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: 11/30/2014

 

Item 1 – Schedule of Investments

Schedule of Investments November 30, 2014 (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)	Represents or includes a TBA transaction. Unsettled TBA transactions as of November 30, 2014 were as follows:

		Counterparty											Value		Unrealized Appreciation/Depreciation
		Bank Of America Securities LLC										$	(3,769,750)	$	(11,156)
		Credit Suisse Securities (USA) LLC										$	(5,162,697)	$	3,693
		Deutsche Bank Securities, Inc.										$	7,562,578	$	55,156
		JPMorgan Securities Inc.										$	30,290,411	$	159,551
		Goldman Sachs & Co.										$	2,928,884	$	13,200
		Morgan Stanley & Co. Inc.										$	3,281	$	(188)

(g)	Represents the current yield as of report date.
(h)	Investments in issuers considered to be an affiliate of the Trust during the period ended November 30, 2014, 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 November 30, 2014		Income
	BlackRock Liquidity Funds, TempFund, Institutional Class						8,012,499							6,126,912				14,139,411	$	1,124

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

•

Reverse repurchase agreements outstanding as of November 30, 2014 were as follows:

 

Counterparty		Interest Rate	Trade Date	Maturity Date		Face Value		Face Value Including Accrued Interest
Citibank N.A.		0.22%	11/12/14	1/14/15	$	101,807,000	$	101,818,199
CS First Boston		0.22%	11/12/14	1/14/15		78,925,000		78,933,682
BNP Paribas S.A.		0.09%	7/7/14	Open		2,831,575		2,832,608
CS First Boston		0.12%	9/7/14	Open		16,380,000		16,384,095
Total					$	199,943,575	$	199,968,584

 

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

•	Financial futures contracts outstanding as of November 30, 2014 were as follows:

 

Contracts Purchased/ Sold	Issue	Exchange			Expiration		Notional Value					Unrealized Appreciation (Depreciation)
(839)	Long U.S. Treasury Bond	Chicago Board of Trade			March 2015		$	119,662,375			$	(1,523,355)
(165)	10-Year U.S. Treasury Note	Chicago Board of Trade			March 2015		$	20,962,734				(186,961)
(144)	2-Year U.S. treasury Note	Chicago Board of Trade			March 2015		$	31,556,250				(41,344)
(41)	90-Day Euro-Dollar	Chicago Mercantile			December 2014		$	10,225,656				(49,989)
(41)	90-Day Euro-Dollar	Chicago Mercantile			March 2015		$	10,223,863				(54,009)
(12)	90-Day Euro-Dollar	Chicago Mercantile			June 2015		$	2,989,200				(7,523)
(12)	90-Day Euro-Dollar	Chicago Mercantile			December 2015		$	2,977,500				(2,423)
(12)	90-Day Euro-Dollar	Chicago Mercantile			March 2016		$	2,970,750				352
37	Ultra Long U.S. Treasury Bond	Chicago Board of Trade			March 2015		$	5,950,063				43,895
93	5-Year U.S. Treasury Note	Chicago Board of Trade			March 2015		$	11,112,773				48,463
Total											$	(1,772,894)

•

Centrally cleared interest rate swaps outstanding as of November 30, 2014 were as follows:

 

Fixed Rate

Floating Rate

Counterparty

Expiration Date

Notional Amount (000)

Unrealized Appreciation

0.46%

3-month LIBOR

Chicago Mercantile

6/11/15

$

100

$

111

•	OTC interest rate swaps outstanding as of November 30, 2014 were as follows:

