refundable issues. We were overweight in bonds with maturities greater than 20 years for much of the period, which helped the Fund's relative performance as the prices on longer-maturity bonds increased sharply during the market's rally. That is, interest rates on bonds with maturities greater than 20 years decreased at a faster rate than bonds with shorter maturities (that is, the municipal yield curve flattened). In addition, the Fund benefited from the advance refunding of several holdings during the period. When municipal bonds are advance refunded, or refinanced ahead of their maturity dates, their prices generally increase sharply. What changes were made to the portfolio during the period? We continued to focus our efforts on capturing the best relative value in the insured municipal market. We maintained emphasis on bonds from high-tax states, where demand for tax-exempt securities is strong. These states included New Jersey, California and Massachusetts. Yield spreads in the municipal market are at relatively narrow levels, and we believe these states' bonds are well positioned to outperform when spreads widen in the future. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 A Discussion With Your Funds' Portfolio Managers (continued) Given the recent strength in the municipal market, we took select opportunities to sell some of our longer-maturity and pre-refunded bonds. The more seasoned bonds in the portfolio were purchased in higher-rate environments and, as such, they were difficult to replace in the prevailing low-rate environment. In general, we only sold bonds with book yields that were not significantly higher than current market yields, allowing us to take proceeds from our sales and invest in bonds with relatively high current yields. To that end, we primarily looked to premium-coupon, high-quality bonds in the 15-year to 20-year maturity range, as we were not sufficiently compensated for extending much further out. Although new issuance in the municipal market increased sharply late in 2006, the new supply was readily absorbed by the market, thereby limiting potential reinvestment opportunities. We also looked to reinvest the proceeds from a significant portfolio holding that was redeemed in the fourth quarter of the year. Overall, we maintained a very high credit-quality portfolio, with all of the Fund's holdings insured by AAA-rated insurers. During the past six months, we continued to look to newer insurers in the market, such as XLCA and CIFG. We are still able to book some incremental yield on these securities given the insurers' shorter histories, and we expect their spreads to narrow over time as the companies establish track records in the market. How would you characterize the Fund's position at the close of the period? The Fund was fully invested at period-end and positioned neutrally with respect to interest rate risk. We will look for a steepening of the yield curve to provide attractive investment opportunities for the portfolio. In the meantime, we maintain our focus on providing shareholders with a competitive yield and preservation of net asset value within the context of a high-quality portfolio. Michael A. Kalinoski Portfolio Manager Robert A. DiMella, CFA Vice President and Portfolio Manager Theodore R. Jaeckel Jr., CFA Portfolio Manager Walter O'Connor Portfolio Manager January 30, 2007 BlackRock National Municipal Fund How did the Fund perform during the period in light of the existing market conditions? For the six-month period ended December 31, 2006, BlackRock Municipal Bond Fund, Inc. - BlackRock National Municipal Fund's (formerly Merrill Lynch Municipal Bond Fund, Inc. - National Portfolio) Institutional, Investor A, Investor B, Investor C and Investor C1 Shares had total returns of +4.47%, +4.34%, +4.07%, +3.95% and +4.05%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 9 - 15 of this report to shareholders.) For the same period, the Fund's broad market benchmark, the Lehman Brothers Municipal Bond Index, returned +4.55% and the Lipper General Municipal Debt Funds category had an average return of +4.26%. (Funds in this Lipper category invest primarily in municipal debt issues in the top four credit-rating categories.) Fund performance benefited from our ongoing strategy of maximizing the portfolio's current yield. Over time, these above-average income distributions to shareholders serve to enhance total return. The Fund also benefited from the continued tightening of credit spreads in the municipal market, which allowed lower-quality, higher-yielding credits to outperform higher-quality issues of comparable maturity. As such, that portion of the Fund invested in higher-yielding credits experienced above-average price appreciation. Overall, we maintained a duration exposure (a measure of sensitivity to interest rates) consistent with our peers, thereby minimizing interest rate timing and the risk inherent in that, and instead focusing on maintaining a competitive income accrual. What changes were made to the portfolio during the period? We did not alter our mainline strategy. We continued to focus our efforts on protecting the Fund's net asset value and delivering as high a current return as possible given the portfolio's relatively conservative credit parameters. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 During the past year, municipal issuers continued to refinance their existing, higher-couponed debt amid the historically low interest rate environment. Although some of the portfolio's higher-couponed bonds were called as a result of this refinancing boom, we were rewarded for our patient approach to reinvesting the proceeds. We were content to allow call proceeds to build as cash reserves during periods when interest rates were inopportune, and then recommitted the funds when rates rose to more advantageous levels. This approach helped to maintain the Fund's current income distribution, while also protecting the underlying net asset value. Early in the period, as 10-year Treasury issues and the federal funds rate both approached 5.25%, rates on the long end of the municipal yield curve moved higher. We viewed this as an opportunity to begin purchasing longer- dated bonds in pursuit of a more neutral duration posture. Heavy new issuance and secondary market selling by insurance companies and trading accounts provided us with ample opportunity to make these purchases. How would you characterize the Fund's position at the close of the period? The Fund ended the period with a neutral duration stance and 4% of assets in cash reserves. Whereas we sought to maintain a fully invested portfolio in prior periods, we believe a moderate position in cash is an acceptable alternative now given the flatness of the yield curve and the availability of relatively attractive short-term yields. We intend to keep the portfolio in its current posture until market technicals (supply/demand) become less supportive for long-term rates and investment rates rise. We continue to exercise patience in recommitting the proceeds realized from bond calls. We believe this is a prudent approach given the low absolute level of long-term rates, the flatness of the yield curve and historically tight credit spreads. Generally speaking, new purchases have been concentrated in higher-grade securities, reflecting our ongoing commitment to maintaining a high-quality portfolio and also the fact that credit spreads are at historically tight levels. The tight spreads mean there is little yield advantage to be realized from investment in lower-quality issues and, therefore, we are not inclined to take on the additional risk. Walter C. O'Connor Vice President and Portfolio Manager Theodore R. Jaeckel Jr., CFA Portfolio Manager January 10, 2007 BlackRock High Yield Municipal Fund How has the Fund performed since its inception? Since inception (August 1, 2006), through December 31, 2006, BlackRock Municipal Bond Fund, Inc. - BlackRock High Yield Municipal Fund's (formerly Merrill Lynch Municipal Bond Fund, Inc. - High Yield Portfolio) Institutional, Investor A and Investor C Shares had total returns of +3.58%, +3.29% and +3.16%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 9 - 15 of this report to shareholders.) For the same period, the Fund's broad market benchmark, the Lehman Brothers Municipal Bond Index, returned +3.25%. The Lipper High Yield Municipal Debt Funds category posted an average return of +3.84%. (Funds in this Lipper category invest at least 50% of their assets in lower-rated municipal debt issues.) After a fairly brief ramp-up period in which we invested the initial cash in the portfolio, the Fund remained fully invested and with a duration higher than that of its peers. Both factors contributed to relative performance. How have you managed the Fund since its inception? The Fund was introduced on August 1, and since our initial efforts to put money to work, our focus has been on pursuing attractive high yield investment opportunities. This works hand-in-hand with our more general strategy of achieving sustainable yield targets. Despite a challenging environment characterized by strong investor demand and narrow credit spreads, we were able to make reasonable progress in terms of both security selection and sector allocation. From a sector perspective, areas of emphasis have included health care and housing. This reflects recent issuance trends, but also our recognition that credit spreads, being at historically tight levels, do not offer tremendous value. At period-end, 31.8% of the Fund's assets were invested in health care-related bonds, comprised of 16.5% long-term care and 15.3% hospitals. Housing, which was one of only a few sectors that had increased issuance in 2006, comprised 14.5% of net assets at period-end. Because housing bonds are generally higher rated, this has contributed to the Fund having a more conservative credit profile than many of its peers. Finally, corporate-related debt represented 16.6% of the Fund's assets at period-end, with the biggest component of that being airlines at roughly 7.7%. Relatively strong cash flows have continued since the Fund's inception, providing a steady source of reserves available for deployment as new opportunities arise. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 A Discussion With Your Funds' Portfolio Managers (concluded) At period-end, the Fund's credit-quality profile was broken down as follows: 13.7% of assets rated AAA, 9.2% rated AA, 12.1% rated A, 16.7% rated BBB, 5.1% rated BB, 4.2% rated B, 10% rated CCC (consisting primarily of airlines) and 29% non-rated. The greatest difference versus our peer group is that the Fund has greater concentrations in the AA and AAA categories offset by a lower weighting in non-rated issues. Ultimately, we would look to move down the credit spectrum as credit spreads widen. How would you characterize the Fund's position at the close of the period? At December 31, 2006, the Fund was positioned somewhat more aggressively than its peers in terms of duration, partly reflecting the less seasoned nature of the portfolio's current holdings. Yields have declined in recent years, generating a more conservative interest rate risk profile for more seasoned issues commonly held by the Fund's peers. As mentioned previously, however, our credit profile at period-end was somewhat more conservative than that of our peers. We anticipate that this posture will evolve gradually as valuation improves and opportunities present themselves. Theodore R. Jaeckel Jr., CFA Vice President and Portfolio Manager Walter O'Connor Portfolio Manager January 12, 2007 Insured Fund is managed by a team of investment professionals comprised of Michael A. Kalinoski, Director at BlackRock, Robert A. DiMella, Managing Director at BlackRock, Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, and Walter O'Connor, Managing Director at BlackRock. Mr. Kalinoski is the Fund's lead portfolio manager and is responsible for the day-to-day management of the Fund's portfolio. National Fund is managed by a team of investment professionals comprised of Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, and Walter O'Connor, Managing Director at BlackRock. Mr. O'Connor is the Fund's lead portfolio manager and is responsible for the day-to-day management of the Fund's portfolio. High Yield Fund is managed by a team of investment professionals comprised of Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock and Walter O'Connor, Managing Director at BlackRock. Mr. Jaeckel is the Fund's lead portfolio manager and is responsible for the day-to-day management of the Fund's portfolio. Mr. Kalinoski joined BlackRock in 2006. Prior to joining BlackRock, he was a Director (Municipal Tax-Exempt Fund Management) of Merrill Lynch Investment Managers, L.P. ("MLIM") since 2006 and was a Vice President of MLIM from 1999 to 2006. He has been a portfolio manager with BlackRock or MLIM since 1999. Mr. Jaeckel joined BlackRock in 2006. Prior to joining BlackRock, he was a Managing Director (Municipal Tax-Exempt Fund Management) of MLIM from 2005 to 2006 and a Director of MLIM from 1997 to 2005. He has been a portfolio manager with BlackRock or MLIM since 1991. Mr. O'Connor joined BlackRock in 2006. Prior to joining BlackRock, he was a Managing Director (Municipal Tax-Exempt Fund Management) of MLIM from 2003 to 2006 and was a Director of MLIM from 1997 to 2002. He has been a portfolio manager with BlackRock or MLIM since 1991. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data About Fund Performance Effective, October 2, 2006, BlackRock Short-Term Municipal Fund's Class A, Class B and Class I Shares were redesignated Investor A1, Investor B and Institutional Shares, respectively. All Class C Shares of the BlackRock Short- Term Municipal Fund converted to Class A (now Investor A1) shares on August 25, 2006 and are no longer outstanding. BlackRock Municipal Insured Fund's and BlackRock National Municipal Fund's Class A, Class B, Class C and Class I Shares were redesignated Investor A, Investor B, Investor C1 and Institutional Shares, respectively. BlackRock High Yield Municipal Fund's Class A, Class C and Class I Shares were redesignated Investor A, Investor C and Institutional Shares, respectively. Also, effective October 2, 2006 BlackRock Short-Term Municipal Fund's BlackRock Shares, Investor A Shares and Investor C Shares commenced operations and BlackRock Municipal Insured Fund's and BlackRock National Municipal Fund's Investor C Shares commenced operations. As previously communicated to shareholders, new sales charge schedules came into effect at the same time for certain of these shares. BlackRock Short-Term Municipal Fund * BlackRock Shares are not subject to any front-end sales charge. BlackRock Shares bear no ongoing distribution or service fees and are available only to eligible investors. Prior to October 2, 2006, BlackRock Share performance results are those of the Institutional Shares (which have no distribution or service fees) restated to reflect BlackRock Share fees. * Institutional Shares are not subject to any front-end sales charge. Institutional Shares bear no ongoing distribution or service fees and are available only to eligible investors. * Investor A Shares incur a maximum initial sales charge (front-end load) of 3% and a service fee of 0.25% per year (but no distribution fee). Prior to October 2, 2006, Investor A Share performance results are those of the Institutional Shares (which have no distribution or service fees) restated to reflect Investor A Share fees. * Investor A1 Shares incur a maximum initial sales charge (front-end load) of 1% and a service fee of 0.10% per year (but no distribution fee). * Investor B Shares are subject to a maximum contingent deferred sales charge of 1% declining to 0% after three years. In addition, Investor B Shares are subject to a distribution fee of 0.20% per year and a service fee of 0.15% per year. These shares automatically convert to Investor A Shares after approximately 10 years. (There is no initial sales charge for automatic share conversions.) * Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. In addition, Investor C shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. Prior to October 2, 2006, Investor C Share performance results are those of the Institutional Shares (which have no distribution or service fees) restated to reflect Investor C Share fees. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (continued) BlackRock Municipal Insured Fund and BlackRock National Municipal Fund * Institutional Shares are not subject to any front-end sales charge. Institutional Shares bear no ongoing distribution or service fees and are available only to eligible investors. * Investor A Shares incur a maximum initial sales charge (front-end load) of 4.25% and a service fee of 0.25% per year (but no distribution fee). * Investor B Shares are subject to a maximum contingent deferred sales charge of 4% declining to 0% after six years. In addition, Investor B Shares are subject to a distribution fee of 0.50% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately 10 years. (There is no initial sales charge for automatic share conversions.) All returns for periods greater than 10 years reflect this conversion. * Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. In addition, Investor C shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. Prior to October 2, 2006, Investor C Share performance results are those of the Institutional Shares (which have no distribution or service fees) restated to reflect Investor C Share fees. * Investor C1 Shares are subject to a distribution fee of 0.55% per year and a service fee of 0.25% per year. In addition, Investor C1 shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. BlackRock High Yield Municipal Fund * Institutional Shares are not subject to any front-end sales charge. Institutional Shares bear no ongoing distribution or service fees and are available only to eligible investors. * Investor A Shares incur a maximum initial sales charge (front-end load) of 4.25% and a service fee of 0.25% per year (but no distribution fee). * Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. In addition, Investor C shares are subject to a 1% contingent deferred sales charge if redeemed within one year of purchase. Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in each of the 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 service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund's Manager and FAM, the Fund's previous manager, reimbursed a portion of its management fee. Without such reimbursement, performance would have been lower. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (continued) Recent Performance Results*
10-Year/ Since 6-Month 12-Month Inception Standardized As of December 31, 2006 Total Return Total Return Total Return 30-day Yield Short-Term Municipal Fund BlackRock Shares +2.02% +2.85% +36.06% 3.28% Short-Term Municipal Fund Institutional Shares +2.02 +2.85 +36.06 3.28 Short-Term Municipal Fund Investor A Shares +1.89 +2.59 +32.71 2.94 Short-Term Municipal Fund Investor A1 Shares +1.97 +2.85 +34.86 3.15 Short-Term Municipal Fund Investor B Shares +1.84 +2.48 +31.31 2.93 Short-Term Municipal Fund Investor C Shares +1.51 +1.83 +23.14 2.28 Municipal Insured Fund Institutional Shares +4.60 +4.58 +68.21 3.57 Municipal Insured Fund Investor A Shares +4.60 +4.45 +64.10 3.18 Municipal Insured Fund Investor B Shares +4.34 +3.92 +56.00 2.81 Municipal Insured Fund Investor C Shares +4.22 +3.69 +52.47 2.72 Municipal Insured Fund Investor C1 Shares +4.31 +3.87 +55.23 2.76 National Municipal Fund Institutional Shares +4.47 +5.38 +74.26 3.92 National Municipal Fund Investor A Shares +4.34 +5.22 +70.01 3.51 National Municipal Fund Investor B Shares +4.07 +4.69 +61.60 3.16 National Municipal Fund Investor C Shares +3.95 +4.33 +57.74 2.92 National Municipal Fund Investor C1 Shares +4.05 +4.53 +60.81 3.11 High Yield Municipal Fund Institutional Shares -- -- + 3.58 4.38 High Yield Municipal Fund Investor A Shares -- -- + 3.29 3.95 High Yield Municipal Fund Investor C Shares -- -- + 3.16 3.37 Lehman Brothers 3-Year General Obligation Bond Index++ +2.51 +3.06 +48.11 -- Lehman Brothers Municipal Bond Index++++ +4.55 +4.84 +74.99/+3.25 -- * 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. All of the Funds' 10-year/since inception returns are for the 10-year period except for High Yield Municipal Fund's 10-year/since inception returns, which are from 8/01/06. ++ This unmanaged Index consists of state and local government obligation bonds that mature in three - four years, rated Baa or better. The 10-year/since inception total return is for the 10-year period. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. 10-Year/Since Inception total returns are for 10 years and from 8/01/06, respectively.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (continued) BlackRock Short-Term Municipal Fund Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in BlackRock Shares*++, Institutional Shares*++, Investor A Shares*++, Investor A1 Shares*++, Investor B Shares*++ and Investor C Shares*++ compared to a similar investment in Lehman Brothers Municipal Bond Index++++ and Lehman Brothers 3-Year General Obligation Bond Index++++++. Values illustrated are as follows: BlackRock Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,421.00 December 1998 $10,901.00 December 1999 $11,124.00 December 2000 $11,686.00 December 2001 $12,294.00 December 2002 $12,760.00 December 2003 $12,953.00 December 2004 $13,046.00 December 2005 $13,229.00 December 2006 $13,606.00 Institutional Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,421.00 December 1998 $10,901.00 December 1999 $11,124.00 December 2000 $11,686.00 December 2001 $12,294.00 December 2002 $12,760.00 December 2003 $12,953.00 December 2004 $13,046.00 December 2005 $13,229.00 December 2006 $13,606.00 Investor A Shares*++ Date Value December 1996 $ 9,700.00 December 1997 $10,084.00 December 1998 $10,521.00 December 1999 $10,710.00 December 2000 $11,223.00 December 2001 $11,777.00 December 2002 $12,194.00 December 2003 $12,347.00 December 2004 $12,405.00 December 2005 $12,548.00 December 2006 $12,873.00 Investor A1 Shares*++ Date Value December 1996 $ 9,700.00 December 1997 $10,317.00 December 1998 $10,770.00 December 1999 $10,980.00 December 2000 $11,534.00 December 2001 $12,122.00 December 2002 $12,570.00 December 2003 $12,747.00 December 2004 $12,827.00 December 2005 $12,981.00 December 2006 $13,351.00 Investor B Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,395.00 December 1998 $10,823.00 December 1999 $11,006.00 December 2000 $11,520.00 December 2001 $12,076.00 December 2002 $12,490.00 December 2003 $12,635.00 December 2004 $12,681.00 December 2005 $12,813.00 December 2006 $13,131.00 Investor C Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,318.00 December 1998 $10,686.00 December 1999 $10,796.00 December 2000 $11,229.00 December 2001 $11,696.00 December 2002 $12,019.00 December 2003 $12,079.00 December 2004 $12,046.00 December 2005 $12,093.00 December 2006 $12,314.00 Lehman Brothers Municipal Bond Index++++ Date Value December 1996 $10,000.00 December 1997 $10,919.00 December 1998 $11,627.00 December 1999 $11,388.00 December 2000 $12,718.00 December 2001 $13,370.00 December 2002 $14,654.00 December 2003 $15,433.00 December 2004 $16,124.00 December 2005 $16,691.00 December 2006 $17,499.00 Lehman Brothers 3-Year General Obligation Bond Index++++++ Date Value December 1996 $10,000.00 December 1997 $10,541.00 December 1998 $11,085.00 December 1999 $11,298.00 December 2000 $12,004.00 December 2001 $12,764.00 December 2002 $13,612.00 December 2003 $13,983.00 December 2004 $14,252.00 December 2005 $14,372.00 December 2006 $14,811.00 * Assuming maximum sales charge, if any, transaction costs and other operating expenses, including advisory fees. ++ The Fund invests primarily in investment grade municipal bonds (bonds rated Baa or better) with a maximum maturity not to exceed four years. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. ++++++ This unmanaged Index consists of state and local government obligation bonds that mature in three - four years, rated Baa or better. Past performance is not indicative of future results. Average Annual Total Return Return BlackRock Shares One Year Ended 12/31/06 +2.85% Five Years Ended 12/31/06 +2.05 Ten Years Ended 12/31/06 +3.13 Return Institutional Shares One Year Ended 12/31/06 +2.85% Five Years Ended 12/31/06 +2.05 Ten Years Ended 12/31/06 +3.13 Return Without Return With Sales Charge Sales Charge* Investor A Shares One Year Ended 12/31/06 +2.59% -0.48% Five Years Ended 12/31/06 +1.80 +1.18 Ten Years Ended 12/31/06 +2.87 +2.56 Return Without Return With Sales Charge Sales Charge** Investor A1 Shares One Year Ended 12/31/06 +2.85% +1.82% Five Years Ended 12/31/06 +1.95 +1.74 Ten Years Ended 12/31/06 +3.04 +2.93 Return Return Without CDSC With CDSC++++++ Investor B Shares++ One Year Ended 12/31/06 +2.48% +1.49% Five Years Ended 12/31/06 +1.69 +1.69 Ten Years Ended 12/31/06 +2.76 +2.76 Return Return Without CDSC With CDSC++++++ Investor C Shares++++ One Year Ended 12/31/06 +1.83% +0.83% Five Years Ended 12/31/06 +1.04 +1.04 Ten Years Ended 12/31/06 +2.10 +2.10 * Assuming maximum sales charge of 3%. ** Assuming maximum sales charge of 1%. ++ 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 MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (continued) BlackRock Municipal Insured Fund Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Institutional Shares*++, Investor A Shares*++, Investor B Shares*++, Investor C Shares*++ and Investor C1 Shares*++ compared to a similar investment in Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Institutional Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,876.00 December 1998 $11,499.00 December 1999 $10,899.00 December 2000 $12,239.00 December 2001 $12,836.00 December 2002 $14,117.00 December 2003 $14,773.00 December 2004 $15,469.00 December 2005 $16,084.00 December 2006 $16,821.00 Investor A Shares*++ Date Value December 1996 $ 9,600.00 December 1997 $10,415.00 December 1998 $10,984.00 December 1999 $10,372.00 December 2000 $11,634.00 December 2001 $12,171.00 December 2002 $13,351.00 December 2003 $13,940.00 December 2004 $14,541.00 December 2005 $15,082.00 December 2006 $15,713.00 Investor B Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,794.00 December 1998 $11,326.00 December 1999 $10,641.00 December 2000 $11,875.00 December 2001 $12,361.00 December 2002 $13,491.00 December 2003 $14,015.00 December 2004 $14,546.00 December 2005 $15,011.00 December 2006 $15,600.00 Investor C Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,768.00 December 1998 $11,272.00 December 1999 $10,578.00 December 2000 $11,761.00 December 2001 $12,213.00 December 2002 $13,298.00 December 2003 $13,779.00 December 2004 $14,284.00 December 2005 $14,705.00 December 2006 $15,247.00 Investor C1 Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,789.00 December 1998 $11,315.00 December 1999 $10,625.00 December 2000 $11,852.00 December 2001 $12,330.00 December 2002 $13,451.00 December 2003 $13,966.00 December 2004 $14,488.00 December 2005 $14,944.00 December 2006 $15,523.00 Lehman Brothers Municipal Bond Index++++ Date Value December 1996 $10,000.00 December 1997 $10,919.00 December 1998 $11,627.00 December 1999 $11,388.00 December 2000 $12,718.00 December 2001 $13,370.00 December 2002 $14,654.00 December 2003 $15,433.00 December 2004 $16,124.00 December 2005 $16,691.00 December 2006 $17,499.00 * Assuming maximum sales charge, if any, transaction costs and other operating expenses, including advisory fees. ++ The Fund invests primarily in long-term, investment grade municipal bonds (bonds rated Baa or better) covered by portfolio insurance guaranteeing the timely payment of principal at maturity and interest. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. Past performance is not indicative of future results. Average Annual Total Return Return Institutional Shares One Year Ended 12/31/06 +4.58% Five Years Ended 12/31/06 +5.56 Ten Years Ended 12/31/06 +5.34 Return Without Return With Sales Charge Sales Charge* Investor A Shares One Year Ended 12/31/06 +4.45% +0.01% Five Years Ended 12/31/06 +5.30 +4.39 Ten Years Ended 12/31/06 +5.08 +4.62 Return Return Without CDSC With CDSC++++++ Investor B Shares++ One Year Ended 12/31/06 +3.92% -0.06% Five Years Ended 12/31/06 +4.76 +4.43 Ten Years Ended 12/31/06 +4.55 +4.55 Return Return Without CDSC With CDSC++++++ Investor C Shares++++ One Year Ended 12/31/06 +3.69% +2.69% Five Years Ended 12/31/06 +4.54 +4.54 Ten Years Ended 12/31/06 +4.31 +4.31 Return Return Without CDSC With CDSC++++++ Investor C1 Shares++++ One Year Ended 12/31/06 +3.87% +2.88% Five Years Ended 12/31/06 +4.71 +4.71 Ten Years Ended 12/31/06 +4.50 +4.50 * Assuming maximum sales charge of 4.25%. ++ Maximum contingent deferred sales charge is 4% and is reduced to 0% after six years. ++++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after one year. ++++++ Assuming payment of applicable contingent deferred sales charge. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (continued) BlackRock National Municipal Fund Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Institutional Share*s++, Investor A Shares*++, Investor B Shares*++, Investor C Shares*++ and Investor C1 Shares*++ compared to a similar investment in Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Institutional Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,935.00 December 1998 $11,514.00 December 1999 $10,892.00 December 2000 $12,242.00 December 2001 $12,857.00 December 2002 $14,069.00 December 2003 $14,959.00 December 2004 $15,779.00 December 2005 $16,536.00 December 2006 $17,426.00 Investor A Shares*++ Date Value December 1996 $ 9,600.00 December 1997 $10,462.00 December 1998 $10,998.00 December 1999 $10,379.00 December 2000 $11,624.00 December 2001 $12,191.00 December 2002 $13,293.00 December 2003 $14,101.00 December 2004 $14,852.00 December 2005 $15,512.00 December 2006 $16,278.00 Investor B Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,853.00 December 1998 $11,341.00 December 1999 $10,647.00 December 2000 $11,865.00 December 2001 $12,380.00 December 2002 $13,432.00 December 2003 $14,177.00 December 2004 $14,856.00 December 2005 $15,437.00 December 2006 $16,160.00 Investor C Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,827.00 December 1998 $11,287.00 December 1999 $10,571.00 December 2000 $11,764.00 December 2001 $12,233.00 December 2002 $13,253.00 December 2003 $13,952.00 December 2004 $14,571.00 December 2005 $15,119.00 December 2006 $15,774.00 Investor C1 Shares*++ Date Value December 1996 $10,000.00 December 1997 $10,847.00 December 1998 $11,341.00 December 1999 $10,632.00 December 2000 $11,854.00 December 2001 $12,350.00 December 2002 $13,405.00 December 2003 $14,142.00 December 2004 $14,798.00 December 2005 $15,384.00 December 2006 $16,081.00 Lehman Brothers Municipal Bond Index++++ Date Value December 1996 $10,000.00 December 1997 $10,919.00 December 1998 $11,627.00 December 1999 $11,388.00 December 2000 $12,718.00 December 2001 $13,370.00 December 2002 $14,654.00 December 2003 $15,433.00 December 2004 $16,124.00 December 2005 $16,691.00 December 2006 $17,499.00 * Assuming maximum sales charge, if any, transaction costs and other operating expenses, including advisory fees. ++ The Fund invests primarily in long-term municipal bonds rated in any rating category. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. Past performance is not indicative of future results. Average Annual Total Return Return Institutional Shares One Year Ended 12/31/06 +5.38% Five Years Ended 12/31/06 +6.27 Ten Years Ended 12/31/06 +5.71 Return Without Return With Sales Charge Sales Charge* Investor A Shares One Year Ended 12/31/06 +5.22% +0.74% Five Years Ended 12/31/06 +6.01 +5.09 Ten Years Ended 12/31/06 +5.45 +4.99 Return Return Without CDSC With CDSC++++++ Investor B Shares++ One Year Ended 12/31/06 +4.69% +0.69% Five Years Ended 12/31/06 +5.47 +5.15 Ten Years Ended 12/31/06 +4.92 +4.92 Return Return Without CDSC With CDSC++++++ Investor C Shares++++ One Year Ended 12/31/06 +4.33% +3.33% Five Years Ended 12/31/06 +5.22 +5.22 Ten Years Ended 12/31/06 +4.66 +4.66 Return Return Without CDSC With CDSC++++++ Investor C1 Shares++++ One Year Ended 12/31/06 +4.53% +3.53% Five Years Ended 12/31/06 +5.42 +5.42 Ten Years Ended 12/31/06 +4.87 +4.87 * Assuming maximum sales charge of 4.25%. ++ Maximum contingent deferred sales charge is 4% and is reduced to 0% after six years. ++++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after one year. ++++++ Assuming payment of applicable contingent deferred sales charge. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Performance Data (concluded) BlackRock High Yield Municipal Fund Aggregate Total Return Return Institutional Shares Inception (8/01/06) to 12/31/06 +3.58% Return Without Return With Sales Charge Sales Charge* Investor A Shares Inception (8/01/06) to 12/31/06 +3.29% -1.10% Return Return Without CDSC With CDSC++++ Class C Shares++ Inception (8/01/06) to 12/31/06 +3.16% +2.16% * Assuming maximum sales charge of 4.25%. ++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after one year. ++++ Assuming payment of applicable contingent deferred sales charge. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses Shareholders of these Funds 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 July 1, 2006 and held through December 31, 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 of each Fund 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 of each Fund 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. BlackRock Short-Term Municipal Fund
