BlackRock Credit Allocation Income Trust : CEF Quarterly Market Update

Closed-end fund market review

Second quarter 2020

Closed-end fund market overview

Equities had a strong second quarter, supported by aggressive fiscal and monetary stimulus measures across the globe. U.S. stocks performed well, with the S&P 500 up 20.5% on the quarter. Riskier assets were driven by increased market liquidity and growing optimism surrounding the reopening of the economy. Fixed income markets, supported by Fed actions, were positive on the quarter. The Barclays Aggregate Bond Index was up 2.9%. The 10-year treasury moved as high as 0.91% during the second quarter, but finished flat, ending June at 0.66%. Credit assets performed well as markets normalized and spreads came in, leading to a strong quarter for corporate bonds.

Closed-end funds ("CEFs") rebounded in the second quarter, with the average CEF up 12.2% on net asset value ("NAV") and up 15.2% on market price. Sector equity CEFs led the way, driven by strong performance in technology stocks. Equity and credit CEFs rebounded amid increasing investor optimism. Over the quarter, discounts narrowed 90 basis points, on average, ending the quarter at an average of -7.3%. Discount narrowing can be attributed to investors shifting to a risk-on attitude as equity and credit markets rebounded from March lows.

Second quarter CEF total returns % (NAV and market price)

0%								29.3
								21.9
-10
			14.9	14.6	14.6	15.2	16.7
			13.8
		12.5			12.2	12.2
		10.9	11.7
		10.7
-20
4.5	3.8
-30
Municipal	Investment	All CEFs	General	Bank loan	Equity	High yield	Sector
		grade		bond		(options		equity
● NAV ● Market price return				strategies)

Source: Lipper as of 6/30/2020. Returns are shown net of advisory fees paid by the Fund and net of the Fund's operating fees and expenses. Investors who purchase shares of the Fund through an investment adviser or other financial professional may separately pay a fee to that service provider. Past performance is not indicative of future results.

Second quarter 2020| Closed-end fund market review

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Municipal

Municipal bonds rebounded from March lows over the second quarter. Positive performance was driven by the reopening of the U.S. economy along with favorable supply/demand dynamics in the space. Municipal CEF returns were positive on the quarter and many funds benefited from the use of leverage as the asset class rebounded. The average muni CEF was up 4.5% on NAV and up 3.8% on market price over the quarter. Muni CEF discounts widened 80 over the quarter, finishing at an average of -7.2%.

The majority of municipal CEFs use leverage in an effort to support higher distributions. Leverage seeks to profit from the spread between short-term (lower) and long-term (higher) interest rates, assuming an upward sloping yield curve, by borrowing at short-term interest rates and investing the proceeds in longer-term securities that typically pay higher rates of return. The SIFMA Municipal Swap Index, a common base rate used to calculate interest rates on various forms of municipal fund leverage, finished the quarter at 0.09%, well below its 3-year average of 1.27%. Lower leverage costs may help support or grow municipal CEF distributions.

Taxable fixed income

The coronavirus induced sell-off created extreme volatility across fixed income markets earlier this year. This has led to a strong wave of monetary and fiscal stimulus to stabilize markets and support economic activity. These aggressive measures by central banks, including purchases of corporate debt, have provided a favorable backdrop for credit assets. This has led to a rebound in corporate bonds

as credit spreads have narrowed off of March highs. This led to strong performance in fixed income credit CEFs. The average taxable fixed income CEF was up 11.4% on NAV and up 14.1% on market price in the second quarter. Taxable fixed income discounts narrowed 80 basis points, on average, finishing the quarter at an average discount of -7.3%.

Coming off the swiftest sell-off in U.S. high yield history, high yield bonds came back strong in the second quarter as market conditions normalized. High yield spreads tightened by 254 basis points, finishing the quarter at 626 basis points. This led to strong performance in high yield CEFs, where in many cases, performance was enhanced by the use of leverage. High yield CEFs were up an average of 12.2% on NAV and up 14.6% on market price over the second quarter. Discounts in high yield CEFs narrowed by 80 basis points, finishing June at an average discount of -8.6%. Investment grade credit also benefited from market normalization and support from the Fed. Investment grade CEFs were up 10.7% on NAV and 12.5% on market price, on average. Discount in the investment grade space narrowed 90 basis points, finishing the quarter at an average discount of -7.6%.

Bank loans rallied in the second quarter. The average bank loan CEF was up 11.7% on NAV and up 14.6% on market price. Bank loan CEF discounts moved 50 basis points narrower on the quarter, finishing at an average discount of -12.2%. Bank loan discounts continue to be among the widest in the fixed income space given there is a lack of demand for floating rate assets in this low interest rate environment.

• Second quarter 2020| Closed-end fund market review

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Equity

After a rough start to the year, equities bounced back in the second quarter. Increasingly positive investor sentiment was supported by the economy reopening , advancements in potential COVID-19 treatments and vaccines, and the Fed. Equity CEFs moved higher during the second quarter. Equity CEFs finished the quarter up 17.8% on NAV and up 23.0% on market price, on average. Market prices outperformed NAVs as discounts narrowed as demand picked up for equity CEFs following the sell-off in March. Discounts in the equity CEF space narrowed 90 basis points over the quarter, finishing at an average discount of -7.5%.

Equity CEFs that use covered calls generally lagged broader markets from a NAV performance. Generally, covered calls offer some downside protection in exchange for upside participation. These strategies were up 13.8% on NAV and up 16.7% on market price. Discounts in the category narrowed by an average of 90 basis points, finishing at an average discount of -6.4%. From a sector perspective, energy and technology CEFs had strong returns. Sector equity CEFs were up an average

of 21.9% on NAV and up 27.9% on market price over the quarter. Discounts in the sector equity funds narrowed 100 basis points, finishing at an average discount of -8.5%.

