UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

 

Investment Company Act file number: 811-05542

 

Name of Fund: BlackRock Income Trust, Inc. (BKT)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Income Trust, Inc., 55 East 52^nd Street, New York, NY 10055

 

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

 

Date of fiscal year end: 08/31/2015

 

Date of reporting period: 05/31/2015

 

Item 1 –

Schedule of Investments

Schedule of Investments May 31, 2015 (Unaudited)	BlackRock Income Trust, Inc. (BKT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)
	(Percentages shown are based on Net Assets)

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)

Notes to Schedule of Investments
(a)	Variable rate security. Rate shown is as of report date.
(b)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(c)	Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(d)	Zero-coupon bond.
(e)	Amount is less than $500.
(f)	All or a portion of security has been pledged as collateral in connection with outstanding reverse repurchase agreements.
(g)	Represents or includes a TBA transaction. As of May 31, 2015, Unsettled TBA transactions were as follows:

 

		Counterparty			Value		Unrealized Appreciation(Depreciation)
		Credit Suisse Securities (USA) LLC		$	(1,241,160)	$	12,520
		Deutsche Bank Securities, Inc.		$	(13,276,451)	$	(330)
		Goldman Sachs & Co.		$	36,508,600	$	93,373
		J.P. Morgan Securities LLC		$	(209,524)	$	38

 

(h)	During the period ended May 31, 2015, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

	Affiliate		Shares Held at August 31, 2014		Net Activity		Shares Held at May 31, 2015		Income
	BlackRock Liquidity Funds, TempFund, Institutional Class		8,012,499		13,188,428		21,200,927	$	3,360

 

(i)	Represents the current yield as of report date.

 

Portfolio Abbreviations
CMO	Collateralized Mortgage Obligation
LIBOR	London Interbank Offered Rate
TBA	To Be Announced

 

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)

•	As of May 31, 2015, reverse repurchase agreements outstanding were as follows:
Counterparty		Interest Rate	Trade Date	Maturity Date 1		Face Value		Face Value Including Accrued Interest
BNP Paribas Securities Corp.		0.09%	7/07/14	Open	$	2,831,575	$	2,833,897
Credit Suisse Securities (USA) LLC		0.21%	4/20/15	Open		15,009,000		15,012,589
HSBC Securities (USA) Inc.		0.25%	5/12/15	6/11/15		168,934,000		168,956,290
Total					$	186,774,575	$	186,802,776

 

1	Certain agreements have no stated maturity and can be terminated by either party at any time.

 

 

•	As of May 31, 2015, financial futures contracts outstanding were as follows:

 

Contracts Long/ (Short)	Issue	Exchange		Expiration	Notional Value			Unrealized Appreciation (Depreciation)
(12)	90-Day Euro-Dollar	Chicago Mercantile	June 2015		$	2,991,225	$	(9,548)
(165)	10-Year U.S. Treasury Note	Chicago Board of Trade	September 2015		$	21,068,437		(96,983)
(593)	Long U.S. Treasury Bond	Chicago Board of Trade	September 2015		$	92,285,625		(1,048,466)
141	Ultra Long U.S. Treasury Bond	Chicago Board of Trade	September 2015		$	22,599,656		204,361
(294)	2-Year U.S. Treasury Note	Chicago Board of Trade	September 2015		$	64,344,657		(78,739)
(219)	5-Year U.S. Treasury Note	Chicago Board of Trade	September 2015		$	26,220,117		(95,008)
(12)	90-Day Euro-Dollar	Chicago Mercantile	December 2015		$	2,983,050		(7,973)
(12)	90-Day Euro-Dollar	Chicago Mercantile	March 2016		$	2,977,650		(6,548)
Total							$	(1,138,904)

 

•	As of May 31, 2015, centrally cleared interest rate swaps outstanding were as follows:

Fixed Rate	Floating Rate	Clearinghouse	Expiration Date			Notional Amount (000)		Unrealized Appreciation
0.46% 2	3-month LIBOR	Chicago Mercantile	6/11/15	$		100	$	3

2	Trust pays the floating rate and receives the fixed rate.

 

•	As of May 31, 2015, OTC interest rate swaps outstanding were as follows:

Fixed Rate		Floating Rate		Counterparty		Expiration Date			Notional Amount (000)		Value		Premiums Received			Unrealized Appreciation (Depreciation)
2.81% 3		3-month LIBOR		Citibank N.A.		2/06/16		$	20,000	$	328,805		—		$	328,805
3.43% 3		3-month LIBOR		JPMorgan Chase Bank N.A.		3/28/21		$	6,000		563,318	$	(163,160)			726,478
5.41% 3		3-month LIBOR		JPMorgan Chase Bank N.A.		8/15/22		$	9,565		2,276,727		—			2,276,727
5.72% 3		3-month LIBOR		JPMorgan Chase Bank N.A.		7/14/16		$	5,400		312,424		—			312,424
4.87% 3		3-month LIBOR		Goldman Sachs Bank USA		1/25/16		$	5,500		159,498		—			159,498
4.31% 4		3-month LIBOR		Deutsche Bank AG		10/01/18		$	60,000		(6,034,342)		—			(6,034,342)
Total										$	(2,393,570)	$	(163,160)		$	(2,230,410)

