June 30, 2024
2024 Semi-Annual Report (Unaudited) |
BlackRock Core Bond Trust (BHK) |
BlackRock Corporate High Yield Fund, Inc. (HYT) |
BlackRock Credit Allocation Income Trust (BTZ) |
BlackRock Floating Rate Income Trust (BGT) |
Not FDIC Insured • May Lose Value • No Bank Guarantee |
Supplemental Information
(unaudited)
Section 19(a) Notices
BlackRock Core Bond Trust
’
s (BHK), BlackRock Corporate High Yield Fund, Inc.’s (HYT), BlackRock Credit Allocation Income Trust
’
s (BTZ) and BlackRock Floating Rate
Income Trust
’
s (BGT) (collectively the “Trusts”, or individually a “Trust”) amounts and sources of distributions reported are estimates and are being provided pursuant to
regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Trust’s
investment experience during the year and may be subject to changes based on tax regulations. Each Trust will provide a Form 1099-DIV each calendar year that will tell you
how to report these distributions for U.S. federal income tax purposes.
June 30, 2024
Total Cumulative Distributions for the Fiscal Period |
% Breakdown of the Total Cumulative Distributions for the Fiscal Period | ||||||||||
Trust Name |
Net Income |
Net Realized Capital Gains Short-Term |
Net Realized Capital Gains Long-Term |
Return of Capital (a) |
Total Per Common Share |
Net Income |
Net Realized Capital Gains Short-Term |
Net Realized Capital Gains Long-Term |
Return of Capital |
Total Per Common Share | |
BHK |
$ 0.291321 |
$ — |
$ — |
$ 0.156279 |
$ 0.447600 |
65 % |
— % |
— % |
35 % |
100 % | |
HYT |
0.382004 |
— |
— |
0.085396 |
0.467400 |
82 |
— |
— |
18 |
100 | |
BTZ |
0.340964 |
— |
— |
0.162436 |
0.503400 |
68 |
— |
— |
32 |
100 | |
BGT |
0.593371 |
— |
— |
0.128309 |
0.721680 |
82 |
— |
— |
18 |
100 | |
(a) |
Each Trust estimates that it has distributed more than its net income and net realized capital gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in a Trust is returned to the shareholder. A return of capital does not necessarily reflect a Trust’s investment performance and should not be confused with “yield” or “income.” When distributions exceed total return performance, the difference will reduce a Trust’s net asset value per share. |
Section 19(a) notices for the Trusts, as applicable, are available on the BlackRock website at
blackrock.com
.
Managed Distribution Plan
The Trusts, each with the approval of its Board of Trustees (the “Board”), has adopted a managed distribution plan, consistent with its investment objectives and policies, to
support a level distribution of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plans, the Trusts currently distribute the following fixed amounts
per share on a monthly basis.
Trust Name |
Amount Per Common Share |
BHK |
$ 0.074600 |
HYT |
0.077900 |
BTZ |
0.083900 |
BGT |
0.120280 |
The fixed amounts distributed per share are subject to change at the discretion of each Trust
’
s Board. Each Trust is currently not relying on any exemptive relief from
Section 19(b) of the Investment Company Act of 1940, as amended (the “1940 Act”). Under its Plan, a Trust will distribute all available investment income to its shareholders
as required by the Internal Revenue Code of 1986, as amended (the “Code”). If sufficient income (inclusive of net investment income and short-term capital gains) is not earned
on a monthly basis, a Trust will distribute long-term capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution to
shareholders is expected to be at the fixed amount established by the Board; however, a Trust may make additional distributions from time to time, including additional capital
gain distributions at the end of the taxable year, if required to meet requirements imposed by the Code and/or the 1940 Act.
Shareholders should not draw any conclusions about a Trust
’
s investment performance from the amount of these distributions or from the terms of the Plan. Each Trust
’
s total
return performance is presented in its financial highlights table.
Each Trust
’
s Board may amend, suspend or terminate a Trust
’
s Plan at any time without prior notice to the Trust
’
s shareholders if it deems such actions to be in the best
interests of the Trust or its shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Trust
’
s stock is trading at or above
net asset value) or widening an existing trading discount. Each Trust is subject to risks that could have an adverse impact on its ability to maintain level distributions. Examples
of potential risks include, but are not limited to, economic downturns impacting the markets, changes in interest rates, decreased market volatility, companies suspending or
decreasing corporate dividend distributions and changes in the Code. Please refer to BHK
’
s, HYT
’
s and BGT
’
s prospectus for a more complete description of a Trust
’
s risks.