Expenses Paid Ending During the Period Account Value Ended++++ Beginning December 31, December 31, Account Value++ 2006 2006* Actual BlackRock Shares $1,000 $1,020.20 $2.08 Institutional $1,000 $1,020.20 $1.99 Investor A $1,000 $1,018.90 $1.55 Investor A1 $1,000 $1,019.70 $2.58 Investor B $1,000 $1,018.40 $3.95 Investor C $1,000 $1,015.10 $3.43 Hypothetical (5% annual return before expenses)** BlackRock Shares $1,000 $1,023.01 $2.08 Institutional $1,000 $1,010.64 $1.98 Investor A $1,000 $1,011.07 $1.55 Investor A1 $1,000 $1,022.51 $2.59 Investor B $1,000 $1,021.16 $3.95 Investor C $1,000 $1,009.20 $3.42 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.35% for BlackRock, .41% for Institutional, .61% for Investor A, .51% for Investor A1, .78% for Investor B and 1.35% for Investor C), multiplied by the average account value over the period, multiplied by 183/365 for Institutional, Investor A1 and Investor B Shares and 92/365 for BlackRock, Investor A and Investor C Shares (to reflect the one-half year period for Institutional, Investor A1 and Investor B Shares and the actual days since inception for BlackRock, Investor A and Investor C Shares.) ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year for Institutional, Investor A1 and Investor B Shares and the actual days since inception for BlackRock, Investor A and Investor C Shares divided by 365. ++ July 1, 2006 for Institutional, Investor A1 and Investor B Shares and October 2, 2006 (commencement of operations) for BlackRock, Investor A and Investor C Shares. ++++ The period represents the six months ended for Institutional, Investor A1 and Investor B Shares and from October 2, 2006 (commencement of operations) to December 31, 2006 for BlackRock, Investor A and Investor C Shares.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses (continued) BlackRock Municipal Insured Fund Including Interest Expense and Fees
Expenses Paid Ending During the Period Account Value Ended++++ Beginning December 31, December 31, Account Value++ 2006 2006* Actual Institutional $1,000 $1,046.00 $4.36 Investor A $1,000 $1,046.00 $5.64 Investor B $1,000 $1,043.40 $8.25 Investor C $1,000 $1,042.20 $4.61 Investor C1 $1,000 $1,043.10 $8.55 Hypothetical (5% annual return before expenses)** Institutional $1,000 $1,020.84 $4.31 Investor A $1,000 $1,019.58 $5.57 Investor B $1,000 $1,017.03 $8.14 Investor C $1,000 $1,008.09 $4.53 Investor C1 $1,000 $1,016.73 $8.44 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.85% for Institutional, 1.10% for Investor A, 1.61% for Investor B, 1.79% for Investor C and 1.67% for Investor C1), multiplied by the average account value over the period, multiplied by 183/365 for Institutional, Investor A, Investor B and Investor C1 Shares and 92/365 for Investor C Shares (to reflect the one-half year period for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares.) ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares divided by 365. ++ July 1, 2006 for Institutional, Investor A, Investor B and Investor C1 Shares and October 2, 2006 (commencement of operations) for Investor C Shares. ++++ The period represents the six months ended for Institutional, Investor A, Investor B and Investor C1 Shares and from October 2, 2006 (commencement of operations) to December 31, 2006 for Investor C Shares.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses (continued) BlackRock Municipal Insured Fund Excluding Interest Expense and Fees
Expenses Paid Ending During the Period Account Value Ended++++ Beginning December 31, December 31, Account Value++ 2006 2006* Actual Institutional $1,000 $1,046.00 $2.31 Investor A $1,000 $1,046.00 $3.59 Investor B $1,000 $1,043.40 $6.20 Investor C $1,000 $1,042.20 $3.58 Investor C1 $1,000 $1,043.10 $6.50 Hypothetical (5% annual return before expenses)** Institutional $1,000 $1,022.81 $2.28 Investor A $1,000 $1,021.56 $3.55 Investor B $1,000 $1,019.00 $6.12 Investor C $1,000 $1,009.10 $3.52 Investor C1 $1,000 $1,018.73 $6.43 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.45% for Institutional, .70% for Investor A, 1.21% for Investor B, 1.39% for Investor C and 1.27% for Investor C1), multiplied by the average account value over the period, multiplied by 183/365 for Institutional, Investor A, Investor B and Investor C1 Shares and 92/365 for Investor C Shares (to reflect the one-half year period for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares.) ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares divided by 365. ++ July 1, 2006 for Institutional, Investor A, Investor B and Investor C1 Shares and October 2, 2006 (commencement of operations) for Investor C Shares. ++++ The period represents the six months ended for Institutional, Investor A, Investor B and Investor C1 Shares and from October 2, 2006 (commencement of operations) to December 31, 2006 for Investor C Shares.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses (continued) BlackRock National Municipal Fund Including Interest Expense and Fees
Expenses Paid Ending During the Period Account Value Ended++++ Beginning December 31, December 31, Account Value++ 2006 2006* Actual Institutional $1,000 $1,044.70 $5.02 Investor A $1,000 $1,043.40 $6.30 Investor B $1,000 $1,040.70 $8.90 Investor C $1,000 $1,039.50 $5.14 Investor C1 $1,000 $1,040.50 $9.21 Hypothetical (5% annual return before expenses)** Institutional $1,000 $1,020.19 $4.96 Investor A $1,000 $1,018.93 $6.23 Investor B $1,000 $1,016.38 $8.80 Investor C $1,000 $1,007.56 $5.06 Investor C1 $1,000 $1,016.08 $9.10 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.98% for Institutional, 1.23% for Investor A, 1.74% for Investor B, 2.00% for Investor C and 1.80% for Investor C1), multiplied by the average account value over the period, multiplied by 183/365 for Institutional, Investor A, Investor B and Investor C1 Shares and 92/365 for Investor C Shares (to reflect the one-half year period for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares.) ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares divided by 365. ++ July 1, 2006 for Institutional, Investor A, Investor B and Investor C1 Shares and October 2, 2006 (commencement of operations) for Investor C Shares. ++++ The period represents the six months ended for Institutional, Investor A, Investor B and Investor C1 Shares and from October 2, 2006 (commencement of operations) to December 31, 2006 for Investor C Shares.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses (continued) BlackRock National Municipal Fund Excluding Interest Expense and Fees
Expenses Paid Ending During the Period Account Value Ended++++ Beginning December 31, December 31, Account Value++ 2006 2006* Actual Institutional $1,000 $1,044.70 $2.87 Investor A $1,000 $1,043.40 $4.15 Investor B $1,000 $1,040.70 $6.75 Investor C $1,000 $1,039.50 $4.06 Investor C1 $1,000 $1,040.50 $7.06 Hypothetical (5% annual return before expenses)** Institutional $1,000 $1,022.29 $2.84 Investor A $1,000 $1,021.04 $4.15 Investor B $1,000 $1,018.48 $6.75 Investor C $1,000 $1,008.62 $4.00 Investor C1 $1,000 $1,018.18 $7.06 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.56% for Institutional, .81% for Investor A, 1.32% for Investor B, 1.58% for Investor C and 1.38% for Investor C1), multiplied by the average account value over the period, multiplied by 183/365 for Institutional, Investor A, Investor B and Investor C1 Shares and 92/365 for Investor C Shares (to reflect the one-half year period for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares.) ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half year for Institutional, Investor A, Investor B and Investor C1 Shares and the actual days since inception for Investor C Shares divided by 365. ++ July 1, 2006 for Institutional, Investor A, Investor B and Investor C1 Shares and October 2, 2006 (commencement of operations) for Investor C Shares. ++++ The period represents the six months ended for Institutional, Investor A, Investor B and Investor C1 Shares and from October 2, 2006 (commencement of operations) to December 31, 2006 for Investor C Shares.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Expenses (concluded) BlackRock High Yield Municipal Fund
Expenses Paid Beginning Ending During the Period Account Value Account Value Ended++++ August 1, December 31, December 31, 2006++ 2006 2006* Actual Institutional $1,000 $1,035.80 $2.79 Investor A $1,000 $1,032.90 $3.82 Investor C $1,000 $1,031.60 $7.03 Hypothetical (5% annual return before expenses)** Institutional $1,000 $1,018.35 $2.77 Investor A $1,000 $1,017.34 $3.79 Investor C $1,000 $1,014.18 $6.97 * For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.64% for Institutional, .89% for Investor A and 1.64% for Investor C), multiplied by the average account value over the period, multiplied by 154/365 (to reflect the actual days since inception). ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days since inception divided by 365. ++ Commencement of operations. ++++ The period represents August 1, 2006 (commencement of operations) to December 31, 2006.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments as of December 31, 2006 (In Thousands) BlackRock Short-Term Municipal Fund Face Amount Municipal Bonds Value Alabama--4.7% $ 6,075 Birmingham, Alabama, Special Care Facilities Financing Authority Revenue Bonds (Ascension Health Subordinate Credit Group), Series A, 5% due 10/01/2008 $ 6,212 8,095 Huntsville, Alabama, GO, Refunding, Series A, 5.25% due 2/01/2009 (f) 8,356 Alaska--0.4% 1,250 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (ConocoPhillips Company Project), VRDN, 3.77% due 5/01/2007 (b) 1,250 Arizona--0.4% 1,378 Tierra Antigua, Arizona, Revenue Bonds, VRDN, AMT, Series A, 3.76% due 12/01/2034 (b) 1,378 California--1.4% 750 California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds (Republic Services, Inc. Project), VRDN, AMT, 4.15% due 3/01/2028 (b) 750 3,650 Contra Costa County, California, M/F Housing Revenue Bonds (Pleasant Hill Bart Transit Station Project), VRDN, AMT, Series A, 3.95% due 12/05/2007 (b) 3,652 Colorado--2.4% 7,500 Colorado State, General Fund Revenue Bonds, RAN, 4.50% due 6/27/2007 7,532 Florida--8.2% 10,000 Florida Hurricane Catastrophe Fund Financing Corporation Revenue Bonds, Series A, 5% due 7/01/2008 10,205 14,195 Orange County, Florida, Tourist Development, Tax Revenue Bonds, 5.50% due 10/01/2009 (a)(c) 14,911 250 Putnam County, Florida, Development Authority, PCR (Seminole Electric Cooperative, Inc. Project), VRDN, Series H-4, 3.55% due 3/15/2007 (b) 250 Georgia--7.7% 5,600 Catoosa County, Georgia, School District, GO, 4.25% due 8/01/2008 (g) 5,656 6,005 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds, Series DD, 7% due 1/01/2008 (g) 6,201 11,905 Georgia State, GO, Series B, 5% due 3/01/2008 12,102 Illinois--1.8% 5,390 Du Page County, Illinois, Transportation Revenue Refunding Bonds, 4.50% due 1/01/2009 (f) 5,481 Face Amount Municipal Bonds Value Indiana--0.3% $ 1,000 Indiana State Development Finance Authority, IDR (Republic Services, Inc. Project), VRDN, AMT, 4.27% due 11/01/2035 (b) $ 1,000 Kansas--0.6% 2,000 Junction City, Kansas, Temporary Notes, GO, Series D, 5% due 8/01/2007 2,011 Louisiana--3.2% 3,700 Louisiana HFA, S/F Mortgage Revenue Bonds, VRDN, AMT, 4.71% due 11/28/2008 (b) 3,700 6,200 Louisiana HFA, S/F Mortgage Revenue Refunding Bonds, VRDN, AMT, 4.784% due 4/30/2007 (b) 6,200 Maryland--0.3% 1,000 Maryland State Community Development Administration, Department of Housing and Community Development, Residential Revenue Refunding Bonds, AMT, Series D, 3.40% due 3/07/2007 999 Massachusetts--5.1% 6,830 Massachusetts Municipal Wholesale Electric Company, Power Supply System Revenue Refunding Bonds (Nuclear Mix Number 1 Issue), Series A, 5% due 7/01/2008 (g) 6,966 8,505 Massachusetts State, Consolidated Loan, GO, Series C, 5% due 5/01/2008 (h) 8,660 Michigan--0.1% 280 Michigan State Strategic Fund, Limited Obligation Revenue Bonds (Kay Screen Printing, Inc. Project), VRDN, AMT, 4.20% due 5/01/2020 (b) 280 Minnesota--2.6% 500 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports Commission, Airport Revenue Bonds, AMT, Series B, 5.50% due 1/01/2010 (d) 522 7,385 Minnesota State, GO, Refunding, 5% due 8/01/2007 7,446 Nevada--4.7% 6,500 Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds, AMT, Series B-1, 5% due 7/01/2008 6,621 7,500 Clark County, Nevada, EDR (Alexander Dawson School of Nevada Project), 5.50% due 5/15/2009 (c) 7,887 Portfolio Abbreviations To simplify the listings of BlackRock Municipal Bond Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list at right. AMT Alternative Minimum Tax (subject to) BAN Bond Anticipation Notes CARS Complementary Auction Rate Securities COP Certificates of Participation CP Commercial Paper DRIVERS Derivative Inverse Tax-Exempt Receipts EDA Economic Development Authority EDR Economic Development Revenue Bonds GO General Obligation Bonds HDA Housing Development Agency HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds M/F Multi-Family PCR Pollution Control Revenue Bonds PILOT Payment in Lieu of Taxes RAN Revenue Anticipation Notes RIB Residual Interest Bonds ROLS Reset Option Long Securities S/F Single-Family TRAN Tax Revenue Anticipation Notes VRDN Variable Rate Demand Notes BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock Short-Term Municipal Fund Face Amount Municipal Bonds Value New Mexico--1.9% $ 5,685 New Mexico State, Severance Tax Bonds, Series A, 5% due 7/01/2008 (g) $ 5,802 New York--3.8% 11,565 Long Island Power Authority, New York, Electric System Revenue Bonds, Series C, 5.50% due 9/01/2013 (c) 11,825 Ohio--2.7% 3,505 Ohio State, Infrastructure Improvement, GO, Refunding, Series A, 5% due 8/01/2010 3,664 4,400 Ohio State Building Authority, State Facilities Revenue Bonds (Administrative Building Fund Projects), Series A, 5.375% due 10/01/2008 (c) 4,577 Oklahoma--2.5% 4,150 Tulsa County, Oklahoma, Industrial Authority, Capital Improvements Revenue Bonds, Series D, 5% due 7/01/2009 (f) 4,283 3,300 Tulsa Oklahoma, Public Facilities Authority, Capital Improvement Revenue Bonds, Series A, 4.375% due 6/01/2008 (a) 3,336 Pennsylvania--5.5% 10,250 Allegheny County, Pennsylvania, Port Authority, Special Revenue Transportation Bonds, 6.375% due 3/01/2009 (c)(g) 10,937 1,000 Pennsylvania State Higher Educational Facilities Authority, Revenue Refunding Bonds (University of Scranton Project), VRDN, Series C, 3.50% due 5/01/2007 (b)(e) 999 5,000 Pennsylvania State, GO, Refunding, Third Series, 5% due 7/01/2009 5,166 South Carolina--3.0% 4,590 Aiken County, South Carolina, Consolidated School District, GO, Refunding, 5% due 3/01/2009 4,724 Hilton Head Island, South Carolina, Public Facility Corporation, COP (Beach Preservation Fee Pledge) (g): 2,160 5% due 8/01/2008 2,206 2,240 5% due 8/01/2009 2,315 Tennessee--6.7% 11,500 Metropolitan Government of Nashville and Davidson County, Tennessee, Health and Education Facilities Board Revenue Refunding Bonds (Ascension Health Credit), VRDN, Series B-1, 3.72% due 8/03/2007 (b) 11,505 4,000 Tennessee Energy Acquisition Corporation, Gas Revenue Bonds, Series A, 5% due 9/01/2009 4,129 5,000 Tennessee State Local Development Authority Revenue Bonds (Student Loan Programs), BAN, Series A, 5% due 5/17/2007 5,025 Texas--7.6% 5,000 Harris County, Texas, Toll Road Revenue Refunding Bonds, VRDN, Series B-2, 5% due 8/15/2009 (b)(d) 5,146 5,120 Houston, Texas, Public Improvement, GO, Refunding, Series A, 5% due 3/01/2010 (g) 5,323 Face Amount Municipal Bonds Value Texas (concluded) $ 2,200 Montgomery County, Texas, Unlimited Tax Adjustable Rate Road, GO, VRDN, Series B, 5% due 9/01/2008 (b)(f) $ 2,247 2,790 North Texas Thruway Authority, Dallas North Thruway System, Revenue Refunding Bonds, VRDN, Series B, 5% due 7/01/2008 (a)(b) 2,844 2,500 San Antonio, Texas, Electric and Gas System, Junior Lien Revenue Bonds, VRDN, 3.55% due 12/01/2007 (b) 2,500 5,455 Texas State Transportation Commission, First Tier Revenue Bonds, 5% due 4/01/2008 5,547 Virginia--4.0% 7,050 Virginia State Public Building Authority, Public Facilities Revenue Bonds, Series A, 5% due 8/01/2009 7,292 4,885 Virginia State Public School Authority, School Financing Revenue Bonds, Series B, 5% due 8/01/2008 (c) 5,041 Washington--7.5% 9,940 Energy Northwest, Washington, Electric Revenue Refunding Bonds (Columbia Generating Station), Series A, 5.25% due 7/01/2009 (a) 10,322 5,000 Washington State Public Power Supply System, Revenue Refunding Bonds (Nuclear Project Number 1), Series C, 6% due 7/01/2009 (a) 5,276 7,500 Washington State, Various Purpose, GO, Refunding, Series R-A, 5% due 1/01/2009 (a) 7,698 West Virginia--0.3% 1,000 West Virginia State Housing Development Fund, Housing Finance Revenue Bonds, VRDN, AMT, Series B, 3.67% due 4/09/2007 (b) 999 Wisconsin--4.4% 6,500 Madison, Wisconsin, Metropolitan School District, TRAN, 4% due 9/07/2007 6,519 6,890 Wisconsin State, Transportation Revenue Bonds, Series B, 4.50% due 7/01/2009 (a) 7,034 Puerto Rico--2.7% 8,225 Government Development Bank of Puerto Rico, CP, 3.90% due 1/10/2007 8,225 Total Municipal Bonds (Cost--$298,478)--96.5% 298,734 Shares Held Short-Term Securities 6,716 Merrill Lynch Institutional Tax-Exempt Fund, 5.19% (i)(j) 6,716 Total Short-Term Securities (Cost--$6,716)--2.2% 6,716 Total Investments (Cost--$305,194*)--98.7% 305,450 Other Assets Less Liabilities--1.3% 3,900 ---------- Net Assets--100.0% $ 309,350 ========== BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (concluded) BlackRock Short-Term Municipal Fund (In Thousands) * The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 305,194 =============== Gross unrealized appreciation $ 368 Gross unrealized depreciation (112) --------------- Net unrealized appreciation $ 256 =============== (a) AMBAC Insured. (b) Security may have a maturity of more than one year at time of issuance, but has variable rate and demand features that qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based upon prevailing market rates. (c) Prerefunded. (d) FGIC Insured. (e) XL Capital Insured. (f) FSA Insured. (g) MBIA Insured. (h) CIFG Insured. (i) Investments in companies considered to be an affiliate of the Fund, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: Net Dividend Affiliate Activity Income Merrill Lynch Institutional Tax-Exempt Fund (17,928) $196 (j) Represents the current yield as of December 31, 2006. See Notes to Financial Statements. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments as of December 31, 2006 (In Thousands) BlackRock Municipal Insured Fund Face Amount Municipal Bonds Value Alabama--2.0% $10,000 Lauderdale County and Florence, Alabama, Health Care Authority Revenue Refunding Bonds (Coffee Health Group), Series A, 6% due 7/01/2029 (b) $ 10,867 7,000 University of Alabama, University Revenue Bonds (Birmingham), 6% due 10/01/2009 (d)(f) 7,435 Arkansas--0.5% 4,000 University of Arkansas, University Revenue Bonds (Various Facilities-Fayetteville Campus), 5% due 12/01/2027 (d) 4,205 California--18.6% 2,075 California State Department of Veteran Affairs, Home Purpose Revenue Refunding Bonds, Series A, 5.35% due 12/01/2027 (a) 2,216 3,480 East Side Union High School District, California, Santa Clara County, GO (Election of 2002), Series D, 5% due 8/01/2022 (i) 3,720 5,170 Fresno, California, Unified School District, GO (Election of 2001), Series D, 5% due 8/01/2027 (b) 5,522 5,000 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement Revenue Bonds, Series B, 5.50% due 6/01/2013 (d)(f) 5,516 5,000 Los Angeles, California, GO, Series A, 5% due 9/01/2019 (b) 5,263 Los Angeles, California, Unified School District, GO: 24,465 (Election of 1997), Series F, 5% due 1/01/2028 (d) 25,811 21,130 Series A, 5% due 1/01/2028 (b) 22,293 6,680 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue Refunding Bonds, Proposition A, First Tier Senior Series A, 5% due 7/01/2021 (a) 7,183 8,965 Modesto, California, Schools Infrastructure Financing Agency, Special Tax Bonds, 5.50% due 9/01/2036 (a) 9,833 12,040 Mount Diablo, California, Unified School District, GO (Election of 2002), 5% due 7/01/2027 (d) 12,688 5,565 Oakland, California, Alameda County Unified School District, GO (Election of 2006), 5% due 8/01/2024 (c) 5,981 6,440 Palm Springs, California, Financing Authority, Lease Revenue Refunding Bonds (Convention Center Project), Series A, 5.50% due 11/01/2035 (b) 7,160 11,685 Rialto, California, Unified School District, GO, Series A, 6.24% due 6/01/2025 (d)(l) 5,250 5,000 Roseville, California, Joint Union High School District, GO (Election of 2004), Series A, 5% due 8/01/2029 (d) 5,284 5,075 Sacramento, California, Unified School District, GO (Election of 1999), Series B, 5% due 7/01/2026 (d) 5,329 2,685 San Diego, California, Community College District, GO (Election of 2002), 5% due 5/01/2030 (c) 2,850 3,495 San Diego County, California, COP (Edgemoor Project and Regional System), Refunding, 5% due 2/01/2027 (a) 3,678 3,700 San Jose, California, GO (Libraries, Parks and Public Safety Projects), 5% due 9/01/2030 (b) 3,895 10,055 Sequoia, California, Unified High School District, GO, Refunding, Series B, 5.50% due 7/01/2035 (c) 11,280 2,755 Tahoe Truckee, California, Unified School District, GO (School Facilities Improvement District Number 2), Series A, 5.25% due 8/01/2029 (b) 2,946 Face Amount Municipal Bonds Value California (concluded) Tustin, California, Unified School District, Senior Lien Special Tax Bonds (Community Facilities District Number 97-1), Series A (c): $ 7,980 5% due 9/01/2032 $ 8,311 9,330 5% due 9/01/2038 9,698 Colorado--2.7% 19,250 Aurora, Colorado, COP, 6% due 12/01/2010 (a)(f) 20,845 4,000 Logan County, Colorado, Justice Center Finance Corporation, COP, 5.50% due 12/01/2020 (b) 4,293 Florida--0.8% 5,500 Dade County, Florida, Water and Sewer System Revenue Bonds, 5.25% due 10/01/2026 (d) 5,608 1,600 West Coast Regional Water Supply Authority, Florida, Capital Improvement Revenue Bonds, 10.40% due 10/01/2010 (a)(f) 1,752 Georgia--4.0% Georgia Municipal Electric Authority, Power Revenue Refunding Bonds (a): 20,000 Series EE, 7% due 1/01/2025 27,210 90 Series Y, 6.40% due 1/01/2011 (f) 99 490 Series Y, 6.40% due 1/01/2013 (h) 547 8,420 Series Y, 6.40% due 1/01/2013 9,348 Illinois--0.8% 6,600 Chicago, Illinois, O'Hare International Airport, Revenue Refunding Bonds, Third Lien, AMT, Series C-2, 5.25% due 1/01/2034 (i) 6,955 Kansas--0.6% 5,145 Manhattan, Kansas, Hospital Revenue Bonds (Mercy Health Center), 5.50% due 8/15/2020 (c) 5,488 Louisiana--2.2% 2,500 Louisiana State Citizens Property Insurance Corporation, Assessment Revenue Bonds, Series B, 5% due 6/01/2022 (a) 2,672 5,750 Louisiana State, Gas and Fuels Tax Revenue Bonds, Series A, 4.75% due 5/01/2039 (c) 5,894 5,000 New Orleans, Louisiana, GO (Public Improvements), 5.25% due 12/01/2029 (a) 5,361 6,800 Rapides Financing Authority, Louisiana, Revenue Bonds (Cleco Power LLC Project), AMT, 4.70% due 11/01/2036 (a) 6,757 Maryland--0.6% 4,400 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds (University of Maryland Medical System), Series B, 7% due 7/01/2022 (d) 5,776 Massachusetts--4.8% 4,000 Massachusetts State HFA, Rental Housing Mortgage Revenue Bonds, AMT, Series C, 5.60% due 1/01/2045 (c) 4,266 15,000 Massachusetts State School Building Authority, Dedicated Sales Tax Revenue Bonds, Series A, 5% due 8/15/2030 (c) 15,938 22,250 Massachusetts State Special Obligation Dedicated Tax Revenue Bonds, 5.25% due 1/01/2014 (d)(f) 24,347 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock Municipal Insured Fund Face Amount Municipal Bonds Value Minnesota--1.6% $ 5,860 Delano, Minnesota, Independent School District Number 879, GO, Series A, 5.875% due 2/01/2025 (c) $ 6,335 Sauk Rapids, Minnesota, Independent School District Number 047, GO, Series A (b): 3,735 5.65% due 2/01/2020 4,006 4,440 5.70% due 2/01/2021 4,771 Mississippi--1.4% 1,320 Harrison County, Mississippi, Wastewater Management District, Revenue Refunding Bonds (Wastewater Treatment Facilities), Series A, 8.50% due 2/01/2013 (d)(h) 1,657 10,000 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds (Forrest County General Hospital Project), 6% due 1/01/2030 (c) 10,788 Missouri--2.4% Kansas City, Missouri, Airport Revenue Refunding and Improvement Bonds, Series A (b): 12,990 5.50% due 9/01/2013 13,334 9,000 5.50% due 9/01/2014 9,238 Nevada--1.4% 1,300 Clark County, Nevada, IDR (Southwest Gas Corp. Project), AMT, Series A, 4.75% due 9/01/2036 (d) 1,308 10,690 Clark County, Nevada, School District, GO, Series D, 5% due 6/15/2017 (b) 11,496 New Jersey--9.5% 6,810 Cape May County, New Jersey, Industrial Pollution Control Financing Authority, Revenue Refunding Bonds (Atlantic City Electric Company Project), Series A, 6.80% due 3/01/2021 (b) 8,838 Garden State Preservation Trust of New Jersey, Open Space and Farmland Preservation Revenue Bonds, Series A (c): 3,125 5.80% due 11/01/2021 3,595 8,310 5.80% due 11/01/2022 9,564 4,340 5.80% due 11/01/2023 4,995 New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds, Series A (b): 5,000 5% due 7/01/2027 5,278 23,000 5.25% due 7/01/2033 24,740 New Jersey State Transportation Trust Fund Authority, Transportation System Revenue Bonds, Series D: 4,240 5% due 6/15/2018 (a) 4,562 11,530 5% due 6/15/2019 (c) 12,381 13,500 New Jersey State Turnpike Authority, Turnpike Revenue Bonds, Series C, 5% due 1/01/2030 (c) 14,284 New Mexico--1.2% 10,400 New Mexico Finance Authority, Senior Lien State Transportation Revenue Bonds, Series A, 5.125% due 6/15/2018 (b) 11,274 New York--15.0% 4,200 Hudson Yards Infrastructure Corporation, New York, Revenue Bonds, Series A, 5% due 2/15/2047 (d) 4,467 New York City, New York, GO: 11,495 Series C, 5.625% due 3/15/2012 (f)(i) 12,586 5 Series C, 5.625% due 3/15/2018 (i) 6 10,000 Series E, 5% due 11/01/2017 (c) 10,778 18,000 Series I, 6% due 4/15/2012 (c) 18,296 Face Amount Municipal Bonds Value New York (concluded) New York City, New York, Sales Tax Asset Receivable Corporation Revenue Bonds: $ 2 DRIVERS, Series 1133Z, 6.289% due 10/15/2012 (a)(j) $ 2 16,905 Series A, 5% due 10/15/2020 (b) 18,120 15,650 Series A, 5% due 10/15/2032 (a) 16,581 11,795 New York State Dormitory Authority Revenue Bonds (School Districts Financing Program), Series D, 5.25% due 10/01/2023 (b) 12,677 9,110 New York State Urban Development Corporation, Personal Income Tax Revenue Bonds (State Facilities), Series A-1, 5.25% due 3/15/2034 (d) 9,785 5 Niagara Falls, New York, GO, Public Improvement, 6.90% due 3/01/2024 (b) 5 Tobacco Settlement Financing Corporation of New York Revenue Bonds: 22,500 Series A-1, 5.25% due 6/01/2022 (a) 24,091 10,755 Series C-1, 5.50% due 6/01/2020 (d) 11,705 North Carolina--0.3% 3,030 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 14-A, 5.35% due 1/01/2022 (a) 3,131 North Dakota--0.3% 2,740 North Dakota State HFA, Revenue Bonds (Housing Finance Program), Series C, 5.30% due 7/01/2022 (a) 2,820 Ohio--0.9% 8,000 Ohio State Air Quality, Development Authority Revenue Bonds (Dayton Power and Light Company Project), 4.80% due 9/01/2036 (d) 8,121 Oklahoma--0.7% Oklahoma State Industries Authority, Health System Revenue Refunding Bonds (Integris Obligated Group), Series A (b): 2,680 6.25% due 8/15/2009 (f) 2,882 3,705 6.25% due 8/15/2016 3,958 Oregon--1.5% 8,700 Oregon State Department, Administrative Services, COP, Series A, 6.25% due 5/01/2010 (a)(f) 9,479 3,865 Port of Portland, Oregon, Airport Revenue Refunding Bonds (Portland International Airport), AMT, Series 7-B, 7.10% due 1/01/2012 (b)(f) 4,413 Pennsylvania--2.7% 5,765 Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 12th Series B, 7% due 5/15/2020 (b)(h) 6,886 4,420 Philadelphia, Pennsylvania, Redevelopment Authority Revenue Bonds (Neighborhood Transformation), Series A, 5.50% due 4/15/2020 (d) 4,766 12,010 Pittsburgh, Pennsylvania, GO, Series C, 5.25% due 9/01/2018 (c) 13,268 Rhode Island--0.8% 6,815 Rhode Island State Economic Development Corporation, Airport Revenue Bonds, Series B, 6% due 7/01/2010 (d)(f) 7,395 Texas--3.7% 21,230 Dallas-Fort Worth, Texas, International Airport Joint Revenue Refunding and Improvement Bonds, AMT, Series A, 5% due 11/01/2025 (b) 21,594 3,500 Houston, Texas, Water Conveyance System Contract, COP, Series J, 6.25% due 12/15/2013 (a) 4,000 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock Municipal Insured Fund Face Amount Municipal Bonds Value Texas (concluded) $ 8,110 Lewisville, Texas, Independent School District, Capital Appreciation and School Building, GO, Refunding, 4.67% due 8/15/2024 (d)(l) $ 3,584 Texas State Department of Housing and Community Affairs, S/F Mortgage Revenue Bonds, AMT, Series A (b)(e): 2,085 5.45% due 9/01/2023 2,166 2,725 5.50% due 3/01/2026 2,833 Utah--1.8% 9,535 Utah Transit Authority, Sales Tax and Transportation Revenue Bonds (Salt Lake County Light Rail Transit Project), 5.375% due 12/15/2007 (c)(f) 9,788 Utah Water Finance Agency Revenue Bonds (Pooled Loan Financing Program), Series A (a): 2,515 5.75% due 10/01/2015 2,690 3,770 6% due 10/01/2020 4,062 Virginia--0.2% 2,200 Virginia Port Authority, Port Facilities Revenue Bonds, AMT, 4.75% due 7/01/2031 (d) 2,222 Washington--0.8% 7,225 Chelan County, Washington, Public Utility District Number 001, Consolidated Revenue Bonds (Chelan Hydro System), AMT, Series A, 5.45% due 7/01/2037 (a) 7,715 West Virginia--1.4% 12,250 Pleasants County, West Virginia, PCR, Refunding (Potomac-Pleasants), Series C, 6.15% due 5/01/2015 (a) 12,466 Wisconsin--1.4% 9,000 Superior, Wisconsin, Limited Obligation Revenue Refunding Bonds (Midwest Energy Resources), Series E, 6.90% due 8/01/2021 (d) 11,739 670 Wisconsin State, GO, AMT, Series B, 6.50% due 5/01/2025 (b) 672 Total Municipal Bonds (Cost--$757,436)--86.6% 801,563 Municipal Bonds Held in Trust (m) California--3.8% 21,360 California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and Electric), AMT, Series A, 5.35% due 12/01/2016 (b) 22,909 5,000 California State, Veterans, GO, Refunding, AMT, Series BZ, 5.35% due 12/01/2021 (b) 5,117 7,500 San Jose, California, Financing Authority, Lease Revenue Refunding Bonds (Civic Center Project), Series B, 5% due 6/01/2032 (a) 7,599 Face Amount Municipal Bonds Held in Trust (m) Value Maryland--2.5% $21,640 Baltimore, Maryland, Convention Center Hotel Revenue Bonds, Senior Series A, 5.25% due 9/01/2039 (i) $ 23,519 Michigan--1.5% 13,145 Michigan State Strategic Fund, Limited Obligation Revenue Refunding Bonds (Detroit Edison Company Pollution Control Project), AMT, Series A, 5.50%, due 6/01/2030 (i) 14,195 Illinois--2.2% 17,690 Chicago, Illinois, O'Hare International Airport Revenue Bonds, Third Lien, AMT, Series B-2, 6% due 1/01/2027 (b) 19,831 New York--1.6% 13,925 New York City, New York, Sales Tax Asset Receivable Corporation Revenue Bonds, Series A, 5.25% due 10/15/2027 (a) 15,119 Texas--8.1% 35,950 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, AMT, Series A, 6% due 11/01/2028 (d) 37,928 35,050 Harris County, Texas, Toll Road Revenue Refunding Bonds, Senior Lien, Series A, 5.25% due 8/15/2035 (c) 36,657 Total Municipal Bonds Held in Trust (Cost--$178,282)--19.7% 182,874 Shares Held Mutual Funds (k) 300 BlackRock California Insured Municipal 2008 Term Trust, Inc. 4,602 810 BlackRock Insured Municipal 2008 Term Trust, Inc. 12,579 205 BlackRock Insured Municipal Term Trust, Inc. 2,001 Total Mutual Funds (Cost--$21,127)--2.1% 19,182 Short-Term Securities 4,850 Merrill Lynch Institutional Tax-Exempt Fund, 5.19% (g)(k) 4,850 Total Short-Term Securities (Cost--$4,850)--0.5% 4,850 Total Investments (Cost--$961,695*)--108.9% 1,008,469 Other Assets Less Liabilities--1.1% 10,361 Liability for Trust Certificates, Including Interest Expense Payable--(10.0%) (93,152) ---------- Net Assets--100.0% $ 925,678 ========== BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (concluded) (In Thousands) BlackRock Municipal Insured Fund * The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 873,860 =============== Gross unrealized appreciation $ 44,354 Gross unrealized depreciation (2,308) --------------- Net unrealized appreciation $ 42,046 =============== (a) AMBAC Insured. (b) MBIA Insured. (c) FSA Insured. (d) FGIC Insured. (e) FNMA/GNMA Collateralized. (f) Prerefunded. (g) Represents the current yield as of December 31, 2006. (h) Escrowed to maturity. (i) XL Capital Insured. (j) The rate disclosed is that currently in effect. This rate changes periodically and inversely based upon prevailing market rates. (k) Investments in companies considered to be an affiliate of the Fund, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: Net Dividend Affiliate Activity Income BlackRock California Insured Municipal 2008 Term Trust, Inc. -- $116 BlackRock Insured Municipal 2008 Term Trust, Inc. -- 322 BlackRock Insured Municipal Term Trust, Inc. -- 38 Merrill Lynch Institutional Tax-Exempt Fund 3,120 144 (l) Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase. (m) Securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which the Fund may have acquired the residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1(c) to Financial Statements for details of Municipal Bonds Held in Trust. o Forward interest rate swaps outstanding as of December 31, 2006 were as follows: Notional Unrealized Amount Appreciation Receive a fixed rate of 3.547% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires March 2017 $47,300,000 $629,894 See Notes to Financial Statements. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments as of December 31, 2006 (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Alabama--0.9% $ 3,820 Alabama Incentives Financing Authority, Special Obligation Revenue Refunding Bonds, Series A, 6% due 10/01/2029 (c) $ 4,112 3,525 Jefferson County, Alabama, Public Building Authority, Lease Revenue Bonds, 5.125% due 4/01/2021 (c) 3,807 500 Mobile, Alabama, Industrial Development Board, Environmental Improvement Revenue Refunding Bonds (International Paper Company Project), AMT, Series A, 6.35% due 5/15/2016 532 2,500 Selma, Alabama, IDB, Environmental Improvement Revenue Refunding Bonds (International Paper Company Project), AMT, Series A, 6.70% due 2/01/2018 2,688 3,400 Tuscaloosa, Alabama, Special Care Facilities Financing Authority, Residential Care Facility Revenue Bonds (Capstone Village, Inc. Project), Series A, 5.875% due 8/01/2036 3,484 Alaska--0.3% 1,150 Alaska State Housing Financial Corporation, General Mortgage Revenue Refunding, Series A, 6% due 6/01/2027 (f) 1,169 3860 Anchorage, Alaska, School, GO, Series B, 5.875% due 12/01/2010 (e)(j) 4,169 Arizona--3.0% 4,000 Arizona Health Facilities Authority Revenue Bonds (Catholic Healthcare West), Series A, 6.625% due 7/01/2020 4,407 Maricopa County, Arizona, Hospital Revenue Refunding Bonds (Sun Health Corporation): 730 6.125% due 4/01/2007 (j) 749 270 6.125% due 4/01/2018 277 3,100 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools Project 1), Series A, 6.75% due 7/01/2029 3,158 1,625 Maricopa County, Arizona, IDA, Health Facilities Revenue Refunding Bonds (Catholic Healthcare West Project), Series A, 5% due 7/01/2021 1,651 1,000 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Public Service Company of New Mexico Project), Series A, 6.30% due 12/01/2026 1,023 Peoria, Arizona, Improvement District Number 8401, Special Assessment Bonds Number 8802: 430 7.20% due 1/01/2010 441 510 7.20% due 1/01/2013 523 Peoria, Arizona, Improvement District, Special Assessment Bonds Number 8801: 190 7.30% due 1/01/2009 195 395 7.30% due 1/01/2011 405 5,000 Phoenix and Pima County, Arizona, IDA, S/F Mortgage Revenue Bonds, AMT, Series 3-A, 5.25% due 8/01/2038 (i)(l) 5,220 2,330 Phoenix, Arizona, Civic Improvement Corporation, Municipal Facilities, Excise Tax Revenue Bonds, 5.75% due 7/01/2016 (e) 2,505 3,685 Phoenix, Arizona, IDA, Airport Facility, Revenue Refunding Bonds (America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 3,761 Face Amount Municipal Bonds Value Arizona (concluded) $ 500 Pinal County, Arizona, IDA, Wastewater Revenue Bonds (San Manuel Facilities Project), AMT, 6.25% due 6/01/2026 $ 552 391 Prescott Valley, Arizona, Improvement District, Special Assessment Bonds (Sewer Collection System Roadway Repair), 7.90% due 1/01/2012 405 1,500 Queen Creek Improvement District Number 001, Arizona, Special Assessment Bonds, 5% due 1/01/2032 1,528 6,000 Salt River Project, Arizona, Agriculture Improvement and Power District, Electric System Revenue Refunding Bonds, Series A, 5.125% due 1/01/2023 6,370 3,515 Tucson, Arizona, IDA, Senior Living Facilities Revenue Bonds (Christian Care Tucson Inc. Project), Series A, 6.125% due 7/01/2010 (j)(m) 3,822 3,180 University of Arizona, COP, Refunding, Series A, 5.50% due 6/01/2018 (c) 3,434 1,000 University of Arizona, COP (University of Arizona Parking and Student Housing), 5.75% due 6/01/2009 (c)(j) 1,050 Vistancia Community Facilities District, Arizona, GO: 3,000 6.75% due 7/15/2022 3,339 2,125 5.75% due 7/15/2024 2,304 Arkansas--0.1% 30 Arkansas State Development Finance Authority, S/F Mortgage Revenue Bonds (Mortgage Backed Securities Program), Series H, 6.15% due 7/01/2016 (i) 31 250 Arkansas State Student Loan Authority Revenue Bonds, AMT, Sub-Series B, 7.25% due 6/01/2009 259 200 Jonesboro, Arkansas, Residential Housing and Health Care Facilities Board, Hospital Revenue Refunding Bonds (Saint Bernards Regional Medical Center), Series B, 5.90% due 7/01/2016 (c) 204 250 North Little Rock, Arkansas, Health Facilities Board, Health Care Revenue Bonds (Baptist Health), 5.50% due 7/01/2016 259 500 Pine Bluff, Arkansas, Environmental Improvement Revenue Refunding Bonds (International Paper Company Project), AMT, Series A, 6.70% due 8/01/2020 537 250 University of Central Arkansas, Housing System Revenue Bonds, 6.50% due 1/01/2010 (h)(j) 274 California--13.2% 2,500 Agua Caliente Band of Cahuilla Indians, California, Casino Revenue Bonds, 6% due 7/01/2018 2,713 23,000 Bay Area Toll Authority, California, Toll Bridge Revenue Refunding Bonds (San Francisco Bay Area), Series F, 5% due 4/01/2031 24,525 5,000 California Pollution Control Financing Authority, Solid Waste Disposal Revenue Refunding Bonds (Waste Management Inc. Project), AMT, Series A, 5% due 1/01/2022 5,215 35 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), AMT, Series D, Class 5, 6.70% due 5/01/2029 (i)(l) 35 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value California (continued) $ 75 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Refunding Bonds (Mortgage Backed Securities Program), AMT, Series A-2, 7% due 9/01/2029 (i)(l) $ 76 5,000 California State, GO, 5.25% due 4/01/2029 5,361 130 California State, GO, Refunding, 5.75% due 5/01/2030 139 California State, Various Purpose, GO: 10,000 5.25% due 11/01/2027 10,698 14,100 5.50% due 11/01/2033 15,442 9,880 California Statewide Communities Development Authority, Health Facility Revenue Bonds (Memorial Health Services), Series A, 6% due 10/01/2023 10,969 Chula Vista, California, Community Facilities District, Special Tax Bonds (Number 06-1, Eastlake Woods Area), Series A: 1,080 6.05% due 9/01/2020 1,158 2,965 6.15% due 9/01/2026 3,170 10,000 Chula Vista, California, IDR, Refunding (San Diego Gas & Electric Co.), AMT, Series C, 5.25% due 12/01/2027 10,675 Contra Costa County, California, Special Tax Bonds (Community Facilities District Number 2001-01): 1,585 6% due 9/01/2026 1,683 1,200 6.10% due 9/01/2031 1,277 3,100 Elk Grove, California, Poppy Ridge Community Facilities Number 3 Special Tax, Series 1, 6% due 9/01/2008 (j) 3,237 10,000 Fremont, California, Unified School District, Alameda County, GO (Election of 2002), Series B, 5% due 8/01/2028 (h) 10,623 12,730 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue Refunding Bonds, Proposition A, First Tier Senior Series A, 5% due 7/01/2035 (c) 13,527 2,740 Pomona, California, Public Financing Authority, Revenue Refunding Bonds (Merged Redevelopment Project), Series A1, 5.75% due 2/01/2034 2,880 1,100 Poway, California, Unified School District, Special Tax Bonds (Community District Number 6), Series A, 6.05% due 9/01/2025 1,154 2,695 Riverside, California, Improvement Bond Act of 1915, Special Assessment (Riverwalk Assessment District), 6.375% due 9/02/2026 2,906 3,915 Roseville, California, Special Tax Bonds (Fiddyment Ranch Community Facilities Number 1), 5.125% due 9/01/2026 3,967 Roseville, California, Special Tax (Stoneridge Community Facilities Number 1): 1,250 6.20% due 9/01/2021 1,344 1,125 6% due 9/01/2025 1,195 2,500 6.30% due 9/01/2031 2,707 Sacramento, California, Special Tax (North Natomas Community Facilities): 2,200 Series 01-03, 6% due 9/01/2028 2,316 2,270 Series 4-C, 6% due 9/01/2028 2,426 30,075 Sacramento County, California, Sanitation District Financing Authority, Revenue Bonds, Series A, 5% due 12/01/2035 (c) 31,848 10,000 San Diego, California, Public Facilities Financing Authority, Subordinated Water Revenue Refunding Bonds, 5% due 8/01/2032 (f) 10,410 Face Amount Municipal Bonds Value California (concluded) San Francisco, California, City and County Redevelopment Agency Revenue Bonds (Community Facilities District Number 6-Mission): $ 5,000 6% due 8/01/2021 $ 5,233 2,500 GO, Series A, 6% due 8/01/2025 2,615 1,075 San Francisco, California, Uptown Parking Corporation, Parking Revenue Bonds (Union Square), 6% due 7/01/2020 (f) 1,189 5,460 San Mateo County, California, Community College District, GO (Election of 2001), Series C, 5% due 3/01/2031 5,806 Santa Margarita, California, Water District, Special Tax Refunding Bonds (Community Facilities District Number 99), Series 1: 3,680 6.20% due 9/01/2020 3,926 2,970 6.25% due 9/01/2029 3,164 Colorado--2.6% 5,000 Arkansas River Power Authority, Colorado, Power Improvement Revenue Bonds, 5.25% due 10/01/2032 (k) 5,433 500 Boulder County, Colorado, Hospital Development Revenue Bonds (Longmont United Hospital Project), 6% due 12/01/2010 (j)(m) 541 390 Colorado HFA, Revenue Bonds (S/F Program), Series B-3, 6.55% due 10/01/2016 394 4,000 Colorado HFA, Revenue Refunding Bonds (Adventist Health System/Sunbelt Obligor Group), Series D, 5.25% due 11/15/2035 4,247 Colorado HFA, Revenue Refunding Bonds (S/F Program): 330 AMT, Senior Series A-2, 7.50% due 4/01/2031 336 125 AMT, Senior Series B-2, 7.10% due 4/01/2017 129 855 AMT, Senior Series B-2, 7.25% due 10/01/2031 865 35 AMT, Senior Series B-3, 6.80% due 11/01/2028 35 350 AMT, Senior Series C-2, 7.25% due 10/01/2031 (b) 363 115 Senior Series A-3, 7.35% due 10/01/2030 118 525 Senior Series C-3, 6.75% due 10/01/2021 (b) 545 125 Senior Series C-3, 7.15% due 10/01/2030 (b) 127 Colorado Health Facilities Authority Revenue Refunding Bonds: 2,500 (Catholic Health Initiatives), 5.50% due 9/01/2011 (j) 2,689 1,000 (Christian Living Communities Project), Series A, 5.75% due 1/01/2037 1,049 550 Colorado Water Resource and Power Development Authority, Small Water Resources Revenue Bonds, Series A, 5.80% due 11/01/2010 (e)(j) 590 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee): 7,560 Series A, 7.35% due 9/01/2031 8,023 1,100 Series B, 7.45% due 9/01/2031 1,171 3,685 Larimer County, Colorado, Poudre School District Number R-1, GO, 6% due 12/15/2010 (e)(j) 4,000 Plaza Metropolitan District Number 1, Colorado, Tax Allocation Revenue Bonds (Public Improvement Fees): 7,700 8% due 12/01/2025 8,539 1,910 8.125% due 12/01/2025 1,925 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Connecticut--1.1% $ 1,000 Connecticut State Development Authority, Governmental Lease Revenue Bonds, 6.60% due 6/15/2014 (f) $ 1,002 1,250 Connecticut State Development Authority, Water Facility Revenue Bonds (Bridgeport Hydraulic Company), AMT, 6.15% due 4/01/2035 (c) 1,282 960 Connecticut State HFA, Revenue Refunding Bonds (Housing Mortgage Finance Program), Series C-1, 6.30% due 11/15/2017 984 Connecticut State Health and Educational Facilities Authority Revenue Bonds: 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (f) 1,002 1,500 (Waterbury Hospital Issue), Series C, 5.75% due 7/01/2020 (m) 1,577 1,000 (Westover School), Series A, 5.70% due 7/01/2030 (m) 1,063 Connecticut State Health and Educational Facilities Authority, Revenue Refunding Bonds (m): 2 DRIVERS, Series 215, 8.779% due 6/01/2030 (n) 2 1,885 (Eastern Connecticut Health Network), Series A, 6.50% due 7/01/2010 (j) 2,073 115 (Eastern Connecticut Health Network), Series A, 6.50% due 7/01/2030 126 640 (Sacred Heart University), 6.625% due 7/01/2026 654 5,710 (University of Hartford), Series E, 5.50% due 7/01/2022 6,196 680 Connecticut State Higher Education Supplemental Loan Authority, Revenue Bonds (Family Education Loan Program), AMT, Series A, 5.50% due 11/15/2020 (f) 684 860 Waterbury, Connecticut, GO, 6% due 2/01/2009 (j)(m) 910 Delaware--0.1% 1,685 New Castle County, Delaware, PCR (General Motors Corporation Project), VRDN, 7% due 10/01/2008 (g) 1,685 Florida--9.2% 2,000 Anthem Park Community Development District, Florida, Capital Improvement Revenue Bonds, 5.80% due 5/01/2036 2,085 2,000 Ave Maria Stewardship Community District, Florida, Capital Improvement Revenue Bonds, Series A, 5.125% due 5/01/2038 1,980 1,500 Ave Maria Stewardship Community District, Florida, Revenue Bonds, 4.80% due 11/01/2012 1,495 1,670 Ballantrae, Florida, Community Development District, Capital Improvement Revenue Bonds, 6% due 5/01/2035 1,762 5,000 Bartram Springs Community Development District, Florida, Special Assessment Refunding Bonds, 4.75% due 5/01/2034 4,947 4,440 Baywinds Community Development District, Florida, Special Assessment Bonds, Series B, 4.90% due 5/01/2012 4,419 1,825 Beacon Tradeport Community, Florida, Development District, Special Assessment Revenue Refunding Bonds (Commercial Project), Series A, 5.25% due 5/01/2016 (m) 1,958 4,000 Broward County, Florida, Airport System Revenue Refunding Bonds, AMT, Series E, 5.25% due 10/01/2012 (f) 4,140 Face Amount Municipal Bonds Value Florida (continued) $ 2,500 CFM Community Development District, Florida, Capital Improvement Revenue Bonds, Series B, 5.875% due 5/01/2014 $ 2,600 2,725 Duval County, Florida, School Board, COP, 5.75% due 7/01/2017 (h) 2,857 East Homestead Community Development District, Florida, Special Assessment Revenue Bonds: 1,000 5.375% due 5/01/2036 1,010 1,500 5.45% due 5/01/2036 1,518 1,500 Series B, 5% due 5/01/2011 1,514 Fiddlers Creek, Florida, Community Development District Number 2, Special Assessment Revenue Bonds: 5,350 Series A, 6.375% due 5/01/2035 5,733 1,050 Series B, 5.75% due 5/01/2013 1,095 2,000 Greater Lakes/Sawgrass Bay Community Development District, Florida, Special Assessment Bonds, Series A, 5.50% due 5/01/2038 2,039 7,000 Halifax Hospital Medical Center, Florida, Hospital Revenue Refunding and Improvement Bonds, Series A, 5.25% due 6/01/2026 7,388 1,145 Highland Meadows Community Development District, Florida, Special Assessment Bonds, Series A, 5.50% due 5/01/2036 1,165 21,000 Highlands County, Florida, Health Facilities Authority, Hospital Revenue Refunding Bonds (Adventist Health System), Series G, 5.125% due 11/15/2032 22,053 5,000 Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT, Series A, 7.125% due 4/01/2030 5,488 1,200 Lexington Oaks, Florida, Community Development District, Special Assessment Revenue Bonds, Series A, 6.70% due 5/01/2033 1,301 1,030 Mediterra, Florida, South Community Development District, Capital Improvement Revenue Bonds, 6.85% due 5/01/2031 1,107 2,500 Middle Village Community Development District, Florida, Special Assessment Bonds, Series A, 6% due 5/01/2035 2,622 6,625 Midtown Miami, Florida, Community Development District, Special Assessment Revenue Bonds, Series A, 6.25% due 5/01/2037 7,204 1,000 New River Community Development District, Florida, Capital Improvement Revenue Bonds, Series B, 5% due 5/01/2013 993 1,825 Old Palm Community Development District, Florida, Special Assessment Bonds (Palm Beach Gardens), Series B, 5.375% due 5/01/2014 1,881 3,500 Orange County, Florida, HFA, M/F Housing Revenue Bonds (Loma Vista Project), Series G, 5.50% due 3/01/2032 3,599 1,000 Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds (Orlando Regional Healthcare), 5.70% due 7/01/2026 1,033 Panther Trace Community Development District II, Florida, Special Assessment Revenue Bonds: 5,000 5.125% due 11/01/2013 5,050 5,000 Series A, 5.60% due 5/01/2035 5,120 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Florida (concluded) $10,000 Orlando, Florida, Greater Orlando Aviation Authority, Airport Facilities Revenue Bonds, AMT, Series A, 5.25% due 10/01/2018 (e) $ 10,415 Park Place Community Development District, Florida, Special Assessment Revenue Bonds: 1,000 6.75% due 5/01/2032 1,069 2,400 6.375% due 5/01/2034 2,566 2,000 Saint Lucie, Florida, West Services District, Utility Revenue Refunding Bonds, Senior Lien, 6% due 10/01/2022 (f) 2,191 2,875 Somerset Community Development District, Florida, Capital Improvement Revenue Bonds, 5% due 5/01/2015 2,918 430 Sterling Hill, Florida, Community Development District, Capital Improvement Revenue Refunding Bonds, Series B, 5.50% due 11/01/2010 431 380 Stoneybrook West, Florida, Community Development District, Special Assessment Revenue Bonds, Series B, 6.45% due 5/01/2010 383 1,190 Tern Bay Community Development District, Florida, Capital Improvement Revenue Refunding Bonds, Series B, 5% due 5/01/2015 1,207 2,185 Tuscany Reserve Community Development District, Florida, Capital Improvement Revenue Bonds, Series B, 5.25% due 5/01/2016 2,253 3,520 University of South Florida Financing Corporation, COP (Master Lease Program), Refunding, Series A, 5.375% due 7/01/2022 (c) 3,858 2,060 Watergrass Community Development District, Florida, Special Assessment Revenue Bonds, Series B, 4.875% due 11/01/2010 2,056 6,000 West Villages Improvement District, Florida, Special Assessment Revenue Refunding Bonds (Unit of Development Number 2), 5.80% due 5/01/2036 6,259 Georgia--1.8% 5,000 Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station Project), 7.90% due 12/01/2024 5,548 Brunswick and Glynn County, Georgia, Development Authority, First Mortgage Revenue Bonds (Coastal Community Retirement Corporation Project), Series A: 2,285 7.125% due 1/01/2025 2,267 4,555 7.25% due 1/01/2035 4,539 5,210 College Park, Georgia, Business and IDA Revenue Bonds (Civic Center Project), 5.75% due 9/01/2010 (c)(j) 5,666 1,940 Fulton County, Georgia, Development Authority, PCR (General Motors Corporation), Refunding, VRDN, 8% due 4/01/2010 (g) 1,940 3,450 Fulton County, Georgia, Development Authority Revenue Bonds (Morehouse College Project), 5.875% due 12/01/2030 (c) 3,742 2,250 Fulton County, Georgia, Residential Care Facilities, Revenue Refunding Bonds (Canterbury Court Project), Series A, 6% due 2/15/2022 2,289 1,500 Milledgeville-Baldwin County, Georgia, Development Authority Revenue Bonds (Georgia College and State University Foundation), 6% due 9/01/2033 1,650 Face Amount Municipal Bonds Value Illinois--7.5% $ 1,000 Bolingbrook, Illinois, Special Services Area Number 1, Special Tax Bonds (Forest City Project), 5.90% due 9/01/2007 (p) $ 1,021 2 Chicago, Illinois, Board of Education, GO, DRIVERS, Series 199, 7.251% due 12/01/2020 (c)(n) 2 26,800 Chicago, Illinois, O'Hare International Airport Revenue Bonds, Third Lien, AMT, Series B-2, 6% due 1/01/2029 (k) 30,064 6,915 Chicago, Illinois, O'Hare International Airport, Special Facility Revenue Refunding Bonds (American Airlines Inc. Project), 8.20% due 12/01/2024 7,124 350 Chicago, Illinois, Park District, GO, Refunding, Series B, 5.75% due 1/01/2015 (e) 376 230 Chicago, Illinois, Park District, Limited Tax, GO, Series A, 5.75% due 1/01/2016 (e) 247 365 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series A, 7.15% due 9/01/2031 (i)(l) 375 2,000 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75% due 12/01/2032 2,169 3,210 Cicero, Illinois, GO, Refunding (Corporate Purpose), 6% due 12/01/2028 (f) 3,464 7,000 Decatur, Illinois, GO, Refunding, 6% due 3/01/2008 (e)(j) 7,195 10,000 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro Biosolids Management LLC Project), AMT, 6% due 11/01/2023 10,415 3,140 Illinois Development Finance Authority Revenue Bonds (Community Rehabilitation Providers Facilities), Series A, 6.50% due 7/01/2022 3,421 Illinois State Finance Authority Revenue Bonds, Series A: 1,750 (Friendship Village of Schaumburg), 5.625% due 2/15/2037 1,806 2,155 (Landing At Plymouth Place Project), 6% due 5/15/2037 2,296 Illinois State, GO, 1st Series (f): 8,890 5.75% due 12/01/2015 9,533 3,745 5.75% due 12/01/2016 4,019 4,000 5.75% due 12/01/2017 4,285 3,000 Illinois State, Sales Tax Revenue Bonds, 6% due 6/15/2020 3,211 3,000 Illinois State, Sales Tax Revenue Refunding Bonds, Series Q, 6% due 6/15/2009 3,079 2,000 Lake County, Illinois, Forest Preservation District, GO (Land Acquisition and Development), 5.75% due 12/15/2016 2,150 16,160 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax Revenue Bonds (McCormick Place Expansion), Series A, 5.25% due 6/15/2042 (f) 17,288 625 Naperville, Illinois, IDR (General Motors Corporation), Refunding, VRDN, 8% due 12/01/2012 (g) 625 1,585 Village of Wheeling, Illinois, Revenue Bonds (North Milwaukee/Lake-Cook Tax Increment Financing (TIF) Redevelopment Project), 6% due 1/01/2025 1,613 Iowa--0.4% 1,000 Iowa City, Iowa, Sewer Revenue Bonds, 5.75% due 7/01/2021 (f) 1,002 4,000 Iowa Finance Authority, Health Care Facilities, Revenue Refunding Bonds (Care Initiatives Project), 9.25% due 7/01/2011 (j) 4,924 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Kansas--0.8% $ 7,000 Sedgwick and Shawnee Counties, Kansas, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), AMT, Series B-2, 5.25% due 12/01/2038 (i)(l) $ 7,396 1,555 Sedgwick and Shawnee Counties, Kansas, S/F Revenue Bonds, AMT, Series A-1, 6.95% due 6/01/2029 (d) 1,595 2,500 Wichita, Kansas, Hospital Facilities Revenue Refunding and Improvement Bonds, Series III, 6.25% due 11/15/2019 2,742 Louisiana--1.3% 400 Louisiana HFA, S/F Mortgage Revenue Bonds, AMT, Series D-2, 5.80% due 6/01/2020 (i) 402 9,500 Louisiana Local Government, Environmental Facilities, Community Development Authority Revenue Bonds (Capital Projects and Equipment Acquisition), Series A, 6.30% due 7/01/2030 (c) 11,332 5,000 Louisiana Public Facilities Authority Revenue Bonds (University of New Orleans Research and Technology Foundation, Inc.--Student Housing Project), 5.25% due 3/01/2037 (f) 5,426 610 Louisiana State, HFA, Single Family Revenue Refunding Bonds (Home Ownership Program), Series B-2, AMT, 6.20% due 12/01/2029 (b)(i) 615 2,000 Rapides Finance Authority, Louisiana, Environmental Improvement Revenue Bonds (International Paper Company Project), AMT, Series A, 6.55% due 11/15/2023 2,130 Maine--0.6% 8,635 Maine Finance Authority, Solid Waste Recycling Facilities Revenue Bonds (Great Northern Paper Project-Bowater), AMT, 7.75% due 10/01/2022 8,705 Maryland--0.4% 500 Anne Arundel County, Maryland, Special Obligation Revenue Bonds (Arundel Mills Project), 7.10% due 7/01/2009 (j) 549 1,000 Maryland State Community Development Administration, Department of Housing and Community Development, Housing Revenue Bonds, AMT, Series B, 6.15% due 1/01/2021 1,041 1,000 Maryland State Community Development Administration, Department of Housing and Community Development Revenue Bonds (Waters Landing II Apartments), AMT, Series A, 5.875% due 8/01/2033 1,050 1,000 Maryland State Energy Financing Administration, Solid Waste Disposal Revenue Bonds, Limited Obligation (Wheelabrator Water Projects), AMT, 6.45% due 12/01/2016 1,022 3,200 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds (King Farm Presbyterian Community), Series B, 5% due 1/01/2017 3,202 Massachusetts--0.5% 275 Massachusetts Educational Financing Authority, Education Loan Revenue Refunding Bonds, AMT, Issue E, 5.85% due 7/01/2014 (c) 277 4,450 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Medical Center of Central Massachusetts), CARS, Series B, 9.717% due 6/23/2022 (c)(n) 4,743 Face Amount Municipal Bonds Value Massachusetts (concluded) $ 1,000 Massachusetts State Industrial Finance Agency, Higher Education Revenue Refunding Bonds (Hampshire College Project), 5.625% due 10/01/2007 (j) $ 1,034 130 Massachusetts State Water Pollution Abatement Trust, Water Abatement Revenue Bonds, Series A, 6.375% due 2/01/2015 130 1,600 Montachusett, Massachusetts, Regional Vocational Technical School District, GO, 5.95% due 1/15/2020 (f) 1,716 Michigan--1.5% 7,500 Delta County, Michigan, Economic Development Corporation, Environmental Improvement Revenue Refunding Bonds (Mead Westvaco-Escanaba), Series A, 6.25% due 4/15/2012 (j) 8,423 500 Dickinson County, Michigan, Economic Development Corporation, Environmental Improvement Revenue Refunding Bonds (International Paper Company Project), Series A, 5.75% due 6/01/2016 535 Eastern Michigan University, General Revenue Refunding Bonds (c): 585 6% due 6/01/2010 (j) 634 415 6% due 6/01/2024 448 3,000 Flint, Michigan, Hospital Building Authority, Revenue Refunding Bonds (Hurley Medical Center), 6% due 7/01/2020 3,158 3,325 Macomb County, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (Mount Clemens General Hospital), Series B, 5.875% due 11/15/2034 3,530 1,500 Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Mercy-Mount Clemens), Series A, 6% due 5/15/2014 (f) 1,584 5,000 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit Metropolitan Wayne County), AMT, Series A, 5% due 12/01/2019 (f) 5,128 Minnesota--0.9% 520 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds (Natural Rural Utilities), AMT, Series A, 6.95% due 12/01/2008 535 1,000 Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills Project), Series A, 6.15% due 8/20/2031 (d) 1,088 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports Commission, Airport Revenue Bonds, AMT, Sub-Series D (e): 470 5.75% due 1/01/2012 500 470 5.75% due 1/01/2014 499 2,060 5.75% due 1/01/2015 2,198 575 Minneapolis, Minnesota, Community Development Agency, Supported Development Revenue Bonds (Common Bond Fund), AMT, Series 2, 6.20% due 6/01/2017 579 Minneapolis, Minnesota, Health Care System Revenue Bonds (Allina Health System), Series A: 1,500 5.70% due 11/15/2022 1,626 2,665 5.75% due 11/15/2032 2,881 1,110 Ramsey County, Minnesota, Housing and Redevelopment Authority, M/F Housing Revenue Bonds (Hanover Townhouses Project), AMT, 6% due 7/01/2031 1,148 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Minnesota (concluded) $ 1,000 Saint Cloud, Minnesota, Health Care Revenue Refunding Bonds (Saint Cloud Hospital Obligation Group), Series A, 6.25% due 5/01/2020 (h) $ 1,085 1,500 Waconia, Minnesota, Health Care Facilities Revenue Bonds (Ridgeview Medical Center Project), Series A, 6.125% due 1/01/2029 (m) 1,593 Mississippi--0.1% 1,700 Warren County, Mississippi, Environmental Improvement Revenue Refunding Bonds (International Paper Company Project), AMT, Series B, 6.75% due 8/01/2021 1,830 Missouri--0.6% 1,000 Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs Redevelopment Project), 5% due 4/01/2014 1,048 1,500 Kansas City, Missouri, IDA, First Mortgage Health Facilities Revenue Bonds (Bishop Spencer Place), Series A, 6.50% due 1/01/2035 1,592 6,500 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds (Homeownership Loan Program), AMT, Series E-1, 5.60% due 3/01/2037 (i) 7,017 Montana--0.4% 6,000 Montana State Higher Education, Student Assistance Corporation, Student Loan Revenue Refunding Bonds, AMT, Sub-Series B, 6.40% due 12/01/2032 6,329 Nevada--1.8% 3,500 Clark County, Nevada, Airport Revenue Bonds (Jet Aviation Fuel Tax), AMT, Series C, 5.375% due 7/01/2020 (c) 3,732 1,550 Clark County, Nevada, Improvement District Number 142, Special Assessment Bonds, 6.375% due 8/01/2023 1,598 Elko, Nevada, GO (Airport Improvement), AMT, Series B (f): 165 6.10% due 10/01/2014 169 245 6.30% due 10/01/2019 252 320 6.75% due 10/01/2024 330 225 7% due 10/01/2029 233 2,650 Henderson, Nevada, Local Improvement Districts, Special Assessment, Series NO T-14, 5.80% due 3/01/2023 2,733 Las Vegas, Nevada, Local Improvement Bonds, Special Assessment, Special Improvement District Number 808, Summerlin: 1,740 5.875% due 6/01/2009 1,797 2,005 6.125% due 6/01/2012 2,077 2,235 6.25% due 6/01/2013 2,317 1,905 Reno, Nevada, Special Assessment District Number 4 (Somerset Parkway), 6.625% due 12/01/2022 1,966 Sparks, Nevada, Redevelopment Agency, Tax Allocation Revenue Refunding Bonds, Series A (m): 3,110 6% due 1/15/2015 3,317 6,315 6% due 1/15/2023 6,724 Face Amount Municipal Bonds Value New Hampshire--0.2% New Hampshire Health and Education Facilities Authority, Revenue Refunding Bonds: $ 1,750 (Elliot Hospital), Series B, 5.60% due 10/01/2022 $ 1,887 590 (Havenwood-Heritage Heights Retirement Community), Series A, 5% due 1/01/2016 592 1,035 (Havenwood-Heritage Heights Retirement Community), Series A, 5.35% due 1/01/2026 1,047 New Jersey--2.4% 310 Camden County, New Jersey, Pollution Control Financing Authority, Solid Waste Resource Recovery, Revenue Refunding Bonds, AMT, Series B, 7.50% due 12/01/2009 314 3,300 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village, Inc. Facility), Series A, 7.25% due 11/15/2011 (j) 3,785 3,680 New Jersey EDA, State Lease Revenue Bonds (State Office Buildings Projects), 6% due 6/15/2010 (c)(j) 3,959 3,130 New Jersey Health Care Facilities Financing Authority Revenue Bonds (South Jersey Hospital), 6% due 7/01/2012 (j) 3,466 2,250 New Jersey Health Care Facilities Financing Authority, Revenue Refunding Bonds (Capital Health System Inc.), Series A, 5.75% due 7/01/2023 2,420 1,090 New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue Refunding Bonds, Series B, 6.25% due 11/01/2026 (h) 1,140 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds (f): 7,025 Series A, 5.75% due 1/01/2010 (j) 7,443 2,975 Series A, 5.75% due 1/01/2018 3,140 9,500 Tobacco Settlement Financing Corporation of New Jersey, Asset-Backed Revenue Bonds, 7% due 6/01/2041 11,016 New Mexico--0.8% 8,000 Farmington, New Mexico, PCR, Refunding (Public Service Company of New Mexico--San Juan Project), Series B, 6.30% due 12/01/2016 8,172 75 New Mexico Mortgage Finance Authority, Revenue Refunding Bonds, Mortgage-Backed Securities, Series F, 7% due 1/01/2026 (i) 76 3,835 New Mexico Mortgage Financing Authority, S/F Mortgage Program Revenue Bonds, AMT, Series D, 6.15% due 7/01/2035 (i)(l) 4,098 250 Santa Fe County, New Mexico, Correctional System Revenue Bonds, 6% due 2/01/2027 (h) 302 New York--4.8% 10,000 Metropolitan Transportation Authority, New York, Transit Facilities Revenue Bonds, Series A, 5.625% due 7/01/2007 (f)(j) 10,248 3,230 New York City, New York, City IDA, Civic Facility Revenue Bonds (Special Needs Facilities Pooled Program), Series C-1, 6% due 7/01/2012 3,357 4,050 New York City, New York, City IDA, Special Facility Revenue Bonds (British Airways Plc Project), AMT, 7.625% due 12/01/2032 4,547 New York City, New York, GO, Refunding: 6,540 Series A, 6% due 5/15/2010 (j) 7,088 2,205 Series A, 6.25% due 5/15/2010 (j)(k) 2,407 60 Series A, 6% due 5/15/2021 (k) 65 675 Series H, 6% due 8/01/2007 (j)(k) 691 325 Series H, 6% due 8/01/2017 (k) 333 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value New York (concluded) New York City, New York, GO, Series B (f): $ 6,640 5.875% due 8/01/2010 (j) $ 7,198 1,300 5.875% due 8/01/2015 1,404 New York State Dormitory Authority, Non-State Supported Debt, Revenue Refunding Bonds (Mount Sinai-NYU Medical Center Health System), Series A: 590 6.50% due 7/01/2010 (j) 647 2,410 6.50% due 7/01/2016 2,598 4,000 New York State Dormitory Authority Revenue Bonds (Saint Barnabas Hospital), Series A, 5.125% due 2/01/2022 (b)(c) 4,236 New York State Dormitory Authority Revenue Refunding Bonds: 2,500 (Concord Nursing Home Inc.), 6.50% due 7/01/2029 2,505 1,680 (Mount Sinai Health), Series A, 6.50% due 7/01/2025 1,807 3,000 (State University Educational Facilities), Series A, 7.50% due 5/15/2013 3,608 1,360 New York State Environmental Facilities Corporation, State Clean Water and Drinking Revenue Bonds (Revolving Funds), Series B, 5.875% due 1/15/2019 1,447 2,285 Oneida County, New York, IDA Revenue Bonds (Civic Facility-Faxton Hospital), Series C, 6.625% due 1/01/2015 (m) 2,480 3,000 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, AMT, 37th Series, 5.50% due 7/15/2018 (h) 3,286 95 Suffolk County, New York, IDA, Civic Facility Revenue Bonds (Special Needs Facilities Pooled Program), Series D-1, 6% due 7/01/2012 99 5,000 Triborough Bridge and Tunnel Authority, New York, Subordinate Revenue Bonds, 5.125% due 11/15/2026 (c) 5,338 705 Westchester County, New York, IDA, Civic Facilities Revenue Bonds (Special Needs Facilities Pooled Program), Series E-1, 6% due 7/01/2012 732 8,095 Westchester County, New York, IDA, Continuing Care Retirement, Mortgage Revenue Bonds (Kendal on Hudson Project), Series A, 6.50% due 1/01/2034 8,702 North Carolina--2.6% 920 Brunswick County, North Carolina, COP, 6% due 6/01/2010 (h)(j) 997 4,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds, Series D, 6.75% due 1/01/2026 4,329 4,440 North Carolina Eastern Municipal Power Agency, Power System Revenue Refunding Bonds, Series D, 6.70% due 1/01/2019 (o) 4,812 4,390 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 9-A, 5.80% due 1/01/2020 4,559 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage Revenue Bonds (Presbyterian Homes Project): 2,500 6.875% due 10/01/2010 (j) 2,766 3,000 5.50% due 10/01/2031 3,124 Face Amount Municipal Bonds Value North Carolina (concluded) North Carolina Medical