 

3	Trust pays the floating rate and receives the fixed rate.
4	Trust pays the fixed rate and receives the floating rate.

 

•

For Trust compliance purposes, the Trust’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)

•	Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:
	•	Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Trust has the ability to access
	•	Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
	•	Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust's own assumptions used in determining the fair value of investments and derivative financial instruments)
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust's policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Trust's policy regarding valuation of investments and derivative financial instruments, refer to the Trust's most recent financial statements as contained in its semi-annual report. As of May 31, 2015, the following tables summarize the Trust's investments and derivative financial instruments categorized in the disclosure hierarchy:

 

			Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
	Asset-Backed Securities			—		$		2,455,134		$		550,100		$	3,005,234
	Non-Agency Mortgage-Backed Securities			—				7,562,530				2,226,724			9,789,254
	U.S. Government Sponsored Agency Securities			—				653,587,013				4,238,900			657,825,913
	U.S. Treasury Obligations			—				10,817,750				—			10,817,750
Short-Term Securities:
	Borrowed Bond Agreement			—				972,020				—			972,020
	Money Market Fund	$		21,200,927				—				—			21,200,927
Liabilities:
Investments:
	Borrowed Bonds			—				(894,935)				—			(894,935)
	TBA Sale Commitments			—				(35,738,229)				—			(35,738,229)
Total		$		21,200,927		$		638,761,283		$		7,015,724		$	666,977,934

 

 

 

 

Schedule of Investments (continued)	BlackRock Income Trust, Inc. (BKT)

		Level 1			Level 2				Level 3				Total
Derivative Financial Instruments 1
Assets:
Interest rate contracts	$		204,361	$		3,803,935				—		$	4,008,296
Liabilities:
Interest rate contracts			(1,343,265)			(6,034,342)				—			(7,377,607)
Total	$		(1,138,904)	$		(2,230,407)				—		$	(3,369,311)

 

1	Derivative financial instruments are swaps and financial futures contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount or face amount, including accrued interest, for financial reporting purposes. As of May 31, 2015, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

		Level 1				Level 2				Level 3				Total
Assets:
Cash		$	1,380				—				—			$	1,380
Cash pledged for financial futures contracts			2,238,500				—				—				2,238,500
Cash pledged as collateral on borrowed bond agreements			203,000				—				—				203,000
Cash pledged as collateral on OTC derivatives			6,500,000												6,500,000
Liabilities:
Cash received as collateral for OTC derivatives			—			$	(4,540,000	)			—				(4,540,000	)
Reverse repurchase agreements			—				(186,802,776	)			—				(186,802,776	)
Total		$	8,942,880			$	(191,342,776	)			—			$	(182,399,896	)

 

During the period ended May 31, 2015, there were no transfers between Level 1 and Level 2.

 

Schedule of Investments (concluded)	BlackRock Income Trust, Inc. (BKT)

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

		Asset-Backed Securities		Non-Agency Mortgage-Backed Securities		U.S. Government Sponsored Agency Securities		Total
	Assets:
	Opening Balance, as of August 31, 2014	$	626,872	$	2,708,549	$	3,612,672	$	6,948,093
	Transfers into Level 3	—		—		—		—
	Transfers out of Level 3	—		—		—		—
	Accrued discounts/premiums	(104,916)		—		(8,580)		(113,496)
	Net realized gain (loss)	(187,054)		15		(12,353)		(199,392)
	Net change in unrealized appreciation (depreciation)1	215,198		(481,824)		24,640		(241,986)
	Purchases	—		—		12,030,119		12,030,119
	Sales	—		(16)		(11,407,598)		(11,407,614)
	Closing Balance, as of May 31, 2015.	$	550,100	$	2,226,724	$	4,238,900	$	7,015,724
	Net change in unrealized appreciation (depreciation) on investments still held at May 31, 20151	$	215,198	$	(481,824)	$	24,640	$	(241,986)

 

1	Included in the related net change in unrealized appreciation (depreciation).
2	Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at May 31, 2015 is generally due to investments no longer held or categorized as level 3 at period end.
Certain of the Trust's investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information inputs could result in a significantly lower or higher value of such Level 3 investments.

 

Item 2 –

Controls and Procedures

2(a) –

The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the ″1940 Act″)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

2(b) –

There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3 –

Exhibits

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 Income Trust, Inc.

By:

/s/ John M. Perlowski

John M. Perlowski

Chief Executive Officer (principal executive officer) of

BlackRock Income Trust, Inc.

Date: July 23, 2015

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/ John M. Perlowski

John M. Perlowski

Chief Executive Officer (principal executive officer) of

BlackRock Income Trust, Inc.

Date: July 23, 2015

By:

/s/ Neal J. Andrews

Neal J. Andrews

Chief Financial Officer (principal financial officer) of

BlackRock Income Trust, Inc.

Date: July 23, 2015