2
2024
BlackRock Semi-Annual Report to Shareholders
The Benefits and Risks of Leveraging
The Trusts may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, there is no
guarantee that these objectives can be achieved in all interest rate environments.
In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income
earned by a Trust on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of each Trust (including the assets
obtained from leverage) are invested in higher-yielding portfolio investments, each Trust
’
s shareholders benefit from the incremental net income. The interest earned on
securities purchased with the proceeds from leverage (after paying the leverage costs) is paid to shareholders in the form of dividends, and the value of these portfolio holdings
(less the leverage liability) is reflected in the per share NAV.
To illustrate these concepts, assume a Trust’s capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available
for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive
slope. In this case, a Trust’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the
securities purchased by a Trust with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Trust’s financing cost of leverage is
significantly lower than the income earned on a Trust’s longer-term investments acquired from such leverage proceeds, and therefore the holders of Common Shares
(“Common Shareholders”) are the beneficiaries of the incremental net income.
However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and
other costs of leverage exceed a Trust
’
s return on assets purchased with leverage proceeds, income to shareholders is lower than if a Trust had not used leverage.
Furthermore, the value of the Trusts
’
portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value
of portfolio investments. In contrast, the amount of each Trust
’
s obligations under its respective leverage arrangement generally does not fluctuate in relation to interest rates.
As a result, changes in interest rates can influence the Trusts
’
NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict
accurately, and there is no assurance that a Trust
’
s intended leveraging strategy will be successful.
The use of leverage also generally causes greater changes in each Trust
’
s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining
market, leverage is likely to cause a greater decline in the NAV and market price of a Trust’s shares than if the Trust were not leveraged. In addition, each Trust may be required
to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the
terms of leverage instruments, which may cause the Trust to incur losses. The use of leverage may limit a Trust’s ability to invest in certain types of securities or use certain
types of hedging strategies. Each Trust incurs expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income to the
shareholders. Moreover, to the extent the calculation of each Trust
’
s investment advisory fees includes assets purchased with the proceeds of leverage, the investment
advisory fees payable to the Trusts
’
investment adviser will be higher than if the Trusts did not use leverage.
Each Trust may utilize leverage through a credit facility or reverse repurchase agreements as described in the Notes to Financial Statements, if applicable.
Under the Investment Company Act of 1940, as amended (the “1940 Act”), each Trust is permitted to borrow money (including through the use of TOB Trusts) or issue debt
securities up to 33 1/3% of its total managed assets. A Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In
addition, a Trust may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by its credit facility, which may be more stringent than
those imposed by the 1940 Act.
Derivative Financial Instruments
The Trusts may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets
without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency
exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect
correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument.
Pursuant to Rule 18f-4 under the 1940 Act, among other things, the Trusts must either use derivative financial instruments with embedded leverage in a limited manner or
comply with an outer limit on fund leverage risk based on value-at-risk. The Trusts
’
successful use of a derivative financial instrument depends on the investment adviser’s
ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used,
may limit the amount of appreciation a Trust can realize on an investment and/or may result in lower distributions paid to shareholders. The Trusts
’
investments in these
instruments, if any, are discussed in detail in the Notes to Financial Statements.
4
2024
BlackRock Semi-Annual Report to Shareholders
Trust Summary
as of June 30, 2024
BlackRock Core Bond Trust (BHK)
Investment Objective
BlackRock Core Bond Trust
’
s (BHK) (the “Trust”)
investment objective is to provide current income and capital appreciation. The Trust seeks to achieve its investment
objective by investing, under normal market conditions, at least 75% of its managed assets in bonds that are investment grade quality at the time of investment. Under normal
market conditions, the Trust intends to invest its assets primarily in a diversified portfolio of investment grade bonds, which may include, but are not limited to, corporate bonds,
U.S. government and agency securities and mortgage-related securities. The Trust may invest up to 25% of its total managed assets in bonds that, at the time of investment,
are rated Ba/BB or below by Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings ("S&P"), Fitch Ratings (“Fitch”) or another nationally recognized rating agency
or bonds that are unrated but judged to be of comparable quality by the investment adviser. The Trust may invest up to 10% of its total managed assets in bonds issued in
foreign currencies. The Trust may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Trust’s investment objective will be achieved.