Care Commission, Health Care Facilities, First Mortgage Revenue Refunding Bonds: $ 2,500 (Presbyterian Homes Project), Series B, 5.20% due 10/01/2021 $ 2,574 1,100 (Salemtowne Project), 5.10% due 10/01/2030 1,110 North Carolina Medical Care Commission, Retirement Facilities, First Mortgage Revenue Bonds: 1,625 (Forest at Duke Project), 6.375% due 9/01/2032 1,737 2,500 (Givens Estates Project), Series A, 6.50% due 7/01/2032 2,709 North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue Refunding Bonds, Series B: 500 6.375% due 1/01/2013 537 1,080 6.375% due 1/01/2013 (o) 1,162 5,000 6.50% due 1/01/2020 5,404 2,500 6.50% due 1/01/2020 (o) 2,702 Piedmont Triad Airport Authority, North Carolina, Airport Revenue Refunding Bonds, Series A (h)(j): 1,000 6% due 7/01/2009 1,067 1,000 6.375% due 7/01/2009 1,076 Ohio--0.8% 325 Ohio HFA, Mortgage Revenue Bonds, AMT, Series A-1, 6.15% due 3/01/2029 (d) 334 7,125 Ohio HFA, Mortgage Revenue Refunding Bonds, AMT, Series C, 5.90% due 9/01/2035 (i) 7,419 1,470 Port of Greater Cincinnati Development Authority, Ohio, Special Assessment Revenue Bonds (Cooperative Public Parking Infrastructure Project), 6.40% due 2/15/2034 1,585 3,005 Toledo-Lucas County, Ohio, Lodging Tax Revenue Refunding Bonds (Convention Center Project), 5.70% due 10/01/2015 (f) 3,070 Oregon--0.4% Forest Grove, Oregon, Campus Improvement Revenue Refunding Bonds (Pacific University) (j)(m): 250 6% due 5/01/2010 268 250 6.20% due 5/01/2010 270 Oregon State Housing and Community Services Department, Mortgage Revenue Refunding Bonds (S/F Mortgage Program): 40 AMT, Series A, 6.20% due 7/01/2027 41 55 Series A, 6.40% due 7/01/2018 56 500 Portland, Oregon, M/F Housing Authority Revenue Bonds (Lovejoy Station Apartments Project), AMT, 5.90% due 7/01/2023 (f) 520 Portland, Oregon, Urban Renewal and Redevelopment Revenue Refunding Bonds (c): 1,000 (Downtown Waterfront), Series A, 5.75% due 6/15/2018 1,074 3,190 (South Park Blocks), Series A, 5.75% due 6/15/2018 3,425 Pennsylvania--1.9% 3,640 Allegheny County, Pennsylvania, IDA, Environmental Improvement Revenue Refunding Bonds, 5.50% due 11/01/2016 3,846 2,220 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds, 5.75% due 12/01/2010 (f)(j) 2,407 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Pennsylvania (concluded) $ 1,760 Bucks County, Pennsylvania, IDA, Retirement Community Revenue Bonds (Ann's Choice, Inc.), Series A, 6.125% due 1/01/2025 $ 1,875 6,500 Delaware County, Pennsylvania, IDA, Revenue Refunding Bonds (Resource Recovery Facility), Series A, 6.10% due 7/01/2013 6,746 Harrisburg, Pennsylvania, Authority, University Revenue Bonds (Harrisburg University of Science): 1,000 Series A, 5.40% due 9/01/2016 1,009 2,000 Series B, 6% due 9/01/2036 2,035 4,000 Pennsylvania State Higher Educational Facilities Authority Revenue Bonds (University of Pennsylvania Medical Center Health System), Series A, 6% due 1/15/2031 4,347 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development, 7.75% due 12/01/2017 1,268 5,000 Sayre, Pennsylvania, Health Care Facilities Authority, Revenue Refunding Bonds (Guthrie Healthcare System), Series A, 5.875% due 12/01/2031 5,412 Rhode Island--0.6% 6,815 Rhode Island State Economic Development Corporation, Airport Revenue Bonds, Series B, 6% due 7/01/2010 (e)(j) 7,395 1,000 Rhode Island State Economic Development Corporation Revenue Bonds (Providence Place Mall), 6.125% due 7/01/2020 (m) 1,109 South Carolina--0.9% Medical University Hospital Authority, South Carolina, Hospital Facilities Revenue Refunding Bonds (j): 2,450 6.50% due 8/15/2012 2,800 5,400 Series A, 6.375% due 8/15/2012 6,136 5,000 South Carolina Jobs EDA, Residential Care Facilities Revenue Bonds (South Carolina Episcopal-- Still Hopes Residence Project), Series A, 6.375% due 5/15/2032 5,296 South Dakota--0.4% 3,750 Pierre, South Dakota, School District Number 32-2, GO, 5.75% due 8/01/2010 (h)(j) 4,011 1,680 South Dakota Housing Development Authority, Homeownership Revenue Bonds, AMT, Series C, 5.375% due 5/01/2018 1,726 Tennessee--1.5% Chattanooga, Tennessee, Industrial Development Board, Lease Rent Revenue Bonds (Southside Redevelopment Corporation) (c): 4,485 5.75% due 10/01/2017 4,788 3,740 5.75% due 10/01/2018 3,990 1,000 Johnson City, Tennessee, Health and Educational Facilities Board, Retirement Facility Revenue Bonds (Appalachian Christian Village Project), Series A, 6.25% due 2/15/2032 1,050 4,950 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling Facility-Calhoun Newsprint), AMT, 7.40% due 12/01/2022 5,022 7,300 Shelby County, Tennessee, Health, Educational and Housing Facility Board, Hospital Revenue Refunding Bonds (Methodist Healthcare), 6.50% due 9/01/2012 (j) 8,349 Face Amount Municipal Bonds Value Texas--11.5% $ 4,000 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Bonds (American Airlines Inc. Project), AMT, 7.50% due 12/01/2029 $ 4,080 Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First Tier, Series A (j): 5,300 6.60% due 1/01/2011 5,858 2,300 6.70% due 1/01/2011 2,550 10,630 Austin, Texas, Revenue Bonds (Town Lake Community Events Center Venue), 6.20% due 11/15/2009 (e)(j) 11,375 Bexar County, Texas, Health Facilities Development Corporation, Revenue Refunding Bonds (Army Retirement Residence Project) (j): 600 6.125% due 7/01/2012 674 1,750 6.30% due 7/01/2012 1,982 2,280 Brazos River Authority, Texas, PCR, Refunding (Texas Utility Company), AMT, Series A, 7.70% due 4/01/2033 2,677 4,250 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy, Inc. Project), Series B, 7.75% due 12/01/2018 4,502 3,700 Brazos River, Texas, Harbor Navigation District, Brazoria County Environmental Revenue Refunding Bonds (Dow Chemical Company Project), AMT, Series A-7, 6.625% due 5/15/2033 4,116 525 Central Texas Housing Finance Corporation, S/F Mortgage Revenue Bonds (GNMA Mortgage Program), AMT, 8.20% due 6/28/2017 (b)(d) 543 600 Dallas, Texas, Industrial Development Corporation, IDR (CR/PL Inc. Project), VRDN, AMT, 7.50% due 8/01/2017 (g) 603 3,620 Dallas-Fort Worth, Texas, International Airport Facility Improvement Corporation, Revenue Bonds (Learjet Inc.), AMT, Series A-1, 6.15% due 1/01/2016 3,645 4,825 Dawson County, Texas, Hospital District, GO, 5.125% due 2/15/2031 (c) 5,092 1,260 Fort Bend County, Texas, Municipal Utility District Number 23, GO, 6.625% due 9/01/2007 (j)(m) 1,285 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project) (j)(m): 3,500 6.375% due 10/01/2010 3,849 1,000 6.875% due 10/01/2010 1,116 5,465 Gulf Coast Waste Disposal Authority, Texas, Revenue Refunding Bonds (International Paper Company), AMT, Series A, 6.10% due 8/01/2024 5,884 HFDC of Central Texas, Inc., Retirement Facilities Revenue Bonds: 2,255 Series A, 5.75% due 11/01/2036 2,316 1,850 (Village at Gleannloch Farms), Series A, 5.50% due 2/15/2037 1,898 15,000 Houston, Texas, Airport System Revenue Refunding Bonds, Sub-Lien, AMT, Series A, 5.50% due 7/01/2023 (h) 15,714 6,000 Houston, Texas, Airport System, Special Facilities Revenue Bonds (Continental Airlines), AMT, Series E, 7% due 7/01/2029 6,481 4,000 Kerrville, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Sid Peterson Memorial Hospital Project), 5.25% due 8/15/2021 4,192 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Value Texas (concluded) $ 8,080 Matagorda County, Texas, Navigation District Number 1, Revenue Refunding Bonds (Reliant Energy Inc.), Series C, 8% due 5/01/2029 $ 8,554 7,350 Matagorda County, Texas, Port of Bay City Authority Revenue Bonds (Hoechst Celanese Corp. Project), AMT, 6.50% due 5/01/2026 7,507 4,825 Port Corpus Christi, Texas, Individual Development Corporation, Environmental Facilities Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25% due 11/01/2031 4,969 1,000 Red River, Texas, Education Finance Revenue Bonds (Saint Mark's School-Texas Project), 6% due 8/15/2019 1,062 1,000 South Plains, Texas, Housing Finance Corporation, S/F Mortgage Revenue Bonds, AMT, Series A, 7.30% due 9/01/2031 (i) 1,014 Southeast Texas Housing Finance Corporation, Revenue Bonds, AMT (d)(l): 85 Series A, 8% due 11/01/2025 86 155 Series B, 8.50% due 11/01/2025 158 Tarrant County, Texas, Cultural Education Facilities Financing Corporation, Retirement Facilities Revenue Refunding Bonds (Northwest Senior Housing-- Edgemere Project), Series A: 2,200 6% due 11/15/2026 2,370 3,000 6% due 11/15/2036 3,212 Texas State Public Finance Authority, Building Revenue Bonds (h)(j): 2,100 (General Services Commission Project), Series A, 6% due 2/01/2010 2,241 1,000 (State Preservation Project), Series B, 6% due 8/01/2009 1,059 45,000 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier, Series A, 5.75% due 8/15/2038 (c) 49,192 4,930 Upper Trinity Regional Water District, Texas, Water Revenue Bonds (Regional Treated Water Supply System), Series A, 6% due 8/01/2010 (e)(j) 5,309 Webster, Texas, GO, COP, Series A (h): 1,500 6% due 3/01/2010 (j) 1,603 805 6% due 3/01/2021 858 Utah--0.1% 815 Utah State HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Series C, Class III, 5.50% due 1/01/2018 831 Virginia--0.6% 2,425 Chesterfield County, Virginia, IDA, PCR, Refunding (Virginia Electric and Power Company), Series B, 5.875% due 6/01/2017 2,627 4,590 Montgomery County, Virginia, IDA, Lease Revenue Bonds, Series B, 5.125% due 1/15/2019 (f) 4,793 Norfolk, Virginia, Redevelopment and Housing Authority, First Mortgage Revenue Bonds (Retirement Community), Series A: 500 6% due 1/01/2025 527 1,100 6.125% due 1/01/2035 1,160 Face Amount Municipal Bonds Value Washington--1.8% $ 5,000 Energy Northwest, Washington, Electric Revenue Refunding Bonds (Project Number 3), Series A, 5.50% due 7/01/2017 (h) $ 5,389 3,000 Port of Seattle, Washington, Special Facilities Revenue Bonds, Series A, 6% due 3/01/2010 (f)(j) 3,235 3,010 Seattle, Washington, Drain and Wastewater Utility Revenue Bonds, 5.75% due 11/01/2009 (f)(j) 3,212 Seattle, Washington, Housing Authority Revenue Bonds: 2,750 (Newholly Project), AMT, 6.25% due 12/01/2035 2,842 4,710 (Replacement Housing Project), 6.125% due 12/01/2032 4,833 7,750 Tacoma, Washington, Electric System Revenue Refunding Bonds, Series A, 5.75% due 1/01/2011 (h)(j) 8,415 Wisconsin--0.7% 1,000 Wisconsin Housing and Economic Development Authority, Home Ownership Revenue Bonds, AMT, Series C, 6% due 9/01/2036 1,061 1,960 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (f) 1,982 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (Synergyhealth Inc.): 3,155 6% due 11/15/2023 3,456 3,700 6% due 11/15/2032 4,029 Guam--0.0% 115 Guam Housing Corporation, S/F Mortgage Revenue Bonds, AMT, Series A, 5.75% due 9/01/2031 (l) 125 Puerto Rico--2.4% 8,045 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation Revenue Bonds, 5.75% due 7/01/2022 8,883 20,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax and Capital Appreciation Revenue Bonds, Series A, 4.64% due 7/01/2032 (e)(p) 6,488 Puerto Rico Commonwealth, Public Improvement, GO, Refunding: 785 5.70% due 7/01/2020 (f)(p) 836 5,500 Series B, 5.25% due 7/01/2032 5,920 15,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series NN, 5.125% due 7/01/2029 15,748 U.S. Virgin Islands--0.6% 8,000 Virgin Islands Government Refinery Facilities, Revenue Refunding Bonds (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 9,022 Total Municipal Bonds (Cost--$1,240,921)--84.1% 1,306,123 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (concluded) (In Thousands) BlackRock National Municipal Fund Face Amount Municipal Bonds Held in Trust (s) Value California--1.9% $ 28,500 Los Angeles, California, Unified School District, GO, Series A, 5% due 1/01/2028 (f) $ 30,068 Connecticut--0.7% 10,045 Connecticut State Health and Educational Facilities Authority Revenue Refunding Bonds (Eastern Connecticut Health Network), Series A, 6.50% due 7/01/2030 (m) 11,047 District of Columbia--0.6% 10,000 Distrtict of Columbia, GO, Refunding, Series A, 6% due 6/01/2007 (f)(j) 10,296 Florida--2.4% 14,000 Lee County, Florida, Airport Revenue Bonds, AMT, Series A, 6% due 10/01/2029 (h) 15,118 20,115 Port St. Lucie, Florida, Utility Revenue Bonds, 5.125% due 9/01/2036 (f) 21,663 Illinois--1.4% 21,235 Chicago, Illinois, Board of Education, GO (Chicago School Reform), 5.75% due 12/01/2007 (c)(j) 22,059 Michigan--0.9% 13,500 Hartland, Michigan, Consolidated School District, GO, Refunding, 5.125% due 5/01/2029 14,035 New Jersey--2.9% 22,000 New Jersey EDA, School Facilities Construction Revenue Bonds, Series O, 5.25% due 3/01/2024 23,804 20,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds, Series A, 5.75% due 1/01/2018 (f) 21,110 Pennsylvania--2.5% 36,210 Philadelphia, Pennsylvania, Redevelopment Authority Revenue Bonds (Neighborhood Transformation), Series A, 5.3% due 4/15/2026 (e) 38,526 Face Amount Municipal Bonds Held in Trust (s) Value South Carolina--1.4% $21,215 South Carolina State Ports Authority, Ports Revenue Bonds, AMT, 5.30% due 7/01/2026 (h) $ 21,778 Texas--5.1% 36,500 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, AMT, Series A, 6% due 11/01/2024 (e) 38,509 18,860 Houston, Texas, Airport System Revenue Refunding Bonds, Sub-Lien, Series B, 5.20% due 7/01/2018 (e) 19,346 20,000 Houston, Texas, Combined Utility System, First Lien Revenue Refunding Bonds, Series A, 5.125% due 5/15/2028 (f) 21,244 Puerto Rico--0.6% Puerto Rico Industrial Tourist Educational, Medical and Environmental Control Facilities Revenue Bonds (Hospital de la Concepcion), Series A: 4,000 6.125% due 11/15/2025 4,347 4,220 6.125%, due 11/15/2030 4,615 Total Municipal Bonds Held in Trust (Cost--$312,581)--20.4% 317,565 Shares Held Short-Term Securities 51,864 Merrill Lynch Institutional Tax-Exempt Fund, 5.19% (q)(r) 51,864 Total Short-Term Securities (Cost--$51,864)--3.3% 51,864 Total Investments (Cost--$1,605,366*)--107.8% 1,675,552 Other Assets Less Liabilities--2.1% 31,881 Liability for Trust Certificates, Including Interest Expense Payable--(9.9%) (153,286) ---------- Net Assets--100.0% $1,554,147 ========== * The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 1,456,813 =============== Gross unrealized appreciation $ 67,220 Gross unrealized depreciation (1,186) --------------- Net unrealized appreciation $ 66,034 =============== (a) Escrowed to maturity. (b) FHA Insured. (c) AMBAC Insured. (d) GNMA Collateralized. (e) FGIC Insured. (f) MBIA Insured. (g) Security may have a maturity of more than one year at time of issuance, but has variable rate and demand features that qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based upon prevailing market rates. (h) FSA Insured. (i) FNMA/GNMA Collateralized. (j) Prerefunded. (k) XL Capital Insured. (l) FHLMC Collateralized. (m) Radian Insured. (n) The rate disclosed is that currently in effect. This rate changes periodically and inversely based upon prevailing market rates. (o) ACA Insured. (p) Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase. (q) Represents the current yield as of December 31, 2006. (r) Investments in companies considered to be an affiliate of the Fund, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: Net Dividend Affiliate Activity Income Merrill Lynch Institutional Tax-Exempt Fund (1,660) $827 (s) Securities represent underlying bonds transferred to a separate securitizaion trust established in a tender option bond transaction in which the Fund may have acquired the residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1(c) to Financial Statements for details of Municipal Bonds Held in Trust. See Notes to Financial Statements. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments as of December 31, 2006 (In Thousands) BlackRock High Yield Municipal Fund Face Amount Municipal Bonds Value Alabama--1.0% $ 500 Tuscaloosa, Alabama, Special Care Facilities Financing Authority, Residential Care Facility Revenue Bonds (Capstone Village, Inc. Project), Series A, 5.875% due 8/01/2036 $ 512 Arizona--3.6% 300 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools Project 1), Series A, 6.75% due 7/01/2029 306 1,000 Phoenix, Arizona, IDA, Airport Facility, Revenue Refunding Bonds (America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 1,021 500 Queen Creek Improvement District Number 001, Arizona, Special Assessment Bonds, 5% due 1/01/2032 509 California--4.1% 500 Lammersville, California, School District, Special Tax Bonds (Community Facilities District Number 2002-- Mountain House), 5.125% due 9/01/2035 505 500 Roseville, California, Special Tax Bonds (Fiddyment Ranch Community Facilities Number 1), 5.25% due 9/01/2036 509 500 Temecula, California, Public Financing Authority, Community Facilities District Number 01-2, Special Tax Refunding Bonds, Sub-Series B, 5.10% due 9/01/2036 504 565 Temecula Valley, California, Unified School District, Community Facilities District Number 2005-1, Special Tax Bonds, 5% due 9/01/2036 565 Colorado--4.0% 1,000 Colorado HFA, Revenue Refunding Bonds (Adventist Health System/Sunbelt Obligor Group), Series D, 5.25% due 11/15/2035 1,062 450 Colorado Health Facilities Authority, Revenue Refunding Bonds (Christian Living Communities Project), Series A, 5.75% due 1/01/2037 472 500 Sorrel Ranch Metropolitan District, Colorado, Limited Tax, GO, 5.75% due 12/01/2036 511 Connecticut--2.1% 1,000 Connecticut State Health and Educational Facilities Authority Revenue Bonds (University of Hartford), Series G, 5.25% due 7/01/2036 (h) 1,077 Florida--9.2% 500 Greater Lakes/Sawgrass Bay Community Development District, Florida, Special Assessment Bonds, Series A, 5.50% due 5/01/2038 510 500 Highland Meadows Community Development District, Florida, Special Assessment Bonds, Series A, 5.50% due 5/01/2036 509 1,000 Hillsborough County, Florida, IDA, Hospital Revenue Bonds (Tampa General Hospital Project), 5.25% due 10/01/2041 1,052 600 Lee County, Florida, IDA, Health Care Facilities, Revenue Refunding Bonds (Shell Point/Alliance Obligor Group), 5% due 11/15/2032 606 Face Amount Municipal Bonds Value Florida (concluded) $ 500 New River Community Development District, Florida, Capital Improvement Revenue Bonds, Series B, 5% due 5/01/2013 $ 496 1,000 Pine Ridge Plantation Community Development District, Florida, Capital Improvement and Special Assessment Bonds, Series B, 5% due 5/01/2011 1,005 500 Santa Rosa Bay Bridge Authority, Florida, Revenue Bonds, 6.25% due 7/01/2028 506 Georgia--4.0% 500 Brunswick and Glynn County, Georgia, Development Authority, First Mortgage Revenue Bonds (Coastal Community Retirement Corporation Project), Series A, 7.25% due 1/01/2035 498 1,000 Richmond County, Georgia, Development Authority, Environmental Improvement Revenue Bonds (International Paper Co. Projects), AMT, Series A, 5% due 8/01/2030 1,005 555 Savannah, Georgia, EDA, First Mortgage Revenue Bonds (Marshes of Skidaway), Series B, 6% due 1/01/2034 550 Illinois--1.0% 500 Illinois State Finance Authority Revenue Bonds (Three Crowns Park Plaza), Series A, 5.875% due 2/15/2038 526 Iowa--1.0% 500 Iowa Financing Authority, Health Facilities Revenue Refunding Bonds (Care Initiatives Project), Series A, 5% due 7/01/2019 506 Kansas--3.0% 1,000 Sedgwick and Shawnee Counties, Kansas, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), AMT, Series B-2, 5.25% due 12/01/2038 (b)(c) 1,057 450 Wyandotte County, Kansas, Kansas City Unified Government Revenue Refunding Bonds (General Motors Corporation Project), 6% due 6/01/2025 454 Maryland--6.5% 540 Baltimore, Maryland, Convention Center Hotel Revenue Bonds, Sub-Series B, 5.875% due 9/01/2039 572 1,000 Maryland State Community Development Administration, Department of Housing and Community Development, Residential Revenue Refunding Bonds, AMT, Series L, 4.80% due 9/01/2021 1,021 1,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration- AES Warrior Run), AMT, 7.40% due 9/01/2019 1,006 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds: 500 (King Farm Presbyterian Community), Series A, 5.30% due 1/01/2037 493 250 (Washington Christian Academy), 5.25% due 7/01/2018 250 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (continued) (In Thousands) BlackRock High Yield Municipal Fund Face Amount Municipal Bonds Value Massachusetts--2.1% $ 390 Massachusetts State Development Finance Agency Revenue Bonds (Curry College), Series A, 5.25% due 3/01/2026 (e) $ 414 650 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds (Bay Cove Human Services Issue), Series A, 5.90% due 4/01/2028 662 Nevada--2.0% 1,000 Clark County, Nevada, IDR (Southwest Gas Corp. Project), AMT, Series A, 4.75% due 9/01/2036 (f) 1,006 New Hampshire--4.0% New Hampshire Health and Education Facilities Authority, Revenue Refunding Bonds: 950 (Havenwood-Heritage Heights Retirement Community), Series A, 5.40% due 1/01/2030 959 1,015 (Southern New Hampshire University), 5% due 1/01/2027 (e) 1,060 New Jersey--9.2% 1,000 New Jersey EDA, Retirement Community Revenue Refunding Bonds (Seabrook Village, Inc.), 5.25% due 11/15/2036 1,011 490 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT, 6.625% due 9/15/2012 525 650 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Pascack Valley Hospital Association), 6.625% due 7/01/2036 712 1,000 New Jersey Health Care Facilities Financing Authority, Revenue Refunding Bonds (South Jersey Hospital System), 5% due 7/01/2046 1,030 1,420 New Jersey State Housing and Mortgage Finance Agency, S/F Revenue Refunding Bonds, AMT, Series M, 4.875% due 10/01/2026 1,452 New York--10.6% 500 Erie County, New York, IDA, Revenue Bonds (Orchard Park CCRC, Inc. Project), Series A, 6% due 11/15/2036 535 1,000 Nassau County, New York, Tobacco Settlement Corporation, Senior Asset-Backed Revenue Refunding Bonds, Series A-3, 5% due 6/01/2035 1,023 500 New York City, New York, City IDA, PILOT Revenue Bonds (Queens Baseball Stadium Project), 5% due 1/01/2036 (a) 534 750 New York City, New York, City IDA, Special Facility Revenue Bonds (JetBlue Airways Corporation Project), AMT, 5.125% due 5/15/2030 743 1,000 New York Liberty Development Corporation Revenue Bonds (National Sports Museum Project), Series A, 6.125% due 2/15/2019 1,058 1,000 New York State Dormitory Authority, Non-State Supported Debt, Revenue Refunding Bonds (New York University Hospital Center), Series A, 5% due 7/01/2026 1,025 500 Onondaga County, New York, IDA, PCR (Anheuser- Busch Companies, Inc. Project), Refunding, Series A, 4.875% due 7/01/2041 510 Face Amount Municipal Bonds Value North Carolina--1.0% $ 500 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage Revenue Refunding Bonds (Salemtowne Project), 5.10% due 10/01/2030 $ 504 North Dakota--2.0% 1,000 Ward County, North Dakota, Health Care Facility Revenue Refunding Bonds (Trinity Health Obligated Group), 5.125% due 7/01/2029 1,041 Ohio--1.8% 875 Richland County, Ohio, Hospital Facilities Revenue Refunding Bonds (MedCentral Health System), 5.25% due 11/15/2036 927 Pennsylvania--1.0% 500 Harrisburg, Pennsylvania, Authority, University Revenue Bonds (Harrisburg University of Science), Series B, 6% due 9/01/2036 509 Rhode Island--2.0% 1,000 Rhode Island Housing and Mortgage Finance Corporation, Homeownership Opportunity Revenue Bonds, AMT, Series 53-B, 5% due 10/01/2046 1,019 South Carolina--2.0% 1,000 Connector 2000 Association, Inc., South Carolina, Toll Road and Capital Appreciation Revenue Bonds, Senior Series B, 7.97% due 1/01/2015 (j) 535 500 Myrtle Beach, South Carolina, Tax Increment Revenue Bonds (Myrtle Beach Air Force Base), Series A, 5.25% due 11/01/2026 508 Tennessee--1.4% 700 Sullivan County, Tennessee, Health, Educational & Housing Facilities Board, Hospital Revenue Bonds (Wellmont Health System Project), Series C, 5.25% due 9/01/2036 735 Texas--11.3% 1,000 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Bonds (American Airlines Inc. Project), AMT, 7.50% due 12/01/2029 1,020 500 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Refunding Bonds (FedEx Corp. Project), AMT, 4.85% due 4/01/2021 509 500 Brazos River Authority, Texas, PCR (TXU Energy Company LLC Project), AMT, 5% due 3/01/2041 502 500 Dallas, Texas, Industrial Development Corporation, IDR (CR/PL Inc. Project), VRDN, AMT, 7.50% due 8/01/2017 (k) 503 655 HFDC of Central Texas, Inc., Retirement Facilities Revenue Bonds, Series A, 5.75% due 11/01/2036 673 1,000 Harlandale, Texas, Independent School District, School Building, GO, 4.75% due 8/15/2040 1,020 500 Houston, Texas, Airport System, Special Facilities Revenue Bonds (Continental Airlines), AMT, Series E, 7.375% due 7/01/2022 548 1,000 Texas State Public Financing Authority, Charter School Financing Corporation, Revenue Refunding Bonds (KIPP, Inc.), Series A, 5% due 2/15/2036 (e) 1,021 BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Schedule of Investments (concluded) (In Thousands) BlackRock High Yield Municipal Fund Face Amount Municipal Bonds Value Utah--3.3% $ 1,640 Utah Housing Corporation, S/F Mortgage Revenue Bonds, AMT, Series A-1, Class I, 5% due 7/01/2037 $ 1,677 Virginia--4.9% 500 Fairfax County, Virginia, EDA, Retirement Revenue Refunding Bonds (Greenspring Village Inc.), Series A, 4.875% due 10/01/2036 508 500 Farms of New Kent, Virginia, Community Development Authority, Special Assessment Bonds, Series C, 5.80% due 3/01/2036 502 450 Henrico County, Virginia, EDA, Residential Care Facility, Mortgage Revenue Refunding Bonds (Westminster-Canterbury Of Winchester, Inc.), 5% due 10/01/2027 463 Face Amount Municipal Bonds Value Virginia (concluded) $ 1,000 Virginia State HDA, Commonwealth Mortgage Revenue Bonds, Series H, Sub-Series H-1, 5.35% due 7/01/2031 (g) $ 1,036 Total Municipal Bonds (Cost--$49,552)--98.1% 50,194 Shares Held Short-Term Securities 901 Merrill Lynch Institutional Tax-Exempt Fund, 5.19% (d)(i) 901 Total Short-Term Securities (Cost--$901)--1.7% 901 Total Investments (Cost--$50,453*)--99.8% 51,095 Other Assets Less Liabilities--0.2% 79 ---------- Net Assets--100.0% $ 51,174 ========== * The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 50,453 =============== Gross unrealized appreciation $ 683 Gross unrealized depreciation (41) --------------- Net unrealized appreciation $ 642 =============== (a) AMBAC Insured. (b) FHLMC Collateralized. (c) FNMA/GNMA Collateralized. (d) Investments in companies considered to be an affiliate of the Fund, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: Net Dividend Affiliate Activity Income Merrill Lynch Institutional Tax-Exempt Fund 901 $30 (e) ACA Insured. (f) FGIC Insured. (g) MBIA Insured. (h) Radian Insured. (i) Represents the current yield as of December 31, 2006. (j) Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase. (k) Security may have a maturity date of more than one year at time of issuance, but has variable rate and demand features that qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based on prevailing market rates. See Notes to Financial Statements. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Assets and Liabilities
BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal As of December 31, 2006 Fund Fund Fund Fund Assets Investments in unaffiliated securities, at value* $ 298,733,933 $ 984,437,114 $ 1,623,688,142 $ 50,194,362 Investments in affiliated securities, at value** 6,716,153 24,032,239 51,864,136 901,074 Unrealized appreciation on forward interest rate swaps -- 629,894 -- -- Cash 76,694 78,887 47,664 95,074 Receivables: Securities sold -- 230,000 15,838,423 -- Interest 4,931,041 14,606,847 25,067,429 727,858 Capital shares sold 740,027 1,129,259 3,847,327 426,241 Dividends from affiliates -- 79,204 -- -- Prepaid expenses and other assets 45,517 786,555 76,146 32,529 --------------- --------------- --------------- --------------- Total assets 311,243,365 1,026,009,999 1,720,429,267 52,377,138 --------------- --------------- --------------- --------------- Liabilities Trust certificates -- 92,563,129 152,705,330 -- Payables: Securities purchased -- 3,602,948 6,202,912 996,275 Capital shares redeemed 925,744 188,210 745,069 -- Dividends to shareholders 819,840 2,849,184 4,933,776 192,170 Interest expense -- 588,405 581,062 -- Investment adviser 40,311 296,573 640,589 8,751 Distributor 18,286 117,563 270,406 4,813 Other affiliates 55,968 84,582 203,256 1,464 Distributions to shareholders -- 1,005 -- -- Accrued expenses and other liabilities 32,848 40,882 145 -- --------------- --------------- --------------- --------------- Total liabilities 1,892,997 100,332,481 166,282,545 1,203,473 --------------- --------------- --------------- --------------- Net Assets Net assets $ 309,350,368 $ 925,677,518 $ 1,554,146,722 $ 51,173,665 =============== =============== =============== =============== Net Assets Consist of Undistributed investment income--net 484,005 1,223,119 957,407 -- Accumulated realized capital gains (losses)--net (9,106,526) (4,672,904) (43,820,792) 49,841 Unrealized appreciation--net 255,962 47,404,556 70,186,209 642,622 --------------- --------------- --------------- --------------- Total accumulated earnings (losses)--net (8,366,559) 43,954,771 27,322,824 692,463 --------------- --------------- --------------- --------------- BlackRock Common Stock, $.10 par value++ 104,298 -- -- -- Institutional Common Stock, $.10 par value++++ 1,427,629 8,112,882 8,903,078 461,070 Investor A Common Stock, $.10 par value++++++ 9,641 2,245,599 3,044,086 19,812 Investor A1 Common Stock, $.10 par value++++++++ 1,398,205 -- -- -- Investor B Common Stock, $.10 par value++++++++++ 172,885 709,540 1,137,867 -- Investor C Common Stock, $.10 par value++++++++++++ 5,503 15,413 143,744 21,987 Investor C1 Common Stock, $.10 par value++++++++++++++ -- 738,985 1,470,760 -- Paid-in capital in excess of par 314,598,766 869,900,328 1,512,124,363 49,978,333 --------------- --------------- --------------- --------------- Net Assets $ 309,350,368 $ 925,677,518 $ 1,554,146,722 $ 51,173,665 =============== =============== =============== ===============
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Assets and Liabilities (concluded)
BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal As of December 31, 2006 Fund Fund Fund Fund Net Asset Value BlackRock: Net assets $ 10,347,384 -- -- -- =============== =============== =============== =============== Shares outstanding 1,042,979 -- -- -- =============== =============== =============== =============== Net asset value and redemption price per share $ 9.92 -- -- -- =============== =============== =============== =============== Institutional: Net assets $ 141,576,404 $ 635,311,750 $ 941,220,449 $ 46,922,237 =============== =============== =============== =============== Shares outstanding 14,276,290 81,128,819 89,030,783 4,610,700 =============== =============== =============== =============== Net asset value and redemption price per share $ 9.92 $ 7.83 $ 10.57 $ 10.18 =============== =============== =============== =============== Investor A: Net assets $ 956,391 $ 175,791,450 $ 321,965,117 $ 2,013,713 =============== =============== =============== =============== Shares outstanding 96,408 22,455,989 30,440,858 198,122 =============== =============== =============== =============== Net asset value and redemption price per share $ 9.92 $ 7.83 $ 10.58 $ 10.16 =============== =============== =============== =============== Investor A1: Net assets $ 138,777,992 -- -- -- =============== =============== =============== =============== Shares outstanding 13,982,047 -- -- -- =============== =============== =============== =============== Net asset value and redemption price per share $ 9.93 -- -- -- =============== =============== =============== =============== Investor B: Net assets $ 17,146,403 $ 55,523,427 $ 120,246,881 -- =============== =============== =============== =============== Shares outstanding 1,728,847 7,095,397 11,378,673 -- =============== =============== =============== =============== Net asset value and redemption price per share $ 9.92 $ 7.83 $ 10.57 -- =============== =============== =============== =============== Investor C: Net assets $ 545,794 $ 1,207,788 $ 15,205,228 $ 2,237,715 =============== =============== =============== =============== Shares outstanding 55,025 154,131 1,437,435 219,866 =============== =============== =============== =============== Net asset value and redemption price per share $ 9.92 $ 7.84 $ 10.58 $ 10.18 =============== =============== =============== =============== Investor C1: Net assets -- $ 57,843,103 $ 155,509,047 -- =============== =============== =============== =============== Shares outstanding -- 7,389,849 14,707,603 -- =============== =============== =============== =============== Net asset value and redemption price per share -- $ 7.83 $ 10.57 -- =============== =============== =============== =============== * Identified cost for unaffiliated securities $ 298,477,971 $ 935,717,984 $ 1,553,501,933 $ 49,551,740 =============== =============== =============== =============== ** Identified cost for affiliated securities $ 6,716,153 $ 25,976,707 $ 51,864,136 $ 901,074 =============== =============== =============== =============== ++ Authorized shares--BlackRock 150,000,000 -- -- -- =============== =============== =============== =============== ++++ Authorized shares--Institutional 150,000,000 500,000,000 375,000,000 100,000,000 =============== =============== =============== =============== ++++++ Authorized shares--Investor A 150,000,000 500,000,000 375,000,000 100,000,000 =============== =============== =============== =============== ++++++++ Authorized shares--Investor A1 150,000,000 -- -- -- =============== =============== =============== =============== ++++++++++ Authorized shares--Investor B 150,000,000 375,000,000 375,000,000 -- =============== =============== =============== =============== ++++++++++++ Authorized shares--Investor C 150,000,000 -- 375,000,000 100,000,000 =============== =============== =============== =============== ++++++++++++++ Authorized shares--Investor C1 -- 375,000,000 375,000,000 -- =============== =============== =============== =============== See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Operations
BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal For the Six Months Ended December 31, 2006 Fund Fund Fund Fund Investment Income Interest $ 5,607,365 $ 23,620,482 $ 42,185,974 $ 828,770 Dividends from affiliates 196,458 619,564 826,771 30,179 Other -- 44,141 -- -- --------------- --------------- --------------- --------------- Total income 5,803,823 24,284,187 43,012,745 858,949 --------------- --------------- --------------- --------------- Expenses Investment advisory fees 543,152 1,703,266 3,478,626 97,458 Interest expense and fees -- 1,881,768 3,148,445 -- Service and distribution fees--Class C 33,491 -- -- -- Service and distribution fees--Investor B 35,793 229,297 478,552 -- Service and distribution fees--Investor C 718 1,677 19,066 5,918 Service fees--Investor A 193 219,563 380,978 882 Service fees--Investor A1 66,137 -- -- -- Accounting services 59,838 138,396 207,387 262 Transfer agent fees--Investor C1 -- 12,101 38,242 -- Transfer agent fees--Institutional 32,213 105,791 229,711 2,365 Transfer agent fees--Investor A 34 28,795 76,095 45 Transfer agent fees--Investor A1 29,983 -- -- -- Custodian fees 15,565 27,635 43,551 2,707 Registration fees 21,209 23,851 41,795 22 Transfer agent fees--Investor B 6,591 12,656 37,931 -- Transfer agent fees--Class C 10,352 -- -- -- Professional fees 19,119 26,472 33,550 15,891 Printing and shareholder reports 8,617 27,924 42,227 1,942 Transfer agent fees--Investor C 938 59 7,625 80 Transfer agent fees--BlackRock 570 -- -- -- Service and distribution fees--Investor C1 -- 240,345 612,823 -- Pricing services 4,748 10,487 27,868 1,182 Directors' fees and expenses 3,618 9,561 14,137 717 Offering costs -- -- -- 57,338 Other 16,731 30,771 38,987 6,863 --------------- --------------- --------------- --------------- Total expenses before waiver 909,610 4,730,415 8,957,596 193,672 Waiver of expenses (101,635) (8,640) (48,597) (72,994) --------------- --------------- --------------- --------------- Total expenses after waiver 807,975 4,721,775 8,908,999 120,678 --------------- --------------- --------------- --------------- Investment income--net 4,995,848 19,562,412 34,103,746 738,271 --------------- --------------- --------------- --------------- Realized & Unrealized Gain (Loss)--Net Realized gain (loss) on: Investments--net (1,432,074) 993,882 7,631,916 60,146 Forward interest rate swaps--net -- (1,234,061) -- -- --------------- --------------- --------------- --------------- Total realized gain (loss)--net (1,432,074) (240,179) 7,631,916 60,146 --------------- --------------- --------------- --------------- Change in unrealized appreciation/depreciation on: Investments--net 2,548,098 22,391,960 22,038,932 642,622 Forward interest rate swaps--net -- 629,894 -- -- --------------- --------------- --------------- --------------- Total change in unrealized appreciation/ depreciation--net 2,548,098 23,021,854 22,038,932 642,622 --------------- --------------- --------------- --------------- Total realized and unrealized gain--net 1,116,024 22,781,675 29,670,848 702,768 --------------- --------------- --------------- --------------- Net Increase in Net Assets Resulting from Operations $ 6,111,872 $ 42,344,087 $ 63,774,594 $ 1,441,039 =============== =============== =============== =============== * Fund commenced operations on August 1, 2006. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Changes in Net Assets BlackRock Short-Term Municipal Fund
For the Six For the Months Ended Year Ended December 31, June 30, Increase (Decrease) in Net Assets: 2006 2006 Operations Investment income--net $ 4,995,848 $ 9,982,288 Realized loss--net (1,432,074) (2,592,944) Change in unrealized appreciation/depreciation--net 2,548,098 (1,927,943) --------------- --------------- Net increase in net assets resulting from operations 6,111,872 5,461,401 --------------- --------------- Dividends to Shareholders Investment income--net: BlackRock (74,449) -- Institutional (2,330,470) (4,454,151) Investor A (2,353) -- Investor A1 (2,042,236) (3,080,084) Investor B (286,990) (696,530) Investor C (1,654) -- Class C (257,695) (1,751,261) --------------- --------------- Net decrease in net assets resulting from dividends to shareholders (4,995,847) (9,982,026) --------------- --------------- Capital Share Transactions Net decrease in net assets derived from capital share transactions (28,028,846) (118,737,525) --------------- --------------- Net Assets Total decrease in net assets (26,912,821) (123,258,150) Beginning of period 336,263,189 459,521,339 --------------- --------------- End of period* $ 309,350,368 $ 336,263,189 =============== =============== * Undistributed investment income--net $ 484,005 $ 484,004 =============== =============== See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Changes in Net Assets BlackRock Municipal Insured Fund (As Restated for the Year Ended 2006. See Note 8)
For the Six For the Months Ended Year Ended December 31, June 30, Increase (Decrease) in Net Assets: 2006 2006 Operations Investment income--net $ 19,562,412 $ 42,545,175 Realized gain (loss)--net (240,179) 6,736,805 Change in unrealized appreciation/depreciation--net 23,021,854 (43,062,066) --------------- --------------- Net increase in net assets resulting from operations 42,344,087 6,219,914 --------------- --------------- Dividends & Distributions to Shareholders Investment income--net: Institutional (13,860,466) (29,830,404) Investor A (3,552,259) (7,533,857) Investor B (1,082,457) (2,879,619) Investor C (5,952) -- Investor C1 (1,048,135) (2,276,067) Realized gain--net: Institutional (3,420,293) (2,535,229) Investor A (945,702) (682,505) Investor B (299,415) (295,880) Investor C (6,273) -- Investor C1 (312,142) (235,289) --------------- --------------- Net decrease in net assets resulting from dividends and distributions to shareholders (24,533,094) (46,268,850) --------------- --------------- Capital Share Transactions Net decrease in net assets derived from capital share transactions (31,426,731) (66,044,701) --------------- --------------- Net Assets Total decrease in net assets (13,615,738) (106,093,637) Beginning of period 939,293,256 1,045,386,893 --------------- --------------- End of period* $ 925,677,518 $ 939,293,256 =============== =============== * Undistributed investment income--net $ 1,223,119 $ 1,209,976 =============== =============== See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statements of Changes in Net Assets BlackRock National Municipal Fund (As Restated for the Year Ended 2006. See Note 8)
For the Six For the Months Ended Year Ended December 31, June 30, Increase (Decrease) in Net Assets: 2006 2006 Operations Investment income--net $ 34,103,746 $ 67,217,185 Realized gain--net 7,631,916 12,238,185 Change in unrealized appreciation--net 22,038,932 (53,182,340) --------------- --------------- Net increase in net assets resulting from operations 63,774,594 26,273,030 --------------- --------------- Dividends to Shareholders Investment income--net: Institutional (21,700,258) (43,778,940) Investor A (6,803,950) (11,906,520) Investor B (2,526,866) (6,469,017) Investor C (69,531) -- Investor C1 (2,992,681) (4,988,554) --------------- --------------- Net decrease in net assets resulting from dividends to shareholders (34,093,286) (67,143,031) --------------- --------------- Capital Share Transactions Net increase in net assets derived from capital share transactions 76,044,291 46,489,740 --------------- --------------- Net Assets Total increase in net assets 105,725,599 5,619,739 Beginning of period 1,448,421,123 1,442,801,384 --------------- --------------- End of period* $ 1,554,146,722 $ 1,448,421,123 =============== =============== * Undistributed investment income--net $ 957,407 $ 946,947 =============== =============== See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Statement of Changes in Net Assets BlackRock High Yield Municipal Fund
For the Period August 1, 2006++ to December 31, Increase (Decrease) in Net Assets: 2006 Operations Investment income--net $ 738,271 Realized gain--net 60,146 Change in unrealized appreciation--net 642,622 --------------- Net increase in net assets resulting from operations 1,441,039 --------------- Dividends & Distributions to Shareholders Investment income--net: Institutional (704,104) Investor A (14,543) Investor C (19,624) Realized gain--net: Institutional (9,444) Investor A (407) Investor C (454) --------------- Net decrease in net assets resulting from dividends and distributions to shareholders (748,576) --------------- Capital Share Transactions Net increase in net assets derived from capital share transactions 50,480,452 --------------- Net Assets Total increase in net assets 51,172,915 Beginning of period 750 --------------- End of period $ 51,173,665 =============== ++ Commencement of operations. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights BlackRock Short-Term Municipal Fund
BlackRock Shares For the Period October 2, 2006++ The following per share data and ratios have been derived to December 31, from information provided in the financial statements. 2006 Per Share Operating Performance Net asset value, beginning of period $ 9.93 --------------- Investment income--net** .07 Realized and unrealized gain--net -- --------------- Total from investment operations .07 --------------- Less dividends from investment income--net (.08) --------------- Net asset value, end of period $ 9.92 =============== Total Investment Return Based on net asset value per share .71%+++ =============== Ratios to Average Net Assets Expenses, net of waiver .35%* =============== Expenses .44%* =============== Investment income--net 3.30%* =============== Supplemental Data Net assets, end of period (in thousands) $ 10,347 =============== Portfolio turnover 75.80% =============== * Annualized. ** Based on average shares outstanding. ++ Commencement of operations. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Short-Term Municipal Fund
Institutional For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 9.88 $ 9.99 $ 10.05 $ 10.17 $ 10.13 $ 10.05 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .16++ .27++ .19++ .18++ .27++ .34 Realized and unrealized gain (loss)--net .08 (.11) (.06) (.12) .02 .08 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .24 .16 .13 .06 .29 .42 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends from investment income--net (.20) (.27) (.19) (.18) (.25) (.34) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 9.92 $ 9.88 $ 9.99 $ 10.05 $ 10.17 $ 10.13 =========== =========== =========== =========== =========== =========== Total Investment Return Based on net asset value per share 2.02%+++ 1.57% 1.30% .59% 2.87% 4.10% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver .41%* .44% .43% .42% .42% .46% =========== =========== =========== =========== =========== =========== Expenses .48%* .45% .44% .43% .43% .46% =========== =========== =========== =========== =========== =========== Investment income--net 3.18%* 2.66% 1.88% 1.78% 2.44% 3.30% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 141,576 $ 149,333 $ 186,877 $ 243,443 $ 251,137 $ 204,936 =========== =========== =========== =========== =========== =========== Portfolio turnover 75.80% 82.77% 87.42% 69.08% 44.61% 74.74% =========== =========== =========== =========== =========== =========== * Annualized. ++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Short-Term Municipal Fund
Investor A For the Period October 2, 2006++ The following per share data and ratios have been derived to December 31, from information provided in the financial statements. 2006 Per Share Operating Performance Net asset value, beginning of period $ 9.93 --------------- Investment income--net*** .05 Realized and unrealized gain--net .01 --------------- Total from investment operations .06 --------------- Less dividends from investment income--net (.07) --------------- Net asset value, end of period $ 9.92 =============== Total Investment Return** Based on net asset value per share .65%+++ =============== Ratios to Average Net Assets Expenses, net of waiver .61%* =============== Expenses .71%* =============== Investment income--net 3.05%* =============== Supplemental Data Net assets, end of period (in thousands) $ 956 =============== Portfolio turnover 75.80% =============== * Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. ++ Commencement of operations. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Short-Term Municipal Fund
Investor A1 For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 9.89 $ 10.00 $ 10.06 $ 10.18 $ 10.14 $ 10.06 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .15++ .26++ .18++ .17++ .24++ .32 Realized and unrealized gain (loss)--net .03 (.11) (.06) (.12) .04 .08 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .18 .15 .12 .05 .28 .40 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends from investment income--net (.14) (.26) (.18) (.17) (.24) (.32) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 9.93 $ 9.89 $ 10.00 $ 10.06 $ 10.18 $ 10.14 =========== =========== =========== =========== =========== =========== Total Investment Return** Based on net asset value per share 1.97%+++ 1.47% 1.20% .50% 2.77% 3.99% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver .51%* .54% .53% .52% .52% .56% =========== =========== =========== =========== =========== =========== Expenses .58%* .55% .54% .53% .53% .56% =========== =========== =========== =========== =========== =========== Investment income--net 3.09%* 2.55% 1.76% 1.68% 2.31% 3.13% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 138,778 $ 99,293 $ 141,172 $ 244,741 $ 248,454 $ 140,744 =========== =========== =========== =========== =========== =========== Portfolio turnover 75.80% 82.77% 87.42% 69.08% 44.61% 74.74% =========== =========== =========== =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges. ++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Short-Term Municipal Fund
Investor B For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 9.88 $ 10.00 $ 10.05 $ 10.17 $ 10.13 $ 10.06 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .14++ .23++ .15++ .14++ .21++ .29 Realized and unrealized gain (loss)--net .26 (.12) (.05) (.12) .04 .07 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .40 .11 .10 .02 .25 .36 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends from investment income--net (.36) (.23) (.15) (.14) (.21) (.29) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 9.92 $ 9.88 $ 10.00 $ 10.05 $ 10.17 $ 10.13 =========== =========== =========== =========== =========== =========== Total Investment Return** Based on net asset value per share 1.84%+++ 1.11% 1.04% .24% 2.51% 3.62% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver .78%* .80% .79% .77% .78% .82% =========== =========== =========== =========== =========== =========== Expenses .85%* .81% .80% .78% .79% .82% =========== =========== =========== =========== =========== =========== Investment income--net 2.81%* 2.28% 1.50% 1.43% 2.10% 2.87% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 17,146 $ 23,769 $ 38,565 $ 63,135 $ 83,886 $ 81,967 =========== =========== =========== =========== =========== =========== Portfolio turnover 75.80% 82.77% 87.42% 69.08% 44.61% 74.74% =========== =========== =========== =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges. ++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Short-Term Municipal Fund
Investor C For the Period October 2, 2006++ The following per share data and ratios have been derived to December 31, from information provided in the financial statements. 2006 Per Share Operating Performance Net asset value, beginning of period $ 9.93 --------------- Investment income--net*** .04 Realized and unrealized gain--net .01 --------------- Total from investment operations .05 --------------- Less dividends from investment income--net (.06) --------------- Net asset value, end of period $ 9.92 =============== Total Investment Return** Based on net asset value per share .46%+++ =============== Ratios to Average Net Assets Expenses, net of waiver 1.35%* =============== Expenses 1.44%* =============== Investment income--net 2.30%* =============== Supplemental Data Net assets, end of period (in thousands) $ 546 =============== Portfolio turnover 75.80% =============== * Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. ++ Commencement of operations. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Municipal Insured Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Institutional For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 7.69 $ 8.00 $ 7.70 $ 8.07 $ 7.80 $ 7.69 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .17++++ .35++++ .36++++ .40++++ .41++++ .41 Realized and unrealized gain (loss)--net .18 (.28) .30 (.37) .27 .11 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .35 .07 .66 .03 .68 .52 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.17) (.35) (.36) (.40) (.41) (.41) Realized gain--net (.04) (.03) -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.21) (.38) (.36) (.40) (.41) (.41) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 7.83 $ 7.69 $ 8.00 $ 7.70 $ 8.07 $ 7.80 =========== =========== =========== =========== =========== =========== Total Investment Return Based on net asset value per share 4.60%+++ .82% 8.74% .35% 8.88% 7.03% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense .45%* .45% .46% .46% .46% .47% =========== =========== =========== =========== =========== =========== Expenses, net of waiver .85%* .74% .63% .66% .71% .78% =========== =========== =========== =========== =========== =========== Expenses .86%* .74% .64% .67% .71% .78% =========== =========== =========== =========== =========== =========== Investment income--net 4.30%* 4.40% 4.58% 5.04% 5.13% 5.35% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 635,312 $ 639,687 $ 707,134 $ 733,310 $ 855,757 $ 878,018 =========== =========== =========== =========== =========== =========== Portfolio turnover 10% 41% 47% 44% 33% 28% =========== =========== =========== =========== =========== =========== * Annualized. ++ Amount is less than $(.01) per share. ++++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Municipal Insured Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor A For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 7.68 $ 8.00 $ 7.70 $ 8.07 $ 7.79 $ 7.69 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .16++++ .33++++ .34++++ .38++++ .39++++ .39 Realized and unrealized gain (loss)--net .19 (.29) .30 (.37) .28 .10 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .35 .04 .64 .01 .67 .49 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.16) (.33) (.34) (.38) (.39) (.39) Realized gain--net (.04) (.03) -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.20) (.36) (.34) (.38) (.39) (.39) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 7.83 $ 7.68 $ 8.00 $ 7.70 $ 8.07 $ 7.79 =========== =========== =========== =========== =========== =========== Total Investment Return** Based on net asset value per share 4.60%+++ .44% 8.47% .10% 8.77% 6.63% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense .70%* .70% .71% .71% .71% .72% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.10%* .99% .88% .91% .96% 1.03% =========== =========== =========== =========== =========== =========== Expenses 1.11%* .99% .89% .91% .96% 1.03% =========== =========== =========== =========== =========== =========== Investment income--net 4.05%* 4.15% 4.33% 4.79% 4.88% 5.10% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 175,791 $ 172,083 $ 182,216 $ 183,007 $ 187,805 $ 161,110 =========== =========== =========== =========== =========== =========== Portfolio turnover 10% 41% 47% 44% 33% 28% =========== =========== =========== =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges. ++ Amount is less than $(.01) per share. ++++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Municipal Insured Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor B For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 7.68 $ 7.99 $ 7.69 $ 8.07 $ 7.79 $ 7.68 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .14++++ .29++++ .30++++ .34++++ .35++++ .36 Realized and unrealized gain (loss)--net .19 (.28) .30 (.38) .28 .11 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .33 .01 .60 (.04) .63 .47 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.14) (.29) (.30) (.34) (.35) (.36) Realized gain--net (.04) (.03) -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.18) (.32) (.30) (.34) (.35) (.36) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 7.83 $ 7.68 $ 7.99 $ 7.69 $ 8.07 $ 7.79 =========== =========== =========== =========== =========== =========== Total Investment Return** Based on net asset value per share 4.34%+++ .05% 7.93% (.53%) 8.21% 6.23% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.21%* 1.21% 1.21% 1.21% 1.22% 1.23% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.61%* 1.50% 1.39% 1.42% 1.47% 1.53% =========== =========== =========== =========== =========== =========== Expenses 1.61%* 1.50% 1.40% 1.42% 1.47% 1.53% =========== =========== =========== =========== =========== =========== Investment income--net 3.54%* 3.64% 3.83% 4.29% 4.38% 4.58% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 55,523 $ 66,477 $ 91,355 $ 111,524 $ 160,177 $ 182,241 =========== =========== =========== =========== =========== =========== Portfolio turnover 10% 41% 47% 44% 33% 28% =========== =========== =========== =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges. ++ Amount is less than $(.01) per share. ++++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Municipal Insured Fund
Investor C For the Period October 2, 2006++ The following per share data and ratios have been derived to December 31, from information provided in the financial statements. 2006 Per Share Operating Performance Net asset value, beginning of period $ 7.88 --------------- Investment income--net*** .05 Realized and unrealized gain--net .02 --------------- Total from investment operations .07 --------------- Less dividends and distributions: Investment income--net (.07) Realized gain--net (.04) --------------- Total dividends and distributions (.11) --------------- Net asset value, end of period $ 7.84 =============== Total Investment Return** Based on net asset value per share .85%+++ =============== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.39%* =============== Expenses, net of waiver 1.79%* =============== Expenses 1.79%* =============== Investment income--net 3.31%* =============== Supplemental Data Net assets, end of period (in thousands) $ 1,208 =============== Portfolio turnover 10% =============== * Annualized. ** Total investment returns exclude the effects of sales charges. *** Based on average shares outstanding. ++ Commencement of operations. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock Municipal Insured Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor C1 For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 7.68 $ 8.00 $ 7.69 $ 8.07 $ 7.79 $ 7.68 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .14++++ .28++++ .30++++ .33++++ .34++++ .35 Realized and unrealized gain (loss)--net .19 (.29) .31 (.38) .28 .11 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .33 (.01) .61 (.05) .62 .46 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.14) (.28) (.30) (.33) (.34) (.35) Realized gain--net (.04) (.03) -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.18) (.31) (.30) (.33) (.34) (.35) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 7.83 $ 7.68 $ 8.00 $ 7.69 $ 8.07 $ 7.79 =========== =========== =========== =========== =========== =========== Total Investment Return** Based on net asset value per share 4.31%+++ (.12%) 8.01% (.58%) 8.16% 6.18% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.27%* 1.26% 1.26% 1.26% 1.27% 1.28% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.67%* 1.55% 1.44% 1.47% 1.52% 1.58% =========== =========== =========== =========== =========== =========== Expenses 1.67%* 1.55% 1.45% 1.47% 1.52% 1.58% =========== =========== =========== =========== =========== =========== Investment income--net 3.51%* 3.59% 3.77% 4.23% 4.31% 4.56% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 57,843 $ 61,046 $ 64,682 $ 61,794 $ 66,089 $ 34,541 =========== =========== =========== =========== =========== =========== Portfolio turnover 10% 41% 47% 44% 33% 28% =========== =========== =========== =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges. ++ Amount is less than $(.01) per share. ++++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock National Municipal Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Institutional For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 10.36 $ 10.66 $ 10.29 $ 10.54 $ 10.26 $ 10.14 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .25+++ .51+++ .53+++ .55+++ .56+++ .62 Realized and unrealized gain (loss)--net .23 (.30) .37 (.25) .28 .12 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .48 .21 .90 .30 .84 .74 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.27) (.51) (.53) (.55) (.56) (.62) Realized gain--net -- -- -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.27) (.51) (.53) (.55) (.56) (.62) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 10.57 $ 10.36 $ 10.66 $ 10.29 $ 10.54 $ 10.26 =========== =========== =========== =========== =========== =========== Total Investment Return Based on net asset value per share 4.47%++++ 2.02% 8.89% 2.88% 8.34% 6.98% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense .56%* .58% .59% .60% .59% .62% =========== =========== =========== =========== =========== =========== Expenses, net of waiver .98%* .83% .72% .71% .75% .96% =========== =========== =========== =========== =========== =========== Expenses .99%* .83% .72% .71% .76% .96% =========== =========== =========== =========== =========== =========== Investment income--net 4.72%* 4.87% 5.02% 5.23% 5.35% 5.55% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 941,220 $ 890,984 $ 909,125 $ 907,419 $ 624,192 $ 626,935 =========== =========== =========== =========== =========== =========== Portfolio turnover 46% 56% 33% 20% 34% 27% =========== =========== =========== =========== =========== =========== * Annualized. +++ Based on average shares outstanding. ++ Amount is less than $(.01) per share. ++++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock National Municipal Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor A For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 10.37 $ 10.67 $ 10.29 $ 10.54 $ 10.27 $ 10.15 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .24+++ .49+++ .50+++ .52+++ .53+++ .53 Realized and unrealized gain (loss)--net .21 (.30) .38 (.25) .27 .12 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .45 .19 .88 .27 .80 .65 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.24) (.49) (.50) (.52) (.53) (.53) Realized gain--net -- -- -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.24) (.49) (.50) (.52) (.53) (.53) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 10.58 $ 10.37 $ 10.67 $ 10.29 $ 10.54 $ 10.27 =========== =========== =========== =========== =========== =========== Total Investment Return* Based on net asset value per share 4.34%++++ 1.77% 8.73% 2.62% 7.98% 6.72% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense .81%** .83% .84% .85% .84% .87% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.23%** 1.08% .97% .95% 1.00% 1.20% =========== =========== =========== =========== =========== =========== Expenses 1.24%** 1.08% .97% .96% 1.01% 1.20% =========== =========== =========== =========== =========== =========== Investment income--net 4.47%** 4.61% 4.76% 4.97% 5.10% 5.30% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 321,965 $ 283,814 $ 248,231 $ 207,376 $ 200,108 $ 137,225 =========== =========== =========== =========== =========== =========== Portfolio turnover 46% 56% 33% 20% 34% 27% =========== =========== =========== =========== =========== =========== * Total investment returns exclude the effects of sales charges. ** Annualized. +++ Based on average shares outstanding. ++ Amount is less than $(.01) per share. ++++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock National Municipal Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor B For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 10.36 $ 10.66 $ 10.28 $ 10.53 $ 10.26 $ 10.14 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .21+++ .43+++ .45+++ .47+++ .48+++ .53 Realized and unrealized gain (loss)--net .21 (.30) .38 (.26) .27 .12 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .42 .13 .83 .21 .75 .65 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.21) (.43) (.45) (.46) (.48) (.53) Realized gain--net -- -- -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.21) (.43) (.45) (.46) (.48) (.53) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 10.57 $ 10.36 $ 10.66 $ 10.28 $ 10.53 $ 10.26 =========== =========== =========== =========== =========== =========== Total Investment Return* Based on net asset value per share 4.07%++++ 1.25% 8.18% 2.10% 7.43% 6.18% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.32%** 1.34% 1.35% 1.35% 1.34% 1.38% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.74%** 1.59% 1.48% 1.46% 1.51% 1.71% =========== =========== =========== =========== =========== =========== Expenses 1.75%** 1.59% 1.48% 1.46% 1.52% 1.71% =========== =========== =========== =========== =========== =========== Investment income--net 3.96%** 4.11% 4.27% 4.47% 4.59% 4.80% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 120,247 $ 134,177 $ 177,553 $ 217,814 $ 321,477 $ 295,827 =========== =========== =========== =========== =========== =========== Portfolio turnover 46% 56% 33% 20% 34% 27% =========== =========== =========== =========== =========== =========== * Total investment returns exclude the effects of sales charges. ** Annualized. +++ Based on average shares outstanding. ++ Amount is less than $(.01) per share. ++++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock National Municipal Fund
Investor C For the Period October 2, 2006++ The following per share data and ratios have been derived to December 31, from information provided in the financial statements. 2006 Per Share Operating Performance Net asset value, beginning of period $ 10.57 --------------- Investment income--net*** .07 Realized and unrealized gain--net .03 --------------- Total from investment operations .10 --------------- Less dividends and distributions investment income--net (.09) --------------- Net asset value, end of period $ 10.58 =============== Total Investment Return* Based on net asset value per share 1.00%++++ =============== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.58%** =============== Expenses, net of waiver 2.00%** =============== Expenses 2.01%** =============== Investment income--net 3.65%** =============== Supplemental Data Net assets, end of period (in thousands) $ 15,205 =============== Portfolio turnover 46% =============== * Total investment returns exclude the effects of sales charges. ** Annualized. *** Based on average shares outstanding. ++ Commencement of operations. ++++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock National Municipal Fund (As Restated for the Years Ended 2006, 2005, 2004, 2003 and 2002. See Note 8)