Distribution rate (% of market price) as of June 30, 2020

10%						8.6	9.0	9.1
		8.0	8.0	8.3	8.4
8
6	5.0
4
2
0
	Investment	Municipal	All CEFs	Equity	High	General	Sector	Bank
	grade	(tax equivalent)		(options	yield	bond	equity	loan
				strategies)

Source: Lipper as of 6/30/2020. Distribution rate is calculated by annualizing the Fund's latest declared regular distribution and dividing that number by the Funds market price as of the stated date. Distributions are sourced from net investment income, unless noted otherwise. Tax-Equivalent Distribution Rate calculated using a 40.8% effective tax rate.

Current premium/discount versus 5-year average as of June 30, 2020

0%
-0.6
-2.1	-3.0
-7	-6.4	-4.9	-5.7
-7.2		-6.7		-7.2
	-7.3	-7.6-8.4	-8.6-7.7
		-8.5
-14							-12.2
General	Municipal	Equity	All CEFs	Investment	Sector	High	Bank
bond		(options		grade	equity	yield	loan
		strategies)
● Current premium/discount ● 5-year avg. premium/discount

Source: Lipper as of 6/30/2020.

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About BlackRock

BlackRock's purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, our clients turn to us for the solutions they need when planning for their most important goals. As of June 30, 2020, the firm managed approximately $7.32 trillion in assets on behalf of investors worldwide. For additional information on BlackRock, please visit www.blackrock.com/corporate Twitter: @blackrock | Blog: www.blackrockblog.com LinkedIn: www.linkedin.com/company/blackrock.

Availability of fund updates

BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the "closed-end funds" section of www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock's website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock's website in this release.

Past performance is not indicative of future results. You cannot invest directly in an unmanaged index.

Investment return, price, yields and NAV will fluctuate with changes in market conditions. At the time of sale, your shares may have a market price that is above or below net asset value, and may be worth more or less than your original investment. There is no assurance that a fund will meet its investment objective. Closed-end fund shares are not deposits or obligations of, or guaranteed by, any bank and are not insured by the FDIC or any other agency. Investing involves risk, including possible loss of principal amount invested. This is not a prospectus intended for use in the purchase or sale of any fund's shares. Investors should review a fund's prospectus and other publicly available information, including shareholder reports, carefully before investing. Shares may only be purchased or sold through registered broker/dealers. For more information regarding any of BlackRock's closed-end funds, please call BlackRock at 800-882-0052. No assurance can be given that a fund will achieve its investment objective.

Some BlackRock CEFs may utilize leverage to seek to enhance the yield and net asset value of their common stock, through bank borrowings, issuance of short-term debt securities or shares of preferred stock, or a combination thereof. However, these objectives cannot be achieved in all interest rate environments. While leverage may result in a higher yield for the Fund, the use of leverage involves risk, including the potential for higher volatility of the NAV, fluctuations of dividends and other distributions paid by the Fund and the market price of the Fund's common stock, among others. Certain funds may invest assets in securities of issuers domiciled outside the United States, including issuers from emerging markets. Foreign investing involves special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments.

Some BlackRock CEFs make distributions of ordinary income and capital gains at calendar year end. Those distributions temporarily cause extraordinarily high yields. There is no assurance that a fund will repeat that yield in the future. Subsequent monthly distributions that do not include ordinary income or capital gains in the form of dividends will likely be lower. Fund details, holdings and characteristics are as of the date noted and subject to change.

The opinions expressed are those of BlackRock as of June 30, 2020, and are subject to change at any time due to changes in market or economic conditions. BlackRock makes no undertaking to change this document in response to such changes. These comments should not be construed as a recommendation of any individual holdings or market sectors.

General market and credit risks: Debt instruments are subject to credit and interest rate risks. Credit risk refers to the likelihood that an obligor will default in the payment of principal or interest on an instrument. Financial strength and solvency of an obligor are the primary factors influencing credit risk. In addition, lack or inadequacy of collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument and debt instrument that are rated by rating agencies are often reviewed and may be subject to downgrade. Interest rate risk refers to the risks associated with market changes in interest rates. Interest rate changes may affect the value of a debt instrument indirectly (especially in the case of fixed rate obligations or directly (especially in the case of instrument whose rates are adjustable). In general, rising interest rates will negatively impact the process of a fixed rate debt instrument and falling interest rates will have a positive effect on price. Adjustable rate instruments also react to interest rate changes in a similar manner although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other factors).

Municipal market risks: There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than taxable bonds. A portion of the income may be taxable. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gain distributions, if any, are taxable. The Fund may utilize leveraging to seek to enhance the yield and net asset value of its common stock, as described in the Fund's prospectus. These objectives will not necessarily be achieved in all interest rate environments. The use of leverage involves risk, including the potential for higher volatility and greater declines of the Fund's net asset value, fluctuations of dividends and other distributions paid by the Fund and the market price of the Fund's common stock, among others.

Equity market risks: The price of equities may rise or fall because of changes in the broad market or changes in a company's financial condition - sometimes rapidly or unpredictable. These price movements may result form factor affecting individual companies, sectors or industries, such as changes in economic or political conditions. Equity securities are subject to "stock market risk" meaning that stock prices may decline over short or extended periods of time.

Index descriptions:

SIFMA Municipal Swap Index: 7-dayhigh-grade market index comprised of tax-exempt Variable Rate Demand Obligations (VRDOs) with certain characteristics. The Index is calculated and published by Bloomberg. The Index is overseen by SIFMA's Municipal Swap Index Committee.

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