Trust Information
Symbol on New York Stock Exchange |
BHK |
Initial Offering Date |
November 27, 2001 |
Current Distribution Rate on Closing Market Price as of June 30, 2024 ($10.65) (a) |
8.41% |
Current Monthly Distribution per Common Share (b) |
$0.074600 |
Current Annualized Distribution per Common Share (b) |
$0.895200 |
Leverage as of June 30, 2024 (c) |
35% |
(a) |
Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a return of capital. Past performance is not an indication of future results. |
(b) |
The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain. |
(c) |
Represents reverse repurchase agreements as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to any borrowings) minus the sum of its liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments. |
Market Price and Net Asset Value Per Share Summary
06/30/24 |
12/31/23 |
Change |
High |
Low | |
Closing Market Price |
$ 10.65 |
$ 10.91 |
(2.38 ) % |
$ 11.00 |
$ 10.23 |
Net Asset Value |
10.51 |
11.02 |
(4.63 ) |
11.02 |
10.24 |
Performance
Returns for the period ended June 30, 2024 were as follows:
Average Annual Total Returns | ||||
6-month |
1 Year |
5 Years |
10 Years | |
Trust at NAV (a)(b) |
(0.52 ) % |
4.77 % |
(0.14 ) % |
3.10 % |
Trust at Market Price (a)(b) |
1.82 |
9.06 |
1.42 |
4.05 |
Bloomberg U.S. Credit Index (c) |
(0.46 ) |
4.42 |
0.54 |
2.21 |
Reference Benchmark (d) |
(0.90 ) |
3.30 |
0.23 |
2.28 |
Bloomberg U.S. Long Government/Credit Index (e) |
(4.10 ) |
(1.58 ) |
(2.22 ) |
1.65 |
Bloomberg Intermediate Credit Index (f) |
0.93 |
5.60 |
1.32 |
2.20 |
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (g) |
2.58 |
10.43 |
3.90 |
4.30 |
Bloomberg CMBS, Eligible for U.S. Aggregate Index (h) |
1.53 |
5.76 |
0.69 |
1.95 |
Bloomberg MBS Index (i) |
(0.98 ) |
2.12 |
(0.76 ) |
0.89 |
Bloomberg ABS Index (j) |
1.66 |
5.46 |
1.62 |
1.84 |
(a) |
All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Trust’s use of leverage, if any. |
(b) |
The Trust moved from a discount to NAV to a premium during the period, which accounts for the difference between performance based on market price and performance based on NAV. |
(c) |
An index that measures the investment grade, U.S. dollar-denominated, fixed-rate, taxable corporate and government related bond markets. It is composed of the U.S. Corporate Index and a non-corporate component that includes foreign agencies, sovereigns, supranationals and local authorities. |
(d) |
The Reference Benchmark is comprised of the Bloomberg U.S. Long Government/Credit Index (40%); Bloomberg Intermediate Credit Index (24%); Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (16%); Bloomberg CMBS, Eligible for U.S. Aggregate Index (8%); Bloomberg MBS Index (8%); and Bloomberg ABS Index (4%). The Reference Benchmark’s index content and weightings may have varied over past periods. |
(e) |
An unmanaged index that is the long component of the Bloomberg U.S. Government/Credit Index. It includes publicly issued U.S. Treasury debt, U.S. government agency debt, taxable debt issued by U.S. states and territories and their political subdivisions, debt issued by U.S. and non-U.S. corporations, non-U.S. government debt and supranational debt. |
(f) |
An unmanaged index that is the intermediate component of the Bloomberg U.S. Credit Index. The Bloomberg U.S. Credit Index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. |
(g) |
An unmanaged index comprised of issuers that meet the following criteria: at least $150 million par value outstanding; maximum credit rating of Ba1; at least one year to maturity; and no issuer represents more than 2% of the index. |
(h) |
An unmanaged index that is the CMBS component of the Bloomberg U.S. Aggregate Index. |
Trust Summary
5