Investor C1 For the Six The following per share data and ratios Months Ended have been derived from information December 31, For the Year Ended June 30, provided in the financial statements. 2006 2006 2005 2004 2003 2002 Per Share Operating Performance Net asset value, beginning of period $ 10.36 $ 10.66 $ 10.29 $ 10.54 $ 10.26 $ 10.14 ----------- ----------- ----------- ----------- ----------- ----------- Investment income--net .21+++ .43+++ .44+++ .46+++ .47+++ .53 Realized and unrealized gain (loss)--net .22 (.29) .37 (.25) .28 .12 ----------- ----------- ----------- ----------- ----------- ----------- Total from investment operations .43 .14 .81 .21 .75 .65 ----------- ----------- ----------- ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.22) (.44) (.44) (.46) (.47) (.53) Realized gain--net -- -- -- -- -- --++ ----------- ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (.22) (.44) (.44) (.46) (.47) (.53) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 10.57 $ 10.36 $ 10.66 $ 10.29 $ 10.54 $ 10.26 =========== =========== =========== =========== =========== =========== Total Investment Return* Based on net asset value per share 4.05%++++ 1.20% 8.02% 2.05% 7.48% 6.13% =========== =========== =========== =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.38%** 1.39% 1.40% 1.40% 1.39% 1.43% =========== =========== =========== =========== =========== =========== Expenses, net of waiver 1.80%** 1.63% 1.53% 1.51% 1.56% 1.76% =========== =========== =========== =========== =========== =========== Expenses 1.80%** 1.63% 1.53% 1.51% 1.57% 1.76% =========== =========== =========== =========== =========== =========== Investment income--net 3.93%** 4.05% 4.20% 4.42% 4.54% 4.76% =========== =========== =========== =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 155,509 $ 139,447 $ 107,893 $ 74,849 $ 77,906 $ 52,822 =========== =========== =========== =========== =========== =========== Portfolio turnover 46% 56% 33% 20% 34% 27% =========== =========== =========== =========== =========== =========== * Total investment returns exclude the effects of sales charges. ** Annualized. +++ Based on average shares outstanding. ++ Amount is less than $(.01) per share. ++++ Aggregate total investment income. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Financial Highlights (continued) BlackRock High Yield Municipal Fund
For the Period August 1, 2006++ The following per share data and ratios have been derived to December 31, 2006 from information provided in the financial statements. Institutional Investor A Investor C Per Share Operating Performance Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 ----------- ----------- ----------- Investment income--net*** .17 .14 .12 Realized and unrealized gain--net .19 .19 .19 ----------- ----------- ----------- Total from investment operations .36 .33 .31 ----------- ----------- ----------- Less dividends and distributions: Investment income--net (.18) (.17) (.13) Realized gain--net --++++ --++++ --++++ ----------- ----------- ----------- Total dividends and distributions (.18) (.17) (.13) ----------- ----------- ----------- Net asset value, end of period $ 10.18 $ 10.16 $ 10.18 =========== =========== =========== Total Investment Return** Based on net asset value per share 3.58%+++ 3.29%+++ 3.16%+++ =========== =========== =========== Ratios to Average Net Assets Expenses, net of waiver .64%* .89%* 1.64%* =========== =========== =========== Expenses 1.06%* 1.26%* 2.04%* =========== =========== =========== Investment income--net 4.20%* 4.12%* 3.32%* =========== =========== =========== Supplemental Data Net assets, end of period (in thousands) $ 46,922 $ 2,014 $ 2,238 =========== =========== =========== Portfolio turnover 5.67% 5.67% 5.67% =========== =========== =========== * Annualized. ** Total investment returns exclude the effects of sales charges for Investor A and Investor C Shares. *** Based on average shares outstanding. ++ Commencement of operations. ++++ Amount is less than $(.01) per share. +++ Aggregate total investment return. See Notes to Financial Statements.
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements 1. Significant Accounting Policies: On September 29, 2006, Merrill Lynch Municipal Bond Fund, Inc. (consisting of Merrill Lynch Short-Term Portfolio, Merrill Lynch Insured Portfolio, Merrill Lynch National Portfolio and Merrill Lynch High Yield Portfolio) was renamed BlackRock Municipal Bond Fund, Inc. (the "Bond Fund"), consisting of BlackRock Short-Term Municipal Fund, BlackRock Municipal Insured Fund, BlackRock National Municipal Fund and BlackRock High Yield Municipal Fund (the "Funds" or individually as the "Fund"), respectively. The Bond Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open- end management investment company. For the BlackRock High Yield Municipal Fund, prior to the commencement of operations on August 1, 2006, the Fund had no operations other than those relating to organizational matters and the issue of the 75 shares of common stock of the Fund to Fund Asset Management, L.P. ("FAM") for $750. The Bond 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. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for the interim period. All such adjustments are of a normal, recurring nature. The Bond Fund's Funds offer multiple classes of shares. Effective October 2, 2006, Class I, Class A, Class B and Class C Shares were redesignated Institutional, Investor A, Investor B and Investor C1 Shares, respectively. BlackRock High Yield Municipal Fund's Class C Shares were redesignated Investor C and BlackRock Short-Term Municipal Fund's Class A Shares were redesignated Investor A1. Newly created BlackRock, Investor A and Investor C Shares commenced operations on October 2, 2006, with the exception of BlackRock High Yield Municipal Fund, which commenced on August 1, 2006. BlackRock and Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A and Investor A1 Shares are sold with a front-end sales charge. Shares of Investor B, Investor C and Investor C1 may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor A1, Investor B, Investor C and Investor C1 Shares bear certain expenses related to the account maintenance of such shares, and Investor B, Investor C and Investor C1 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 Investor B shareholders may vote on certain changes to the Investor A and Investor A1 distribution plan, as applicable). 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 Bond Fund. (a) Valuation of investments--Municipal bonds 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 as 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 are 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. Options traded in the OTC market are valued at 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 Bond Fund from a pricing service. 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. 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. (b) Derivative financial instruments--The Funds may engage in various portfolio investment strategies both to increase their returns and to hedge, or protect, their 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 Funds 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. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Upon entering into a contract, the Funds deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Funds agree 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 Funds as unrealized gains or losses. When the contract is closed, the Funds record 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. * Forward interest rate swaps--The Funds may enter into forward interest rate swaps. In a forward interest rate swap, the Funds and the counterparty agree to pay or receive interest on a specified notional contract amount, commencing on a specified future effective date, unless terminated earlier. The value of the agreement is determined by quoted fair values received daily by the Funds from the counterparty. When the agreement is closed, the Funds record a realized gain or loss in an amount equal to the value of the agreement. * Swaps--Each Fund may enter into swap agreements, which are OTC contracts in which each Fund and a counterparty agree to make periodic net payments on a specified notional amount. The net payments can be made for a set period of time or may be triggered by a pre-determined credit event. The net periodic payments may be based on a fixed or variable interest rate; the change in market value of a specified security, basket of securities or index; or the return generated by a security. These periodic payments received or made by each 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) Municipal bonds held in trust--The BlackRock Municipal Insured Fund and BlackRock National Municipal Fund invest in leveraged residual certificates ("TOB Residuals") issued by tender option bond trusts ("TOBs"). A TOB is established by a third party sponsor forming a special purpose entity, into which a fund, or an agent on behalf of the fund, transfers municipal securities. A TOB typically issues two classes of beneficial interests: short- term floating rate certificates, which are sold to third party investors, and residual certificates, which are generally issued to the fund which made the transfer or to affiliates of the fund. Each of these Funds' transfers of the municipal securities to a TOB do not qualify for sale treatment under Statement of Financial Accounting Standards No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," therefore the municipal securities deposited into a TOB are presented in each of these Funds' schedules of investments and the proceeds from the transactions are reported as a liability for trust certificates of each of these Funds. Interest income from the underlying security is recorded by these Funds on an accrual basis. Interest expense incurred on the secured borrowing and other expenses related to remarketing, administration and trustee services to a TOB are reported as expenses of a fund. The floating rate certificates have interest rates that generally reset weekly and their holders have the option to tender certificates to the TOB for redemption at par at each reset date. The residual interests held by these Funds include the right of the Funds (1) to cause the holders of a proportional share of floating rate certificates to tender their certificates at par, and (2) to transfer a corresponding share of the municipal securities from the TOB to the Funds. At December 31, 2006, the aggregate value of the underlying municipal securities transferred to TOBs and the related liability for trust certificates were: Range of Interest Underlying Rates on Municipal Liability for the Liability Bonds Trust for Trust Transferred Certificates Certificates to TOBs BlackRock Municipal Insured 3.42% - Fund $ 92,563,129 3.98% $182,874,071 BlackRock National 3.56%- Municipal Fund $152,705,330 3.69% $317,564,900 Financial transactions executed through TOBs generally will underperform the market for fixed rate municipal bonds in a rising interest rate environment, but tend to outperform the market for fixed rate bonds when interest rates decline or remain relatively stable. Should short-term interest rates rise, the Funds' investments in TOB Residuals likely will adversely affect the Funds' investment income-net and distributions to shareholders. Fluctuations in the market value of municipal securities deposited into the TOB may adversely affect these Funds' net asset value per share. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) While the Funds' investment policies and restrictions expressly permit investments in inverse floating rate securities such as TOB Residuals, they generally do not allow the Funds to borrow money for purposes of making investments. The Funds' management believes that the Funds' restrictions on borrowings do not apply to the secured borrowings deemed to have occurred for accounting purposes. (d) Income taxes--It is the Bond 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) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. The Funds amortize all premiums and discounts on debt securities. (f) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares are issued. (g) 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. (h) Expenses--Certain expenses have been allocated to the individual Funds in the Bond Fund on a pro rata basis based upon the respective aggregate net asset value of each Fund included in the Bond Fund. (i) Insurance--BlackRock Municipal Insured Fund: Where bonds in the Fund have not been insured pursuant to policies obtained by the issuer, the Fund has obtained insurance with respect to the payment of interest and principal of each bond. Such insurance is valid as long as the bonds are held by the Fund. (j) Offering costs--BlackRock Municipal High Yield Fund: Offering costs are amortized over a 12-month period beginning with the commencement of operations of the Fund. (k) Recent accounting pronouncements--In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity including mutual funds before being measured and recognized in the financial statements. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. The impact on the Funds' financial statements, if any, is currently being assessed. In addition, in September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implications of FAS 157. At this time, its impact on the Funds' financial statements has not been determined. 2. Investment Advisory Agreement and Transactions with Affiliates: On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") combined Merrill Lynch's investment management business, Merrill Lynch Investment Managers, L.P., ("MLIM"), and its affiliates, including FAM, with BlackRock, Inc. to create a new independent company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest in the combined company and The PNC Financial Services Group, Inc. ("PNC"), has approximately a 34% economic and voting interest. The new company operates under the BlackRock name and is governed by a board of directors with a majority of independent members. On August 15, 2006, shareholders of each of the Funds approved a new Investment Advisory Agreement with BlackRock Advisors, Inc. (the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was recently reorganized into a limited liability company and renamed BlackRock Advisors, LLC. The new Investment Advisory Agreement between each Fund and the Manager became effective on September 29, 2006 and was revised on October 27, 2006. Prior to September 29, 2006, FAM was the Fund's Manager. The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch, which is the limited partner. The Funds have also entered into separate Distribution Agreements and Distribution Plans with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. ("BDI") (collectively, the "Distributor"). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc. and BDI is an affiliate of BlackRock, Inc. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) The Manager is responsible for the management of each of the Funds' portfolios and provides the necessary personnel, facilities, equipment and certain other services necessary to the operation of the Bond Fund. For such services, the Manager receives at the end of each month a fee with respect to each Fund at the annual rates set forth below which are based upon the average daily value of the Fund's net assets. Rate of Advisory Fee BlackRock BlackRock BlackRock Aggregate of Average Short-Term Municipal National Daily Net Assets of the Municipal Insured Municipal Three Combined Funds Fund Fund Fund Not exceeding $250 million .40 % .40 % .50 % In excess of $250 million but not exceeding $400 million .375 .375 .475 In excess of $400 million but not exceeding $550 million .35 .375 .475 In excess of $550 million but not exceeding $1.5 billion .325 .375 .475 In excess of $1.5 billion .325 .35 .475 For the period September 29, 2006 to October 27, 2006, a different and lower fee schedule was in effect for BlackRock Municipal Insured Fund and BlackRock National Municipal Fund. For the BlackRock High Yield Municipal Fund, the Manager has voluntarily agreed to waive the management fee where the Fund will pay .20% of average daily net assets. This waiver can be discontinued at any time. For the period July 1, 2006 to September 29, 2006, FAM earned fees of $31,960, of which $26,149 was waived. For the period September 30, 2006 to December 31, 2006, the Manager earned fees of $65,498, of which $45,248 was waived. The BlackRock High Yield Municipal Fund's rates are as follows: .55% of the Fund's average daily net assets not exceeding $250 million; .525% of average daily net assets in excess of $250 million but not exceeding $500 million; and ..50% of average daily net assets in excess of $500 million. For the BlackRock Short-Term Municipal Fund effective October 16, 2006, the Manager has contractually agreed to waive expenses in order to limit expenses as a percentage of average daily net assets allocated to each class as follows: ..35% for BlackRock Shares, .45% for Institutional Shares and .80% for Investor A Shares, until February 1, 2007. In addition to this contractual waiver, the Manager has voluntarily agreed to waive fees or expenses in order to limit expenses as follows: .35% for Institutional Shares, .60% for Investor A Shares, .45% for Investor A1 Shares, .70% for Investor B Shares and 1.35% for Investor C Shares. For the six months ended December 31, 2006, the Manager earned fees of $543,153, of which $90,051 was waived. In addition, the Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays the Sub-Adviser for services it provides a monthly fee that is a percentage of the management fee paid by each Fund to the Manager. The Manager (and previously FAM) has agreed to waive its advisory fee for each Fund by the amount of advisory fee each Fund pays to the Manager (and previously FAM) indirectly through each Fund's investment in the Merrill Lynch Institutional Tax-Exempt Fund. For the six months ended December 31, 2006, the waivers were as follows: For the Period For the Period July 1, September 30, 2006 to 2006 to September 29, December 31, 2006 Waived 2006 Waived by by FAM* the Manager BlackRock Short-Term Municipal Fund $ 8,247 $ 3,337 BlackRock Municipal Insured Fund $ 3,580 $ 5,060 BlackRock National Municipal Fund $ 20,279 $ 28,318 BlackRock High Yield Municipal Fund $ 758 $ 839 * BlackRock High Yield Municipal Fund commenced operations on August 1, 2006 Pursuant to the Distribution Plans adopted by the Bond Fund on behalf of the Funds in accordance with Rule 12b-1 under the Investment Company Act of 1940, each Fund pays the Distributor ongoing account maintenance ("service fees") and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: Service Fees BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal Fund Fund Fund Fund Investor A .25% .25% .25% .25% Investor A1 .10% -- -- -- Investor B .15% .25% .25% -- Investor C .25% .25% .25% .25% Investor C1 -- .25% .25% -- BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Distribution Fees BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal Fund Fund Fund Fund Investor B .20% .50% .50% -- Investor C .75% .75% .75% .75% Investor C1 -- .55% .55% -- Pursuant to a sub-agreement with the Distributor, broker-dealers, including Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, and an affiliate of the Manager, also provides account maintenance and distribution services to the Bond Fund. The ongoing service fee compensates the Distributor and each broker-dealer (including MLPF&S) for providing account maintenance services to Investor A, Investor A1, Investor B, Investor C and Investor C1 shareholders. The ongoing distribution fee compensates the Distributor and the broker-dealers for providing shareholder and distribution-related services to Investor B, Investor C and Investor C1 shareholders. For the six months ended December 31, 2006, FAMD, the Fund's sole Distributor until September 29, 2006, and BDI earned underwriting discounts and direct commissions and MLPF&S earned dealer concessions on sales of the Fund's Institutional and Investor A Shares as follows: Service Fees BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal Fund Fund Fund Fund Institutional Shares: FAMD -- $ 750 $ 337 -- MLPF&S -- $ 750 $ 337 -- Investor A Shares: FAMD $ 425 $ 2,449 $ 939 -- MLPF&S $4,467 $24,605 $8,704 -- BDI -- $ 2 -- -- For the six months ended December 31, 2006, MLPF&S received contingent deferred sales charges relating to Investor B, Investor C and Investor C1 Shares as follows: Investor B Investor C Investor C1 BlackRock Short-Term Municipal Fund $ 3,506 $ 1 -- BlackRock Municipal Insured Fund $ 6,433 $ 1 $ 610 BlackRock National Municipal Fund $11,000 $700 $6,458 BlackRock High Yield Municipal Fund -- $ 1 -- Furthermore, MLPF&S received contingent deferred sales charges relating to transactions subject to front-end sales charge waivers as follows: Investor A Investor A1 BlackRock Short-Term Municipal Fund -- $546 BlackRock National Municipal Fund $ 80 -- BlackRock maintains a call center, which is responsible for providing certain shareholder services to the Bond Fund, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of fund shares. During the period September 29, 2006 to December 31, 2006, the following amounts have been accrued by each Fund to reimburse BlackRock for costs incurred running the call center, which are a component of the transfer agent fees in the accompanying Statements of Operations. Call Center Fees BlackRock BlackRock BlackRock BlackRock Short-Term Municipal National High Yield Municipal Insured Municipal Municipal Fund Fund Fund Fund Institutional $ 638 $ 4,226 $12,222 $ 4,367 Investor A -- $ 847 $ 1,298 $ 260 Investor A1 $ 344 -- -- -- Investor B $ 109 $ 391 $ 764 -- Investor C -- -- -- $ 276 Investor C1 -- $ 266 $ 620 -- For the six months ended December 31, 2006, each Fund reimbursed FAM and the Manager for certain accounting services. The reimbursements were as follows: For the Period For the Period July 1, 2006 September 30, 2006 to September 29, to December 31, 2006 Reimbursed 2006 Reimbursed to FAM* to the Manager BlackRock Short-Term Municipal Fund $1,671 $1,671 BlackRock Municipal Insured Fund $4,736 $4,736 BlackRock National Municipal Fund $7,370 $7,370 BlackRock High Yield Municipal Fund $ 131 $ 131 * BlackRock High Yield Municipal Fund commenced operations on August 1, 2006. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the Manager, became each Fund's transfer agent. Prior to September 29, 2006, each Fund's transfer agent was Financial Data Services, Inc. ("FDS"), a wholly owned subsidiary of Merrill Lynch. Prior to September 29, 2006, certain officers and/or directors of the Bond Fund were officers and/or directors of MLIM, FAM, PSI, FAMD, FDS, Merrill Lynch, 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 of investments, excluding short-term securities, for the six months ended December 31, 2006 were as follows: Purchases Sales BlackRock Short-Term Municipal Fund $205,186,121 $225,907,200 BlackRock Municipal Insured Fund $ 97,128,195 $133,569,853 BlackRock National Municipal Fund $487,841,454 $432,966,146 BlackRock High Yield Municipal Fund $ 51,850,132 $ 2,347,125 4. Capital Share Transactions: Net increase (decrease) in net assets derived from capital share transactions for the six months ended December 31, 2006 and the year ended June 30, 2006 were $(28,028,846) and $(118,737,525), respectively, for the BlackRock Short- Term Municipal Fund; $(31,426,731) and $(66,044,701), respectively, for the BlackRock Municipal Insured Fund; and $76,044,291 and $46,489,740, respectively, for the BlackRock National Municipal Fund; and for the period August 1, 2006 (commencement of operations) to December 31, 2006, $50,480,452 for the BlackRock High Yield Municipal Fund. Transactions in capital shares for each class were as follows: BlackRock Short-Term Municipal Fund BlackRock Shares for the Period October 2, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 2,015 $ 20,003 Shares issued resulting from reorganization 1,094,165 10,856,031 Shares issued to shareholders in reinvestment of dividends 7,391 73,364 -------------- --------------- Total issued 1,103,571 10,949,398 Shares redeemed (60,592) (601,149) -------------- --------------- Net increase 1,042,979 $ 10,348,249 ============== =============== * Commencement of operations. Institutional Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 756,138 $ 7,526,056 Shares issued resulting from reorganization 721,266 7,153,239 Shares issued to shareholders in reinvestment of dividends 132,070 1,309,174 -------------- --------------- Total issued 1,609,474 15,988,469 Shares redeemed (2,443,968) (24,231,839) -------------- --------------- Net decrease (834,494) $ (8,243,370) ============== =============== Institutional Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 1,502,926 $ 14,921,923 Shares issued to shareholders in reinvestment of dividends 260,966 2,590,922 -------------- --------------- Total issued 1,763,892 17,512,845 Shares redeemed (5,351,695) (53,153,601) -------------- --------------- Net decrease (3,587,803) $ (35,640,756) ============== =============== Investor A Shares for the Period October 2, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 98,358 $ 976,154 Shares issued resulting from reorganization 2,042 20,254 Shares issued to shareholders in reinvestment of dividends 168 1,672 -------------- --------------- Total issued 100,568 998,080 Shares redeemed (4,160) (41,271) -------------- --------------- Net increase 96,408 $ 956,809 ============== =============== * Commencement of operations. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Investor A1 Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 552,544 $ 5,482,055 Automatic conversion of shares 41,150 407,926 Shares issued to shareholders in reinvestment of dividends 111,945 1,111,488 Shares issued resulting from conversion of Class C 6,091,469 60,465,669 -------------- --------------- Total issued 6,797,108 67,467,138 Shares redeemed (2,853,534) (28,310,654) -------------- --------------- Net increase 3,943,574 $ 39,156,484 ============== =============== Investor A1 Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 821,123 $ 8,169,499 Automatic conversion of shares 145,897 1,206,454 Shares issued to shareholders in reinvestment of dividends 121,345 1,449,949 -------------- --------------- Total issued 1,088,365 10,825,902 Shares redeemed (5,163,012) (51,318,356) -------------- --------------- Net decrease (4,074,647) $ (40,492,454) ============== =============== Investor B Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 25,043 $ 248,135 Shares issued to shareholders in reinvestment of dividends 19,373 192,128 -------------- --------------- Total issued 44,416 440,263 -------------- --------------- Automatic conversion of shares (41,162) (407,926) Shares redeemed (679,334) (6,737,569) -------------- --------------- Total redeemed (720,496) (7,145,495) -------------- --------------- Net decrease (676,080) $ (6,705,232) ============== =============== Investor B Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 38,884 $ 386,427 Shares issued to shareholders in reinvestment of dividends 44,426 441,220 -------------- --------------- Total issued 83,310 827,647 -------------- --------------- Automatic conversion of shares (121,450) (1,206,454) Shares redeemed (1,415,324) (14,064,507) -------------- --------------- Total redeemed (1,536,774) (15,270,961) -------------- --------------- Net decrease (1,453,464) $ (14,443,314) ============== =============== Investor C Shares for the Period October 2, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 57,219 $ 567,910 Shares issued to shareholders in reinvestment of dividends 129 1,279 -------------- --------------- Total issued 57,348 569,189 Shares redeemed (2,323) (23,046) -------------- --------------- Net increase 55,025 $ 546,143 ============== =============== * Commencement of operations. Class C Shares for the Period July 1, 2006 Dollar to August 25, 2006* Shares Amount Shares sold 62,189 $ 613,069 Shares issued to shareholders in reinvestment of dividends 18,853 185,978 -------------- --------------- Total issued 81,042 799,047 -------------- --------------- Shares redeemed (448,474) (4,421,307) Shares redeemed resulting from conversion to Investor A1 (6,122,405) (60,465,669) -------------- --------------- Total redeemed (6,570,879) (64,886,976) -------------- --------------- Net decrease (6,489,837) $ (64,087,929) ============== =============== * On August 25, 2006, Class C was converted to Class A (Investor A1). Class C Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 611,352 $ 6,048,208 Shares issued to shareholders in reinvestment of dividends 115,698 1,143,935 -------------- --------------- Total issued 727,050 7,192,143 Shares redeemed (3,572,643) (35,353,144) -------------- --------------- Net decrease (2,845,593) $ (28,161,001) ============== =============== BlackRock Municipal Insured Fund Institutional Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 958,057 $ 7,503,455 Shares issued to shareholders in reinvestment of dividends and distributions 1,035,388 8,128,337 -------------- --------------- Total issued 1,993,445 15,631,792 Shares redeemed (4,098,049) (32,160,626) -------------- --------------- Net decrease (2,104,604) $ (16,528,834) ============== =============== BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Institutional Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 1,459,336 $ 11,434,123 Shares issued to shareholders in reinvestment of dividends and distributions 1,775,119 13,924,940 -------------- --------------- Total issued 3,234,455 25,359,063 Shares redeemed (8,382,862) (65,699,941) -------------- --------------- Net decrease (5,148,407) $ (40,340,878) ============== =============== Investor A Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 1,082,954 $ 8,510,769 Automatic conversion of shares 200,920 1,560,842 Shares issued to shareholders in reinvestment of dividends and distributions 293,852 2,305,853 -------------- --------------- Total issued 1,577,726 12,377,464 Shares redeemed (1,520,461) (11,915,528) -------------- --------------- Net increase 57,265 $ 461,936 ============== =============== Investor A Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 1,348,298 $ 10,584,431 Automatic conversion of shares 981,047 7,688,689 Shares issued to shareholders in reinvestment of dividends and distributions 509,243 3,992,856 -------------- --------------- Total issued 2,838,588 22,265,976 Shares redeemed (3,222,764) (25,174,807) -------------- --------------- Net decrease (384,176) $ (2,908,831) ============== =============== Investor B Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 44,948 $ 351,277 Shares issued to shareholders in reinvestment of dividends and distributions 81,249 637,305 -------------- --------------- Total issued 126,197 988,582 -------------- --------------- Automatic conversion of shares (200,919) (1,560,842) Shares redeemed (1,486,018) (11,639,433) -------------- --------------- Total redeemed (1,686,937) (13,200,275) -------------- --------------- Net decrease (1,560,740) $ (12,211,693) ============== =============== Investor B Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 236,379 $ 1,852,684 Shares issued to shareholders in reinvestment of dividends and distributions 174,687 1,370,101 -------------- --------------- Total issued 411,066 3,222,785 -------------- --------------- Automatic conversion of shares (981,283) (7,688,689) Shares redeemed (2,200,222) (17,243,259) -------------- --------------- Total redeemed (3,181,505) (24,931,948) -------------- --------------- Net decrease (2,770,439) $ (21,709,163) ============== =============== Investor C Shares for the Period October 2, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 159,780 $ 1,259,184 Shares issued to shareholders in reinvestment of dividends and distributions 695 5,469 -------------- --------------- Total issued 160,475 1,264,653 Shares redeemed (6,344) (50,026) -------------- --------------- Net increase 154,131 $ 1,214,627 ============== =============== * Commencement of operations. Investor C1 Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 247,930 $ 1,936,256 Shares issued to shareholders in reinvestment of dividends and distributions 91,315 716,487 -------------- --------------- Total issued 339,245 2,652,743 Shares redeemed (896,099) (7,015,510) -------------- --------------- Net decrease (556,854) $ (4,362,767) ============== =============== Investor C1 Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 1,343,228 $ 10,538,215 Shares issued to shareholders in reinvestment of dividends and distributions 162,002 1,270,193 -------------- --------------- Total issued 1,505,230 11,808,408 Shares redeemed (1,646,563) (12,894,237) -------------- --------------- Net decrease (141,333) $ (1,085,829) ============== =============== BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) BlackRock National Municipal Fund Institutional Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 5,781,835 $ 60,845,023 Shares issued to shareholders in reinvestment of dividends 1,447,307 15,271,564 -------------- --------------- Total issued 7,229,142 76,116,587 Shares redeemed (4,189,080) (44,087,429) -------------- --------------- Net increase 3,040,062 $ 32,029,158 ============== =============== Institutional Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 5,928,015 $ 62,151,396 Shares issued to shareholders in reinvestment of dividends 2,713,665 28,501,117 -------------- --------------- Total issued 8,641,680 90,652,513 Shares redeemed (7,929,485) (83,222,555) -------------- --------------- Net increase 712,195 $ 7,429,958 ============== =============== Investor A Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 4,444,624 $ 46,859,492 Automatic conversion of shares 262,676 2,748,322 Shares issued to shareholders in reinvestment of dividends 353,358 3,730,200 -------------- --------------- Total issued 5,060,658 53,338,014 Shares redeemed (1,998,314) (21,072,787) -------------- --------------- Net increase 3,062,344 $ 32,265,227 ============== =============== Investor A Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 5,809,040 $ 60,821,050 Automatic conversion of shares 1,794,525 18,842,536 Shares issued to shareholders in reinvestment of dividends 547,471 5,750,522 -------------- --------------- Total issued 8,151,036 85,414,108 Shares redeemed (4,046,647) (42,487,976) -------------- --------------- Net increase 4,104,389 $ 42,926,132 ============== =============== Investor B Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 484,953 $ 5,117,113 Shares issued to shareholders in reinvestment of dividends 110,015 1,159,708 -------------- --------------- Total issued 594,968 6,276,821 -------------- --------------- Automatic conversion of shares (262,928) (2,748,322) Shares redeemed (1,908,238) (20,098,739) -------------- --------------- Total redeemed (2,171,166) (22,847,061) -------------- --------------- Net decrease (1,576,198) $ (16,570,240) ============== =============== Investor B Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 738,406 $ 7,749,159 Shares issued to shareholders in reinvestment of dividends 254,982 2,677,936 -------------- --------------- Total issued 993,388 10,427,095 -------------- --------------- Automatic conversion of shares (1,796,012) (18,842,536) Shares redeemed (2,903,855) (30,484,753) -------------- --------------- Total redeemed (4,699,867) (49,327,289) -------------- --------------- Net decrease (3,706,479) $ (38,900,194) ============== =============== Investor C Shares for the Period October 2, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 1,457,456 $ 15,431,424 Shares issued to shareholders in reinvestment of dividends 3,995 42,372 -------------- --------------- Total issued 1,461,451 15,473,796 Shares redeemed (24,016) (254,875) -------------- --------------- Net increase 1,437,435 $ 15,218,921 ============== =============== * Commencement of operations. Investor C1 Shares for the Six Months Ended Dollar December 31, 2006 Shares Amount Shares sold 2,071,633 $ 21,732,498 Shares issued to shareholders in reinvestment of dividends 234,355 2,474,792 -------------- --------------- Total issued 2,305,988 24,207,290 Shares redeemed (1,054,753) (11,106,065) -------------- --------------- Net increase 1,251,235 $ 13,101,225 ============== =============== BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) Investor C1 Shares for the Year Dollar Ended June 30, 2006 Shares Amount Shares sold 4,865,773 $ 51,061,570 Shares issued to shareholders in reinvestment of dividends 296,743 3,115,813 -------------- --------------- Total issued 5,162,516 54,177,383 Shares redeemed (1,825,533) (19,143,539) -------------- --------------- Net increase 3,336,983 $ 35,033,844 ============== =============== BlackRock High Yield Municipal Fund Institutional Shares for the Period August 1, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 4,707,582 $ 47,234,990 Shares issued to shareholders in reinvestment of dividends and distributions 705 7,176 -------------- --------------- Total issued 4,708,287 47,242,166 Shares redeemed (97,612) (987,561) -------------- --------------- Net increase 4,610,675 $ 46,254,605 ============== =============== * Prior to August 1, 2006 (commencement of operations), the Fund issued 25 shares to the Manager for $250. Investor A Shares for the Period August 1, 2006* Dollar to December 31, 2006 Shares Amount Shares sold 262,095 $ 2,653,071 Shares issued to shareholders in reinvestment of dividends and distributions 782 7,960 -------------- --------------- Total issued 262,877 2,661,031 Shares redeemed (64,780) (651,589) -------------- --------------- Net increase 198,097 $ 2,009,442 ============== =============== * Prior to August 1, 2006 (commencement of operations), the Fund issued 25 shares to the Manager for $250. Investor C Shares for the Period August 1, 2006* to Dollar December 31, 2006 Shares Amount Shares sold 239,546 $ 2,414,767 Shares issued to shareholders in reinvestment of dividends and distributions 1,082 10,982 -------------- --------------- Total issued 240,628 2,425,749 Shares redeemed (20,787) (209,344) -------------- --------------- Net increase 219,841 $ 2,216,405 ============== =============== * Prior to August 1, 2006 (commencement of operations), the Fund issued 25 shares to the Manager for $250. 