		Fixed Rate				Floating Rate				Counterparty			Expiration Date					Notional Amount (000)			Market Value			Premiums Received								Unrealized Appreciation (Depreciation)
	4.88%			3-month LIBOR						UBS AG			3/21/15				$		25,000	$	351,111					—			$				351,111
	4.87%			3-month LIBOR						Goldman Sachs Bank USA			1/25/16				$		5,500		280,700					—							280,700
	2.81%			3-month LIBOR						Citibank N.A.			2/06/16				$		20,000		567,168					—							567,168
	5.72%			3-month LIBOR						JPMorgan Chase Bank N.A.			7/14/16				$		5,400		447,864					—							447,864
	4.31%			3-month LIBOR						Deutsche Bank AG			10/01/18				$		60,000		(6,705,877)					—							(6,705,877)
	3.43%			3-month LIBOR						JPMorgan Chase Bank N.A.			3/28/21				$		6,000		535,430					$	(177,101)						712,531
	5.41%			3-month LIBOR						JPMorgan Chase Bank N.A.			8/15/22				$		9,565		2,249,131					—							2,249,131
	Total																			$	(2,274,473)					$	(177,101)		$				(2,097,372)

 

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

•	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.
•	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 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, please refer to the Trust’s most recent financial statements as contained in its annual report.   The following tables summarize the Trust's investments and derivative financial instruments categorized in the disclosure hierarchy as of November 30, 2014:

 

			Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
	Asset-Backed Securities			—		$		3,162,016		$		451,406		$	3,613,422
	Non-Agency Mortgage-Backed Securities			—				8,111,196				2,584,756			10,695,952
	U.S. Government Sponsored Agency Securities			—				675,469,853				3,476,880			678,946,733
	U.S. Treasury Obligations			—				9,747,427				—			9,747,427
Short-Term Securities:
	Borrowed Bond Agreement			—				837,000				—			837,000
	Short-Term Investment Fund	$		14,139,411				—				—			14,139,411
Liabilities:
Investments:
	Investments Sold Short			—				(887,269)				—			(887,269)
	TBA Sale Commitments			—				(23,807,292)				—			(23,807,292)
Total		$		14,139,411		$		672,632,931		$		6,513,042		$	693,285,384

 

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

 

		Level 1				Level 2				Level 3				Total
Derivative Financial Instruments 1
Assets:
Interest rate contracts	$		92,710		$		4,608,616				—		$	4,701,326
Liabilities:
Interest rate contracts			(1,865,604)				(6,705,877)				—			(8,571,481)
Total	$		(1,772,894)		$		(2,097,261)				—		$	(3,870,155)

 

1	Derivative financial instruments are 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 for financial reporting purposes. As of November 30, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

			Level 1				Level 2					Level 3				Total
Assets:
	Cash	$		165,999				—					—		$	165,999
	Cash pledged for Financial futures contracts			1,898,000				—					—			1,898,000
	Cash pledged as collateral for centrally cleared swaps			10,000				—					—			10,000
	Cash pledged as collateral for TBA commitments			56,000				—					—			56,000
	Cash pledged as collateral for over-the-counter swaps			7,000,000				—					—			7,000,000
Liabilities:
	Cash recieved as collateral for TBA commitments			—		$		695,390					—			695,390
	Cash recieved as collateral for over-the-counter swaps			—				5,260,000					—			5,260,000
	Reverse repurchase agreement			—				(199,968,584)					—			(199,968,584)
Total		$		9,129,999		$		(194,013,194)					—		$	(184,883,195)

 

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	(614,667)		—		(3,114)		(617,781)
	Net realized gain (loss)	—		7		(3,204)		(3,197)
	Net change in unrealized appreciation/depreciation1,2	439,201		(123,792)		(17,623)		297,786
	Purchases	—		—		—		—
	Sales	—		(7)		(111,851)		(111,858)
	Closing Balance, as of November 30, 2014	$	451,406	$	2,584,757	$	3,476,880	$	6,513,043
	Net change in unrealized appreciation/depreciation on investments held as of November 30, 20142	$	439,201	$	(123,792)	$	(17,623)	$	297,786

 

1	Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.
2	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of November 30, 2014 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: January 22, 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: January 22, 2015

 

	By:	/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		BlackRock Income Trust, Inc.

 

Date: January 22, 2015