Item 1 – Reports to Stockholders
(a) The Reports to Shareholders are attached herewith.
June 30, 2024
2024 Semi-Annual Report (Unaudited) |
BlackRock Debt Strategies Fund, Inc. (DSU) |
BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) |
BlackRock Income Trust, Inc. (BKT) |
BlackRock Limited Duration Income Trust (BLW) |
BlackRock Multi-Sector Income Trust (BIT) |
Not FDIC Insured • May Lose Value • No Bank Guarantee |
Supplemental Information
(unaudited)
Section 19(a) Notices
BlackRock Debt Strategies Fund, Inc.
’
s (DSU), BlackRock Floating Rate Income Strategies Fund, Inc.’s (FRA), BlackRock Income Trust, Inc.
’
s (BKT), BlackRock Limited
Duration Income Trust’s (BLW) and BlackRock Multi-Sector Income Trust
’
s (BIT) (collectively, the “Funds" or individually, a “Fund”) 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 Fund’s investment experience during the year and may be subject to changes based on tax regulations. Each Fund 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 | ||||||||||
Fund 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 | |
DSU |
$ 0.490927 |
$ — |
$ — |
$ 0.101453 |
$ 0.592380 |
83 % |
— % |
— % |
17 % |
100 % | |
FRA |
0.611348 |
— |
— |
0.131692 |
0.743040 |
82 |
— |
— |
18 |
100 | |
BKT |
0.203628 |
— |
— |
0.325572 |
0.529200 |
38 |
— |
— |
62 |
100 | |
BLW |
0.587721 |
— |
— |
0.059679 |
0.647400 |
91 |
— |
— |
9 |
100 | |
BIT |
0.471579 |
— |
— |
0.270621 |
0.742200 |
64 |
— |
— |
36 |
100 | |
(a) |
Each Fund 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 Fund is returned to the shareholder. A return of capital does not necessarily reflect a Fund’s investment performance and should not be confused with “yield” or “income.” When distributions exceed total return performance, the difference will reduce a Fund’s net asset value per share. |
Section 19(a) notices for the Funds, as applicable, are available on the BlackRock website at
blackrock.com
.
Managed Distribution Plan
The Funds, each with the approval of its Board of Directors (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 Funds currently distribute the following fixed amounts
per share on a monthly basis.
Fund Name |
Amount Per Common Share |
DSU |
$ 0.098730 |
FRA |
0.123840 |
BKT |
0.088200 |
BLW |
0.107900 |
BIT |
0.123700 |
The fixed amounts distributed per share are subject to change at the discretion of each Fund
’
s Board. Each Fund 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 Fund 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 Fund 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 Fund 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 Fund
’
s investment performance from the amount of these distributions or from the terms of the Plan. Each Fund
’
s total
return performance is presented in its financial highlights table.
Each Fund
’
s Board may amend, suspend or terminate a Fund
’
s Plan at any time without prior notice to the Fund
’
s shareholders if it deems such actions to be in the best
interests of the Fund or its shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund
’
s stock is trading at or above
net asset value) or widening an existing trading discount. Each Fund 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 DSU
’
s, BKT
’
s, BLW
’
s and BIT
’
s prospectus for a more complete description of a Fund
’
s
risks.
2
2024
BlackRock Semi-Annual Report to Shareholders
The Benefits and Risks of Leveraging
The Funds 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 Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of each Fund (including the assets
obtained from leverage) are invested in higher-yielding portfolio investments, each Fund
’
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 Fund’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 Fund’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 Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Fund’s financing cost of leverage is
significantly lower than the income earned on a Fund’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 Fund
’
s return on assets purchased with leverage proceeds, income to shareholders is lower than if a Fund had not used leverage.
Furthermore, the value of the Funds’ 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 Fund
’
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 Funds’ 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 Fund
’
s intended leveraging strategy will be successful.
The use of leverage also generally causes greater changes in each Fund
’
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 Fund’s shares than if the Fund were not leveraged. In addition, each Fund 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 Fund to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain
types of hedging strategies. Each Fund 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 Fund
’
s investment advisory fees includes assets purchased with the proceeds of leverage, the investment
advisory fees payable to the Funds’ investment adviser will be higher than if the Funds did not use leverage.
Each Fund 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 Fund 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 Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In
addition, a Fund 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 Funds 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 Funds 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 Funds
’
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 Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these
instruments, if any, are discussed in detail in the Notes to Financial Statements.
4
2024
BlackRock Semi-Annual Report to Shareholders
Fund Summary
as of June 30, 2024
BlackRock Debt Strategies Fund, Inc. (DSU)
Investment Objective
BlackRock Debt Strategies Fund, Inc.
’
s (DSU) (the “Fund”)
primary investment objective is to seek to provide current income by investing primarily in a diversified portfolio
of U.S. companies’ debt instruments, including senior and subordinated corporate loans, both secured and unsecured, which are rated in the lower rating categories of the
established rating services (BBB or lower by S&P Global Ratings ("S&P") or Baa or lower by Moody’s Investors Service, Inc. (“Moody’s”)) or unrated debt instruments, which
are in the judgment of the investment adviser of equivalent quality. The Fund may invest directly in debt instruments or synthetically through the use of derivatives. The Fund’s
secondary investment objective is to seek to provide capital appreciation.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
Symbol on New York Stock Exchange |
DSU |
Initial Offering Date |
March 27, 1998 |
Current Distribution Rate on Closing Market Price as of June 30, 2024 ($10.84) (a) |
10.93% |
Current Monthly Distribution per Common Share (b) |
$0.098730 |
Current Annualized Distribution per Common Share (b) |
$1.184760 |
Leverage as of June 30, 2024 (c) |
21% |
(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 bank borrowings outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings), minus the sum of 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 Fund, 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 |
$ 10.84 |
$ 10.79 |
0.46 % |
$ 11.36 |
$ 10.26 |
Net Asset Value |
10.74 |
10.89 |
(1.38 ) |
10.91 |
10.72 |
Performance
Returns for the period ended June 30, 2024 were as follows:
Average Annual Total Returns | ||||
6-month |
1 Year |
5 Years |
10 Years | |
Fund at NAV (a)(b) |
4.16 % |
11.63 % |
6.16 % |
5.84 % |
Fund at Market Price (a)(b) |
6.10 |
23.37 |
8.97 |
6.84 |
Reference Benchmark (c) |
3.50 |
10.81 |
4.75 |
4.48 |
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (d) |
2.58 |
10.43 |
3.90 |
4.30 |
Morningstar LSTA Leveraged Loan Index (e) |
4.40 |
11.11 |
5.53 |
4.60 |
(a) |
All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Fund’s use of leverage, if any. |
(b) |
The Fund 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) |
The Reference Benchmark is comprised of the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (50%) and the Morningstar LSTA Leveraged Loan Index (50%). The Reference Benchmark’s index content and weightings may have varied over past periods. |
(d) |
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. |
(e) |
An unmanaged market value-weighted index designed to measure the performance of the U.S. leveraged loan market based upon spreads, interest payments and market weightings subject to a single loan facility weight cap of 2%. |
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Past performance is not an indication of future results.
The Fund is presenting the performance of one or more indices for informational purposes only. The Fund
is actively managed and does not seek to track or replicate the
performance of any index. The index performance shown is not intended to be indicative of the Fund’s investment strategies, portfolio components or past or future
performance.
More information about the Fund’s historical performance can be found in the “Closed End Funds” section of
blackrock.com
.
Fund Summary
5