5. Short-Term Borrowings: The Bond Fund, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (or MLIM and its affiliates), is a party to a $500,000,000 credit agreement with a group of lenders. The Bond Fund may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Bond Fund may borrow up to the maximum amount allowable under the Bond Fund's current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. On November 22, 2006 the credit agreement was renewed for one year under substantially the same terms. The Bond Fund pays a commitment fee of .06% per annum based on the Bond Fund's pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each Fund's election, the federal funds rate plus .35% or a base rate as defined in the credit agreement. The Bond Fund did not borrow under the credit agreement during the six months ended December 31, 2006. 6. Capital Loss Carryforward: BlackRock Short-Term Municipal Fund On June 30, 2006, the Fund had a net capital loss carryforward of $6,069,000, of which $119,413 expires in 2008, $426,094 expires in 2009, $331,374 expires in 2012, $1,101,799 expires in 2013 and $4,090,320 expires in 2014. This amount will be available to offset like amounts of any future taxable gains. BlackRock National Municipal Fund On June 30, 2006, the Fund had a net capital loss carryforward of $48,879,487, of which $18,431,171 expires in 2007, $27,469,653 expires in 2009, $444,566 expires in 2010, $942,957 expires in 2011 and $1,591,140 expires in 2012. This amount will be available to offset like amounts of any future taxable gains. 7. Acquisition of BlackRock Ultra Short Municipal Portfolio: On October 16, 2006, BlackRock Short-Term Municipal Fund of the Bond Fund (the "Fund") acquired all of the net assets of BlackRock Ultra Short Municipal Portfolio ("Ultra Short"), pursuant to a plan of reorganization. The acquisition was accomplished by a tax-free exchange of 722,400 shares of common stock of Ultra Short for 1,817,473 shares of the Fund. Ultra Short's net assets on that date of $18,029,524, including $130,269 of accumulated net realized losses and $28,132 of net unrealized depreciation were combined with those of the Fund. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (continued) 8. Restatement Information for BlackRock Municipal Insured Fund and BlackRock National Municipal Fund: During the six months ended December 31, 2006, BlackRock Municipal Insured Fund and BlackRock National Municipal Fund determined that the criteria for sale accounting in Statement of Financial Accounting Standards No. 140 had not been met for certain transfers of municipal bonds and that these transfers should have been accounted for as secured borrowings rather than as sales. Accordingly, the Funds have restated the statement of changes in net assets for the year ended June 30, 2006 and the financial highlights for the years ended June 30, 2006, 2005, 2004, 2003 and 2002. The effects of the restatement were to record the transfers of the municipal bonds as secured borrowings, to give effect to offsetting changes in realized gain--net and in the change in unrealized appreciation/ depreciation--net on the transferred municipal securities and to give effect to interest on the bonds as interest income and interest on the secured borrowings as interest expense. Restatement Information for Insured Portfolio Statement of Changes in Net Assets for the Year Ended June 30, 2006 Previously Reported Restated Realized gain--net $ 7,263,175 $ 6,736,805 Change in unrealized appreciation/ depreciation--net $(45,588,436) $(43,062,066) Financial Highlights for the Years Ended June 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Institutional Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver .45% .74% .46% .63% .46% .66% .46% .71% .47% .78% Expenses .46% .74% .46% .64% .46% .67% .46% .71% .47% .78% Portfolio turnover 48.96% 41% 55% 47% 49.27% 44% 38.17% 33% 32.78% 28% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor A Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver .70% .99% .71% .88% .71% .91% .71% .96% .72% 1.03% Expenses .71% .99% .71% .89% .71% .91% .71% .96% .72% 1.03% Portfolio turnover 48.96% 41% 55% 47% 49.27% 44% 38.17% 33% 32.78% 28% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor B Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver 1.21% 1.50% 1.21% 1.39% 1.21% 1.42% 1.22% 1.47% 1.23% 1.53% Expenses 1.21% 1.50% 1.22% 1.40% 1.22% 1.42% 1.22% 1.47% 1.23% 1.53% Portfolio turnover 48.96% 41% 55% 47% 49.27% 44% 38.17% 33% 32.78% 28% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor C1 Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver 1.26% 1.55% 1.26% 1.44% 1.26% 1.47% 1.27% 1.52% 1.28% 1.58% Expenses 1.26% 1.55% 1.27% 1.45% 1.27% 1.47% 1.27% 1.52% 1.28% 1.58% Portfolio turnover 48.96% 41% 55% 47% 49.27% 44% 38.17% 33% 32.78% 28%
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Notes to Financial Statements (concluded) Restatement Information for National Portfolio Statement of Changes in Net Assets for the Year Ended June 30, 2006 Previously Reported Restated Realized gain--net $ 12,459,289 $ 12,238,185 Change in unrealized appreciation/ depreciation--net $(53,403,444) $(53,182,340) Financial Highlights for the Years Ended June 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Institutional Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver .58% .83% .59% .72% .60% .71% .59% .75% .62% .96% Expenses .59% .83% .60% .72% .60% .71% .59% .76% .62% .96% Portfolio turnover 65.46% 56% 35.28% 33% 22.46% 20% 37.75% 34% 35.75% 27% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor A Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver .83% 1.08% .84% .97% .85% .95% .84% 1.00% .87% 1.20% Expenses .84% 1.08% .85% .97% .85% .96% .84% 1.01% .87% 1.20% Portfolio turnover 65.46% 56% 35.28% 33% 22.46% 20% 37.75% 34% 35.75% 27% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor B Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver 1.34% 1.59% 1.35% 1.48% 1.35% 1.46% 1.34% 1.51% 1.38% 1.71% Expenses 1.35% 1.59% 1.36% 1.48% 1.36% 1.46% 1.35% 1.52% 1.38% 1.71% Portfolio turnover 65.46% 56% 35.28% 33% 22.46% 20% 37.75% 34% 35.75% 27% 2006 2005 2004 2003 2002 Previously Previously Previously Previously Previously Investor C1 Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated Expenses, net of waiver 1.39% 1.63% 1.40% 1.53% 1.40% 1.51% 1.39% 1.56% 1.43% 1.76% Expenses 1.40% 1.63% 1.41% 1.53% 1.41% 1.51% 1.40% 1.57% 1.43% 1.76% Portfolio turnover 65.46% 56% 35.28% 33% 22.46% 20% 37.75% 34% 35.75% 27%
While the Statements of Assets and Liabilities for these Funds as of June 30, 2006, 2005, 2004, 2003 and 2002, not presented herein, have not been reissued to give effect to the restatement, the principal effects of the restatement would be to increase investments and payable for floating rate certificates by corresponding amounts at each year, with no effect on previously reported net assets. The Statements of Operations for each of these Funds for the years ended June 30, 2006, 2005, 2004, 2003 and 2002, not presented herein, have not been reissued to give effect to the restatement. However, the principal effects of the restatement would be to increase interest income and interest expense and fees by corresponding amounts each year, and where applicable, to revise realized gain (loss) on investments--net, and the change in unrealized appreciation/depreciation on investments--net, by corresponding and offsetting amounts. The Statements of Changes in Net Assets for each of these Funds for the years ended June 30, 2005, 2004, 2003 and 2002, not presented herein, have not been reissued to give effect to the restatement, but the principal effects of a restatement, where applicable, would be to revise previously reported realized gain (loss) on investments - net, and change in unrealized appreciation/ depreciation - net, by corresponding and offsetting amounts. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Proxy Results BlackRock Short-Term Municipal Fund During the six-month period ended December 31, 2006, BlackRock Short-Term Municipal Fund of BlackRock Municipal Bond Fund, Inc.'s shareholders voted on the following proposals, which were approved at a special shareholders' meeting on August 15, 2006. A description of the proposals and number of shares voted are as follows:
Shares Voted Shares Voted Shares Voted For Against Abstain To approve a contingent sub-advisory agreement with BlackRock Advisors, Inc. 18,947,479 844,841 264,729 To approve a new investment advisory agreement with BlackRock Advisors, Inc. 19,005,277 798,348 253,423
BlackRock Municipal Insured Fund During the six-month period ended December 31, 2006, BlackRock Municipal Insured Fund of BlackRock Municipal Bond Fund, Inc.'s shareholders voted on the following proposals, which were approved at a special shareholders' meeting on August 15 and October 27, 2006, respectively. A description of the proposals and number of shares voted are as follows:
Shares Voted Shares Voted Shares Voted For Against Abstain To approve a contingent sub-advisory agreement with BlackRock Advisors, Inc. 73,500,914 4,038,959 2,272,584 To approve a new investment advisory agreement with BlackRock Advisors, Inc. 62,043,486 3,772,568 2,642,246
BlackRock National Municipal Fund During the six-month period ended December 31, 2006, BlackRock National Municipal Fund of BlackRock Municipal Bond Fund, Inc.'s shareholders voted on the following proposals, which were approved at a special shareholders' meeting on August 15 and October 27, 2006, respectively. A description of the proposals and number of shares voted are as follows:
Shares Voted Shares Voted Shares Voted For Against Abstain To approve a contingent sub-advisory agreement with BlackRock Advisors, Inc. 75,885,639 4,039,397 2,651,492 To approve a new investment advisory agreement with BlackRock Advisors, Inc. 68,480,862 3,924,908 3,813,916
BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Investment Advisory Agreement BlackRock Investment Advisory Agreement--Matters Considered by the Board The following disclosure with respect to National Municipal Fund (formerly National Portfolio), Municipal Insured Fund (formerly Insured Portfolio) and Short-Term Municipal Fund (formerly Short-Term Portfolio) (in this section, each a "Portfolio") appeared in the June 30, 2006 Annual Report of the Corporation (in this section, the "Fund") and is the discussion referred to in "New BlackRock Sub-Advisory Agreement - Matters Considered by the Board," "Approvals to Correct Fee Schedules" and "Disclosure of Investment Advisory Agreements - High Yield Municipal Bond Fund" below. The term "Investment Adviser" as used herein refers to Fund Asset Management, L.P. In connection with the Transaction between Merrill Lynch and BlackRock, the Fund's Board of Directors considered a new investment advisory agreement (the "New Investment Advisory Agreement") between the Fund on behalf of each Portfolio and BlackRock Advisors, Inc. or its successor ("BlackRock Advisors"). If the New Investment Advisory Agreement is approved by each Portfolio's shareholders, it will become effective upon the closing of the Transaction, which is expected in the third quarter of 2006. The Board discussed the New Investment Advisory Agreement at telephonic and in-person meetings held during April and May 2006. The Board, including the independent directors, approved the New Investment Advisory Agreement at a meeting held on May 12, 2006. The Board also approved the issuance of new classes of shares and new distribution arrangements with respect to these new share classes, including higher distribution fees for certain new share classes, to take effect after the closing of the Transaction. The Board also approved revised front-end sales charge schedules with respect to certain classes of shares of the Fund. To assist the Board in its consideration of the New 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 New Investment Advisory Agreement. The additional information was provided in advance of the May 12, 2006 meeting. In addition, the independent directors consulted with their counsel and Fund counsel on numerous occasions, discussing, among other things, the legal standards and certain other considerations relevant to the directors' 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 each Portfolio. At these Board meetings, representatives of Merrill Lynch and BlackRock made presentations to and responded to questions from the Board. The directors also inquired about the plans for and anticipated roles and responsibilities of certain employees and officers of the Investment Adviser and certain affiliates being transferred to BlackRock in connection with the Transaction. The independent directors of the Board also conferred separately and with their counsel about the Transaction and other matters related to the Transaction, including a proposed reorganization in which Short-Term Portfolio would acquire the assets and liabilities of BlackRock UltraShort Municipal Portfolio, a portfolio of BlackRock Funds, 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 New Investment Advisory Agreement. In connection with the Board's review of the New Investment Advisory Agreement, Merrill Lynch and/or BlackRock advised the directors about a variety of matters. The advice included the following, among other matters: * that there is not expected to be any diminution in the nature, quality and extent of services provided to each Portfolio and its shareholders by BlackRock Advisors, including compliance services; * that operation of New BlackRock as an independent investment management firm will enhance its ability to attract and retain talented professionals; * that each Portfolio should 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 has no present intention to alter any applicable expense waivers or reimbursements currently in effect and, while it reserves the right to do so in the future, it would seek the approval of the Board before making any changes; BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Investment Advisory Agreement (continued) * that BlackRock and Merrill Lynch will enter into an agreement, for an initial three-year period and automatically renewable from year to year thereafter, in connection with the Transaction under which Merrill Lynch- affiliated broker-dealers will continue to offer the Portfolios as investment products; * that BlackRock Advisors will have substantially the same access to the Merrill Lynch sales force when distributing shares of the Fund as is currently provided to the Investment Adviser and that other arrangements between the Investment Adviser and Merrill Lynch sales channels will be preserved; * that the Fund will 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 have 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 Investment Adviser (or its affiliates), respectively; and * that Merrill Lynch and BlackRock would derive benefits from the Transaction and that, as a result, they have a different financial interest in the matters that were being considered than do Fund shareholders. The directors 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; * 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 New Investment Advisory Agreement, including the fact that the schedule of each Portfolio's total advisory fees will not increase by virtue of the New Investment Advisory Agreement, but will remain the same; * that in November 2005, the Board performed, on behalf of each Portfolio, a full annual review of the investment advisory agreement currently in effect for the Fund (the "Current Investment Advisory Agreement") as required by the 1940 Act and has determined that the Investment Adviser has the capabilities, resources and personnel necessary to provide the advisory and administrative services currently provided to each Portfolio; and that the advisory and/or management fees paid by each Portfolio, taking into account any applicable agreed-upon fee waivers and breakpoints, represent reasonable compensation to the Investment Adviser in light of the services provided, the costs to the 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 have considered relevant in the exercise of their reasonable judgment; and * that Merrill Lynch agreed to pay all expenses of the Fund in connection with the Board's consideration of the New Investment Advisory Agreement and related agreements and all costs of shareholder approval of the New Investment Advisory Agreement and as a result no Portfolio would bear any costs in obtaining shareholder approval of the New Investment Advisory Agreement. Certain of these considerations are discussed in more detail below. In its review of the New Investment Advisory Agreement, the Board assessed the nature, scope and quality of the services to be provided to each Portfolio 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 New 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 for each Portfolio were: (a) fees (in addition to management fees) to be paid to BlackRock Advisors and its affiliates by the Portfolio; (b) operating expenses paid to third parties; (c) the resources devoted to and compliance reports relating to the Portfolio's investment objective, policies and restrictions, and its compliance with its 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 MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 In the period prior to the Board meetings to consider renewal of the Current Investment Advisory Agreement, the Board had requested and received materials specifically relating to the agreement. These materials were prepared separately for each Portfolio, and included (a) information compiled by Lipper on the fees and expenses and the investment performance of the Portfolio as compared to a comparable group of funds as classified by Lipper; (b) a discussion by the Portfolio's portfolio management team on investment strategies used by the Portfolio during its most recent fiscal year; (c) information on the profitability to the Investment Adviser of the Current Investment Advisory Agreement and other payments received by the Investment Adviser and its affiliates from the Fund/Portfolio; and (d) information provided by the Investment Adviser concerning services related to the valuation and pricing of portfolio holdings, portfolio turnover statistics, and direct and indirect benefits to the Investment Adviser and its affiliates from their relationship with the Fund and the Portfolio. In their deliberations, the directors considered information received in connection with their most recent continuation of the Current 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 New 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 directors, including a majority of the independent directors, concluded that the terms of the New Investment Advisory Agreement are appropriate, that the fees to be paid are reasonable in light of the services to be provided to each Portfolio, and that the New Investment Advisory Agreement should be approved and recommended to shareholders. Nature, Quality and Extent of Services Provided--The Board reviewed the nature, extent and quality of services provided by the Investment Adviser, including the investment advisory services and the resulting performance of each Portfolio, as well as the nature, quality and extent of services expected to be provided by BlackRock Advisors. The Board focused primarily on the Investment Adviser's investment advisory services and each Portfolio's investment performance, but also considered certain areas in which both the Investment Adviser and each Portfolio receive services as part of the Merrill Lynch complex. The Board compared each Portfolio'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 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 New Investment Advisory Agreement, the directors 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 each Portfolio; the ability of BlackRock Advisors to perform its duties after the Transaction; and any anticipated changes to the current investment and other practices of the Portfolio. The directors considered the fact that it was being proposed that Short-Term Portfolio acquire the assets and liabilities of BlackRock UltraShort Municipal Portfolio, a portfolio of BlackRock Funds, as part of a reorganization. The directors were given information with respect to the potential benefits to each Portfolio 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 directors were advised that, as a result of Merrill Lynch's equity interest in BlackRock after the Transaction, the Fund will 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 directors were advised that a revision of existing regulatory relief with respect to these restrictions was being sought from the Securities and Exchange Commission and were advised of the possibility of receipt of such revised regulatory relief. There can be no assurance that such relief will be obtained. 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 each Portfolio under the New Investment Advisory Agreement were expected to be as good or better than that provided under the Current Investment Advisory Agreement. It was noted, however, that it is expected that there will be changes in personnel following the Transaction and the combination of the operations of the Investment Adviser and its affiliates with those of BlackRock. The directors noted that if current portfolio managers or other personnel cease to be available, the Board would consider all available options, which could include seeking the investment advisory or other services of BlackRock affiliates. Accordingly, the directors concluded that, overall, they were satisfied at the present time with assurances from BlackRock and BlackRock Advisors as to the expected nature, extent and quality of the services to be provided to each Portfolio under the New Investment Advisory Agreement. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Investment Advisory Agreement (continued) Costs of Services Provided and Profitability--It was noted that, in conjunction with the recent review of the Current Investment Advisory Agreement, the directors had received, among other things, a report from Lipper comparing each Portfolio's fees, expenses and performance to those of a peer group selected by Lipper, and information as to the fees charged by the Investment Adviser or its affiliates to other registered investment company clients for investment management services. The Board reviewed each Portfolio'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 its Lipper category. They also compared each Portfolio's total expenses to those of other comparable funds. The information showed that each Portfolio 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 each Portfolio. 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 each Portfolio, but BlackRock Advisors provided less extensive services to such clients. The Board concluded that each Portfolio'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 New Investment Advisory Agreement, the directors 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 New Investment Advisory Agreement is substantially similar to the Current Investment Advisory Agreement in all material respects, including the rate of compensation, the directors determined that the Transaction should not increase the total fees payable, including any fee waivers and expense reimbursements, for advisory and administrative services. The directors noted that it was not possible to predict how the Transaction would affect BlackRock Advisors' profitability from its relationship with the Fund and each Portfolio. The directors discussed with BlackRock Advisors its general methodology to be used in determining its profitability with respect to its relationship with the Fund and each Portfolio. 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 each Portfolio'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 each Portfolio increase and whether there should be changes in the management fee rate or structure in order to enable the Fund/Portfolio to participate in these economies of scale. The Board determined that changes were not currently necessary and that the Fund/Portfolios appropriately participated in these economies of scale. In reviewing the Transaction, the directors considered, among other things, whether advisory fees or other expenses would change as a result of the Transaction. Based on the fact that the New Investment Advisory Agreement is substantially similar to the Current Investment Advisory Agreement in all material respects, including the rate of compensation, the directors determined that as a result of the Transaction, each Portfolio's total advisory fees would be no higher than its fees under the Current Investment Advisory Agreement. The directors noted that in conjunction with their most recent deliberations concerning the Current Investment Advisory Agreement, the directors had determined that the total fees for advisory and administrative services for each Portfolio were reasonable in light of the services provided. It was noted that in conjunction with the recent review of the Current Investment Advisory Agreement, the directors had received, among other things, a report from Lipper comparing each Portfolio's fees, expenses and performance to those of a peer group selected by Lipper, and information as to the fees charged by the Investment Adviser to other registered investment company clients for investment management services. The directors concluded that, because the rates for advisory fees for each Portfolio would be no higher than its current fee rates, the proposed management fee structure, including any fee waivers, was reasonable and that no additional changes were currently necessary. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Fall-Out Benefits--In evaluating the fall-out benefits to be received by BlackRock Advisors under the New Investment Advisory Agreement, the directors considered whether the Transaction would have an impact on the fall-out benefits received by the Investment Adviser by virtue of the Current Investment Advisory Agreement. Based on their review of the materials provided, including materials received in connection with their most recent approval or continuance of the Current Investment Advisory Agreement, and their discussions with management of the Investment Adviser and BlackRock, the directors determined that those benefits could include increased ability for BlackRock to distribute shares of its funds and other investment products. The directors noted that any such benefits were difficult to quantify with certainty at this time, and indicated that they would continue to evaluate them going forward. Investment Performance--The directors considered investment performance for each Portfolio. The directors compared each Portfolio'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 each Portfolio's 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 Investment Adviser's investment goals, the Board attaches more importance over relatively long periods of time, typically three to five years. The directors believed each Portfolio's performance was satisfactory. Also, the directors took into account the investment performance of funds currently 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 each Portfolio. Conclusion--After the independent directors of the Fund deliberated in executive session, the entire Board, including the independent directors, approved the New Investment Advisory Agreement, concluding that for each Portfolio the advisory fee rate was reasonable in relation to the services provided and that the New Investment Advisory Agreement was in the best interests of the shareholders. In approving the New 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. Contingent BlackRock Sub-Advisory Agreement--Matters Considered by the Board At the telephonic and in-person meetings held during April and May 2006 at which the Board of Directors discussed and approved the New Investment Advisory Agreement, the Board, including the independent directors, also discussed and approved a contingent sub-advisory agreement (the "Contingent Sub-Advisory Agreement") between the Investment Adviser and BlackRock Advisors (the "BlackRock Sub-Adviser"). The Contingent Sub-Advisory Agreement is intended to ensure that each Portfolio operate with efficient portfolio management services until the closing of the Transaction, in the event that the Board deems it necessary and in the best interests of the Fund and its shareholders that the BlackRock Sub-Adviser assist in managing the operations of a Portfolio during the interim period until the closing of the Transaction. If shareholders approve the Contingent Sub-Advisory Agreement, it will take effect only upon recommendation from the Investment Adviser and upon subsequent approval of the Board in the period up to the closing of the Transaction. The effectiveness of the Contingent Sub-Advisory Agreement, therefore, would be contingent on further Board approval after shareholders approve it. Pursuant to the Contingent Sub-Advisory Agreement, the BlackRock Sub-Adviser would receive a monthly fee from the Investment Adviser equal to 50% of the advisory fee received by the Investment Adviser or any Portfolio. The Investment Adviser would pay the BlackRock Sub-Adviser out of its own resources. There would be no increase in any Portfolio's expenses as a result of the Contingent Sub-Advisory Agreement. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Investment Advisory Agreement (concluded) In making its approval at the May in-person meeting, the Board considered the Contingent Sub-Advisory Agreement in conjunction with the New Investment Advisory Agreement and reviewed the same information and factors discussed above, and came to the same conclusions. The Board also considered in conjunction with the Contingent Sub-Advisory Agreement the necessity of ensuring that each Portfolio operates with effective management services until the closing of the Transaction. In reviewing the sub-advisory fee rate provided in the Contingent Sub-Advisory Agreement, the Board took note of the fact that both the Investment Adviser and the BlackRock Sub-Adviser would have significant responsibilities under their respective advisory agreements. The Investment Adviser would remain responsible for oversight of a Portfolio's operations and administration and the BlackRock Sub-Adviser would provide advisory services to the Portfolio under the Contingent Sub-Advisory Agreement. The Board also took into account the expected short duration of the term of any Contingent Sub-Advisory Agreement and the fact that no Portfolio's total advisory fees would increase as a result of the Contingent Sub-Advisory Agreement. Under all of the circumstances, the Board concluded that it was a reasonable allocation of fees for the BlackRock Sub-Adviser to receive 50% of the advisory fee paid by each Portfolio to the Investment Adviser. After the independent directors deliberated in executive session, the entire Board, including the independent directors, approved the Contingent Sub- Advisory Agreement, concluding that the advisory fee was reasonable in relation to the services provided and that the Contingent Sub-Advisory Agreement was in the best interests of shareholders. Disclosure of Sub-Advisory Agreement BlackRock Sub-Advisory Agreement--Matters Considered by the Board At an in-person meeting held on August 14 - 16, 2006, the Board of Directors, including the independent directors, discussed and approved the sub-advisory agreement between BlackRock Advisors and its affiliate, BlackRock Investment Management, LLC (the "Sub-Adviser") with respect to National Municipal Fund, Municipal Insured Fund and Short-Term Municipal Fund (each, a "Fund") (the "BlackRock Sub-Advisory Agreement"). The BlackRock Sub-Advisory Agreement became effective on September 29, 2006, at the same time a new investment advisory agreement between the Corporation and BlackRock Advisors (which had been approved by the Funds' shareholders) became effective. Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a monthly fee from BlackRock Advisors at an annual rate equal to 59% of the advisory fee received by BlackRock Advisors from the Funds. BlackRock Advisors pays the Sub-Adviser out of its own resources, and there is no increase in the expenses of any of the Funds as a result of the BlackRock Sub-Advisory Agreement. In approving the BlackRock Sub-Advisory Agreement at the August in-person meeting, the Board reviewed their considerations in-connection with their approval of the New Investment Advisory Agreement in May 2006. The Board relied on the same information and considered the same factors as those discussed above in connection with the approval of the New Investment Advisory Agreement, and came to the same conclusions. In reviewing the sub-advisory fee rate provided for in the BlackRock Sub-Advisory Agreement, the Board noted the fact that both BlackRock Advisors and the Sub-Adviser have significant responsibilities under their respective advisory agreements. Under the New Investment Advisory Agreement, BlackRock Advisors remains responsible for the overall management of each Fund and for oversight of each Fund's operations and administration. Under the BlackRock Sub-Advisory Agreement, the Sub- Adviser provides advisory services to each Fund and is responsible for the day- to-day management of each Fund's portfolio. The Board also took into account the fact that there is no increase in total advisory fees paid by any of the Funds as a result of the BlackRock Sub-Advisory Agreement. Based on its considerations, the Board concluded that it was a reasonable allocation of fees for the Sub-Adviser to receive a fee at an annual rate equal to 59% of the advisory fee paid by the Funds to BlackRock Advisors. After the independent directors deliberated in executive session, the entire Board, including the independent directors, approved the BlackRock Sub- Advisory Agreement, concluding that the sub-advisory fee was reasonable in relation to the services provided and that the BlackRock Sub-Advisory Agreement was in the best interests of each Fund's shareholders. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Approvals to Correct Fee Schedules As discussed above, at a meeting on May 12, 2006 the Board, including the independent directors, approved the New Investment Advisory Agreement between the Corporation on behalf the National Portfolio, the Insured Portfolio and the Short-Term Portfolio (each, a "Portfolio") and BlackRock Advisors. The New Investment Advisory Agreement as approved by the Board contained an advisory fee schedule for each Portfolio that was the same as the fee schedule set forth in the Corporation's investment advisory agreement in effect at that time (the "Current Investment Advisory Agreement"). At a shareholder meeting on August 15, 2006, the shareholders of each Portfolio approved a new investment advisory agreement between the Corporation and BlackRock Advisors. The proxy statement sent to Portfolio shareholders in connection with the shareholder meeting (the "Proxy Statement") stated in several places that the advisory fees payable under the New Investment Advisory Agreement would be the same as the fees payable under the Current Investment Advisory Agreement. However, subsequent to the Shareholder Meeting, it was discovered that the advisory fee rates for each Portfolio were incorrectly stated in an appendix in the Proxy Statement. The appendix incorrectly presented advisory fee rates for each of the Insured Portfolio and the National Portfolio that were lower, and for the Short-Term Portfolio that were higher, than the fees then in effect. At a September 11, 2006 meeting, the Board considered ratification and approval of an investment advisory agreement between the Corporation on behalf of each Portfolio and BlackRock Advisors in the form approved by shareholders. The Board was informed that BlackRock Advisors had agreed to contractually reduce the advisory fee payable by the Short-Term Portfolio under that agreement as necessary to reduce the fee to the fee level approved for the Short-Term Portfolio by the Board at the May 2006 meeting. All the Directors who were present at the September 11, 2006 meeting, constituting a majority of the directors and a majority of the non-interested directors, then ratified and approved an investment advisory agreement in the form approved by shareholders, subject to the contractual fee reduction by BlackRock Advisors with respect to the Short-Term Portfolio. The Board also ratified and approved the payment of fees to BlackRock Advisors based upon the lower fee schedules for the National Portfolio and the Insured Portfolio under the investment advisory agreement in the form approved by shareholders, until shareholders of the National Portfolio and the Insured Portfolio approve the New Investment Advisory Agreement with the correct fee schedules. The Board reviewed and reaffirmed their considerations in connection with their approval of the New Investment Advisory Agreement at the May 2006 meeting. All the Directors who were present at the September 11, 2006 meeting, constituting a majority of the directors and a majority of the non-interested directors, then ratified and approved their prior action taken with respect to the New Investment Advisory Agreement at the May 2006 meeting and reapproved the New Investment Advisory Agreement and the correct fee schedules for each Portfolio contained therein. In reapproving the New Investment Advisory Agreement and the correct fee schedules, the Board considered of primary importance the fact that it was always intended to maintain the advisory fee rates at their existing level without any change. The Board also noted that it was only due to the errors in the Proxy Statement that BlackRock Advisors will be paid, with respect to the National Portfolio and the Insured Portfolio, at the lower fee schedules contained in the investment advisory agreement in the form approved at the Shareholder Meeting until shareholders of those Portfolios approve the New Investment Advisory Agreement with the correct fee schedules. The Board also authorized resubmission of the New Investment Advisory Agreement to shareholders of the National Portfolio and the Insured Portfolio for their approval. With respect to the Short Term Portfolio, the Board noted that upon the closing of the Transaction BlackRock Advisors will be paid fees based upon the correct, lower fee schedule contained in the New Investment Advisory Agreement and not the higher fee schedule erroneously included in the Proxy Statement. The Directors also discussed the BlackRock Sub-Advisory Agreement and reviewed and reaffirmed their considerations in connection with their approval of the BlackRock Sub-Advisory Agreement at the August 14 - 16, 2006 meeting. All the Directors who were present at the September 11, 2006 meeting, constituting a majority of the directors and a majority of the non-interested directors, then ratified and approved the BlackRock Sub-Advisory Agreement previously approved at the August 14 - 16, 2006 meeting, in connection with the investment advisory agreement in the form approved by shareholders and in the form of the New Investment Advisory Agreement as reapproved by the Directors. Dislcosure of Investment Advisory Agreement--High Yield Municipal Fund At an in-person Board meeting on May 23, 2006, the Board of Directors considered approval of (a) a proposed investment advisory agreement (the "FAM Investment Advisory Agreement") between the Corporation, on behalf of the High Yield Portfolio, and Fund Asset Management, L.P. ("FAM") and (b) a proposed investment advisory agreement (the "BlackRock Investment Advisory Agreement") between the Corporation, on behalf of the High Yield Portfolio (now High Yield Municipal Fund), and BlackRock Advisors. The High Yield Portfolio commenced operations on August 1, 2006. The FAM Investment Advisory Agreement discussed below remained in effect until September 29, 2006, at which time it was superseded by the BlackRock Investment Advisory Agreement and the sub-advisory agreement discussed below. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Sub-Advisory Agreement (continued) Approval of FAM Investment Advisory Agreement In connection with its consideration of the FAM Investment Advisory Agreement, the Board assessed the nature, scope and quality of the services to be provided to the Corporation and the High Yield Portfolio by the personnel of FAM and its affiliates, including administrative services, shareholder services, oversight of fund accounting, marketing services and assistance in meeting legal and regulatory requirements. The Board also received and assessed information regarding the services to be provided to the Corporation and the High Yield Portfolio by certain unaffiliated service providers. The Board noted its view of FAM as one of the most experienced global asset management firms and considered the overall services provided by FAM to be of high quality. The Board also noted its view of FAM as financially sound and well managed and noted FAM's affiliation with one of America's largest financial firms. In considering whether to approve the FAM Investment Advisory Agreement, the Board reviewed an organizational meeting book and other materials from counsel to the Corporation and the High Yield Portfolio and from FAM which: (a) included information concerning the services that will be rendered to the Corporation and the High Yield Portfolio by FAM and its affiliates and the fees that will be paid by the Corporation and the High Yield Portfolio to FAM and its affiliates and (b) outlined the legal duties of the Board under the Investment Company Act of 1940, as amended (the "Investment Company Act"), with respect to the consideration and approval of the FAM Investment Advisory Agreement. The Board also received information from Lipper Inc. ("Lipper") comparing the High Yield Portfolio's fee rate for advisory and administrative services to those of other comparable funds included within the high yield municipal debt fund group, as defined by Lipper. In particular, the Board considered the following: Services to be Provided by FAM--The Board reviewed the nature, extent and quality of the services that FAM would provide to the High Yield Portfolio. In connection with the investment advisory services to be provided to the High Yield Portfolio, the Board discussed in detail with officers of FAM the management of the High Yield Portfolio's investments in accordance with the High Yield Portfolio's stated investment objective and policies and the types of transactions that would be entered into on behalf of the High Yield Portfolio. In addition to the investment advisory services to be provided to the High Yield Portfolio, FAM and its affiliates also will provide administrative services, shareholder services, oversight of fund accounting, marketing services, assistance in meeting legal and regulatory requirements and other services necessary for the operation of the High Yield Portfolio. In particular, the Board reviewed the compliance and administrative services to be provided to the High Yield Portfolio by FAM, including its oversight of the High Yield Portfolio's day-to-day operations and its oversight of fund accounting. The Board noted that FAM has an administrative, legal and compliance staff to ensure a high level of quality in the compliance and administrative services to be provided to the High Yield Portfolio. Finally, the Board took into consideration the history, reputation and background of FAM and the portfolio management team. The Board included in this review the nature, extent and quality of services provided to the three other portfolios of the Corporation by FAM and considered in their review the performance of the three other portfolios. Since the High Yield Portfolio is newly formed, the Board did not consider portfolio performance. Based on its review, the Board concluded that FAM should provide a satisfactory level of services to the High Yield Portfolio. The Board concluded, based in part on their experience with the three other portfolios of the Corporation and as Board members for other MLIM/FAM-advised funds, that the services to be provided to the High Yield Portfolio by FAM under the FAM Investment Advisory Agreement were likely to be of a high quality and would benefit the High Yield Portfolio. FAM's Personnel and Investment Process--The Board reviewed the High Yield Portfolio's investment objectives and strategies and discussed with FAM's senior management responsible for investment operations and the senior management of FAM's municipal investing group the strategies to be used to achieve the stated objectives. Among other things, the Board considered the size, education and experience of FAM's investment staff, its use of technology, and FAM's approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered the experience of Mr. Jaeckel, the High Yield Portfolio's portfolio manager. The Board concluded that FAM and its investment staff have extensive experience in analyzing and managing the types of investments to be used by the High Yield Portfolio, that the High Yield Portfolio would benefit from that experience and that FAM would be an appropriate investment adviser for the High Yield Portfolio. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Management Fees and Other Expenses--The Board compared both the services to be rendered and the fees to be paid under the FAM Investment Advisory Agreement to other contracts of FAM and its affiliates and to other contracts of other investment advisers with respect to non-MLIM/FAM-advised comparable open-end funds as classified by Lipper. In particular, the Board evaluated the High Yield Portfolio's proposed contractual fee rate for advisory and administrative services as compared to the contractual fee rate of comparable municipal funds. In particular, the Board noted that the High Yield Portfolio's contractual advisory fee rate at a common asset level placed it in the first quartile for the Lipper group. The Board then considered the potential direct and indirect benefits to FAM and its affiliates from FAM's relationship with the Fund, including the distribution arrangements relating to the High Yield Portfolio's shares. Based in part on their experience with the three other portfolios of the Fund as a directors or trustees of other MLIM/FAM-advised funds, the Board concluded that the High Yield Portfolio would benefit from those services. Profitability--The Board also considered the anticipated cost of the services to be provided by FAM and the profits of FAM and its affiliates profits in relation to the management and distribution of the High Yield Portfolio and other funds advised by FAM and its affiliates. Because the High Yield Portfolio had not commenced operations as of the date of the meeting, FAM was not able to provide the Directors with specific information concerning the cost of services to be provided to the High Yield Portfolio and the expected profits to be realized by FAM and its affiliates from their relationships with the High Yield Portfolio. The Directors, however, discussed with FAM its general level of profitability and noted that the Directors would be provided with profitability information after the High Yield Portfolio commences operations in connection with any future renewals of the investment advisory arrangements. Economies of Scale--Since the High Yield Portfolio is newly formed, FAM was not able to provide the Directors with specific information concerning the extent to which economies of scale would be realized as the High Yield Portfolio grows and whether fee levels would reflect such economies of scale, if any. The Directors did note that there were breakpoints in the proposed advisory fee schedule so that it was anticipated that shareholders would realize certain economies of scale as the High Yield Portfolio assets grow. Conclusion--Based on the foregoing and such other matters as were deemed relevant, a majority of the Directors, including all of the non-interested directors, concluded that the proposed advisory fee rate is reasonable in relation to the services to be provided by FAM to the High Yield Portfolio as well as the costs to be incurred and benefits to be gained by FAM and its affiliates in providing such services, including the investment advisory and administrative components. The Board also found the proposed investment advisory fee to be reasonable in comparison to the fees charged by advisers to comparable funds of similar actual or anticipated size. As a result, all of the Directors who were present at the May 23, 2006 meeting, constituting a majority of the directors and all of the directors who are non-interested directors, approved the FAM Investment Advisory Agreement. BlackRock Investment Advisory Agreement--Matters Considered by the Board In connection with the Transaction between Merrill Lynch and BlackRock, the Board considered approval of the proposed BlackRock Investment Advisory Agreement that would take effect upon the closing of the Transaction and replace the FAM Investment Advisory Agreement. As discussed above in "Disclosure of New Investment Advisory Agreements - National Municipal Fund, Municipal Insured Fund and Short-Term Municipal Fund - BlackRock Investment Advisory Agreement - Matters Considered by the Board," the Board of the Corporation, including the independent directors, approved a new investment advisory agreement (the "New Investment Advisory Agreement") between the Corporation on behalf of each of the Corporation's other three portfolios and BlackRock Advisors at a meeting held on May 12, 2006. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Disclosure of Sub-Advisory Agreement (concluded) In considering whether to approve the BlackRock Investment Advisory Agreement, the Board reviewed material from counsel to the Corporation and the High Yield Portfolio and from FAM prepared for the May 23, 2006 meeting and additional information previously provided about BlackRock Advisors in connection with the Directors' approvals relating to the BlackRock Transaction in connection with other MLIM/FAM-advised funds, including the Corporation's three other portfolios. These materials included information concerning the services that will be rendered to the Corporation by BlackRock Advisors and affiliates of BlackRock Advisors and the fees that will be paid by the Corporation and the High Yield Portfolio to BlackRock Advisors and affiliates of BlackRock Advisors. The Board also received, as noted above, information from Lipper comparing the High Yield Portfolio's proposed fee rate for advisory and administrative services to those of other comparable funds included within the high yield municipal debt funds group, as defined by Lipper. The Directors noted that the proposed fee schedule under the BlackRock Investment Advisory Agreement was identical to the fee schedule under the FAM Investment Advisory Agreement and that the nature of the services provided under the agreements is identical. In considering whether to approve the BlackRock Investment Advisory Agreement, the Directors reviewed their considerations in connection with their approval of the New Investment Advisory Agreement on behalf of the Corporation's three other portfolios. The Board relied on the same information and considered the same factors, as pertinent to the High Yield Portfolio, as those discussed above in connection with the May 12, 2006 approval of the New Investment Advisory Agreement. The Directors considered, among other matters, the nature, extent and quality of the services that BlackRock Advisors would provide to the High Yield Portfolio; the anticipated cost of the services to be provided by BlackRock Advisors and the profits of BlackRock Advisors and its affiliates in relation to the management and distribution of the High Yield Portfolio; the fees to be paid under the BlackRock Investment Advisory Agreement; and fall-out benefits to be received by BlackRock Advisors under the BlackRock Investment Advisory Agreement. Conclusion--Based on the foregoing and such other matters as were deemed relevant, all of the Directors present at the meeting, constituting a majority of the directors and all of the non-interested 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 High Yield Portfolio'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. New BlackRock Sub-Advisory Agreement--Matters Considered by the Board At an in-person meeting held on August 14 - 16, 2006, the Board of Directors, including the independent directors, discussed and approved the sub-advisory agreement between BlackRock Advisors and its affiliate, BlackRock Investment Management, LLC (the "Sub-Adviser") with respect to the High Yield Portfolio (the "Sub-Advisory Agreement"). The Sub-Advisory Agreement became effective on September 29, 2006, at the same time the BlackRock Investment Advisory Agreement with BlackRock Advisors (which had been approved by the High Yield Portfolio's shareholders) became effective. Pursuant to the Sub-Advisory Agreement, the Sub-Adviser receives a monthly fee from BlackRock Advisors at an annual rate equal to 59% of the advisory fee received by BlackRock Advisors from the High Yield Portfolio. BlackRock Advisors pays the Sub-Adviser out of its own resources, and there is no increase in the High Yield Portfolio's expenses as a result of the Sub- Advisory Agreement. In approving the Sub-Advisory Agreement at the August in-person meeting, the Board reviewed their considerations in connection with their approval of the BlackRock Investment Advisory Agreement in May 2006. The Board relied on the same information and considered the same factors as those discussed above in connection with the approval of the BlackRock Investment Advisory Agreement, and came to the same conclusions. In reviewing the sub-advisory fee rate provided for in the Sub-Advisory Agreement, the Board noted the fact that both BlackRock Advisors and the Sub-Adviser have significant responsibilities under their respective advisory agreements. Under the BlackRock Investment Advisory Agreement, BlackRock Advisors remains responsible for the overall management of the High Yield Portfolio and for oversight of the High Yield Portfolio's operations and administration. Under the Sub-Advisory Agreement, the Sub- Adviser provides advisory services to the High Yield Portfolio and is responsible for the day-to-day management of the High Yield Portfolio's portfolio. The Board also took into account the fact that there is no increase in total advisory fees paid by the High Yield Portfolio as a result of the Sub- Advisory Agreement. Based on its considerations, the Board concluded that it was a reasonable allocation of fees for the Sub-Adviser to receive a fee at an annual rate equal to 59% of the advisory fee paid by the High Yield Portfolio to BlackRock Advisors. After the independent directors deliberated in executive session, the entire Board, including the independent directors, approved the Sub-Advisory Agreement, concluding that the sub-advisory fee was reasonable in relation to the services provided and that the Sub-Advisory Agreement was in the best interests of the High Yield Portfolio's shareholders. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 BlackRock Funds 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 Additional Information Electronic copies of most financial reports and prospectuses are available on the Fund's Web site or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund's electronic delivery program. To enroll: Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages: Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service. Shareholders Who Hold Accounts Directly with BlackRock: 1) Access the BlackRock Web site at http://www.blackrock.com/edelivery 2) Select eDelivery under the More Information section 3) Log into your account The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called "householding" and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Fund at (800) 441-7762. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 BlackRock Funds (concluded) Availability of Additional Information (concluded) Availability of Proxy Voting Policies and Procedures The Fund has delegated proxy voting responsibilities to BlackRock and its affiliates, subject to the general oversight of the Fund's Board of Directors. A description of the policies and procedures that BlackRock and its affiliates use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, on our Web site at www.blackrock.com, by calling (800) 441-7762, or on the Web site of the Securities and Exchange Commission (the "Commission") at http://www.sec.gov. Availability of Proxy Voting Record Information on how proxies relating to the Fund's voting securities were voted (if any) by BlackRock during the most recent 12-month period ended June 30 is available, upon request and without charge, on our Web site at www.blackrock.com, by calling (800) 441-7762 or on the Web site of the Commission at http://www.sec.gov. Availability of Quarterly Portfolio Schedule The Fund files its complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the Commission on Form N-Q. The Fund's Forms N-Q are available on the Commission's Web site at http://www.sec.gov and may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request, without charge, by calling (800) 441-7762. Shareholder Privileges Account Information Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at www.blackrock.com. Automatic Investment Plans Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock portfolios. Systematic Withdrawal Plans Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock portfolios, as long as their account is at least $10,000. Retirement Plans Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 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 Capital Appreciation 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. and certain funds are also distributed by FAM Distributors, Inc. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund's prospectus contains this and other information and is available at www.blackrock.com or by calling 800-882-0052 or from your financial advisor. The prospectus should be read carefully before investing. BLACKROCK MUNICIPAL BOND FUND, INC. DECEMBER 31, 2006 Item 2 - Code of Ethics - Not Applicable to this semi-annual report Item 3 - Audit Committee Financial Expert - Not Applicable to this semi- annual report Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-annual report 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 - Not Applicable 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) - As of September 29, 2006, with the conclusion of the combination of Merrill Lynch's asset management business with BlackRock, the registrant was migrated to BlackRock's trading and compliance monitoring systems, and various personnel changes occurred. In conjunction with these business improvements, there were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to affect, the registrant's internal control over financial reporting. Item 12 - Exhibits attached hereto 12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report 12(a)(2) - Certifications - Attached hereto 12(a)(3) - Not Applicable 12(b) - Certifications - Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BlackRock Municipal Bond Fund, Inc. By: /s/ Robert C. Doll, Jr. ----------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc. Date: February 20, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Robert C. Doll, Jr. ----------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc. Date: February 20, 2007 By: /s/ Donald C. Burke -------------------- Donald C. Burke, Chief Financial Officer of BlackRock Municipal Bond Fund, Inc. Date: February 20, 2007 EX-99.CERT 2 section302.txt SECTION 302 EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Municipal Bond Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 20, 2007 /s/ Robert C. Doll, Jr. ------------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc. EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald C. Burke, Chief Financial Officer of BlackRock Municipal Bond Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of BlackRock Municipal Bond Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 20, 2007 /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer of BlackRock Municipal Bond Fund, Inc. EX-99.1350CERT 3 section906.txt SECTION 906 Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: February 20, 2007 /s/ Robert C. Doll, Jr. ----------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock Municipal Bond Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to BlackRock Municipal Bond Fund, Inc. and will be retained by BlackRock Municipal Bond Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of BlackRock Municipal Bond Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: February 20, 2007 /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer of BlackRock Municipal Bond Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to BlackRock Municipal Bond Fund, Inc. and will be retained by BlackRock Municipal Bond Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----