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 52nd Street, New York, NY 10055
Registrant’s telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 08/31/2016
Date of reporting period: 05/31/2016
Item 1 – Schedule of Investments
| Schedule of Investments May 31, 2016 (Unaudited) |
BlackRock Income Trust, Inc. (BKT) (Percentages shown are based on Net Assets) |
| BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 | 1 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| 2 | BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 | 3 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| 4 | BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| Notes to Schedule of Investments |
| (a) | Variable rate security. Rate as of period end. |
| (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) | Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end. |
| (d) | Amount is less than $500. |
| (e) | Zero-coupon bond. |
| (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 period end, unsettled TBA transactions were as follows: |
| Counterparty | Value |
Unrealized (Depreciation) |
||||||
| Barclays Bank PLC |
$ | 4,266 | $ | 1,523 | ||||
| Credit Suisse Securities (USA) LLC |
$ | 3,483,511 | $ | (13,717 | ) | |||
| Goldman Sachs & Co. |
$ | 7,284,282 | $ | 31,692 | ||||
| JPMorgan Securities, Inc. |
$ | (25,077,186 | ) | $ | (5,342 | ) | ||
| (h) | Current yield as of period end. |
| (i) | During the period ended May 31, 2016, investments in issuers considered to be affiliates 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, 2015 |
Net Activity |
Shares Held at May 31, 2016 |
Value at May 31, |
Income | |||||||||||||||
| BlackRock Liquidity Funds, TempFund, Institutional Class |
24,634,500 | (7,934,838 | ) | $ | 16,699,662 | $ | 16,699,662 | $ | 27,034 | |||||||||||
| (j) | The amount to be repurchased assumes the maturity will be the day after period end. |
| (k) | Certain agreements have no stated maturity and can be terminated by either party at any time. |
| Portfolio Abbreviations |
| CMO | Collateralized Mortgage Obligation | |
| FNMA | Federal National Mortgage Association | |
| ISDA | International Swaps and Derivatives Association, Inc. | |
| LIBOR | London Interbank Offered Rate | |
| USD | U.S. Dollar |
Reverse Repurchase Agreements
| Counterparty | Interest Rate |
Trade Date |
Maturity Date |
Face Value | Face Value Including Accrued Interest |
Type of Underlying Collateral |
Remaining Contractual Maturity of the Agreements | |||||||||||||||||
| Credit Suisse Securities (USA) LLC |
0.51 | % | 3/15/16 | Open | $ | 12,505,774 | $ | 12,519,416 | U.S. Government Sponsored Agency Securities | Up to 30 Days | ||||||||||||||
| Bank of Montreal |
0.49 | % | 5/11/16 | 6/13/16 | 4,875,000 | 4,876,327 | U.S. Government Sponsored Agency Securities | Up to 30 Days | ||||||||||||||||
| HSBC Securities (USA), Inc. |
0.53 | % | 5/11/16 | 6/13/16 | 119,972,000 | 120,007,325 | U.S. Government Sponsored Agency Securities | Up to 30 Days | ||||||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith, Inc. |
0.51 | % | 5/11/16 | 6/13/16 | 13,568,000 | 13,571,845 | U.S. Government Sponsored Agency Securities | Up to 30 Days | ||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total |
$ | 150,920,774 | $ | 150,974,913 | ||||||||||||||||||||
|
|
|
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| BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 | 5 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| Derivative Financial Instruments Outstanding as of Period End |
Futures Contracts
| Contracts Long (Short) |
Issue | Expiration | Notional Value |
Unrealized (Depreciation) |
||||||||||
| 135 | 2-Year U.S. Treasury Note | September 2016 | $ | 29,417,344 | $ | 15,735 | ||||||||
| (106 | ) | 5-Year U.S. Treasury Note | September 2016 | $ | 12,732,422 | (11,271 | ) | |||||||
| (215 | ) | 10-Year U.S. Treasury Note | September 2016 | $ | 27,882,812 | (32,131 | ) | |||||||
| (110 | ) | 10-Year U.S. Ultra Long Treasury Note | September 2016 | $ | 15,511,719 | (46,699 | ) | |||||||
| (766 | ) | Long U.S. Treasury Bond | September 2016 | $ | 125,097,375 | (656,966 | ) | |||||||
| 288 | Ultra Long U.S. Treasury Bond | September 2016 | $ | 50,436,000 | 184,604 | |||||||||
|
|
Total |
|
$ | (546,728 | ) | |||||||||
|
|
|
|||||||||||||
OTC Interest Rate Swaps
| Fixed Rate |
Floating Rate |
Counterparty | Expiration Date |
Notional Amount (000) |
Value | Premiums Paid (Received) |
Unrealized (Depreciation) |
|||||||||||||||||
| 5.72%1 | 3-Month LIBOR | JPMorgan Chase Bank N.A. | 7/14/16 | $ | 5,400 | $ | 32,781 | — | $ | 32,781 | ||||||||||||||
| 4.31%2 | 3-Month LIBOR | Deutsche Bank AG | 10/01/18 | $ | 60,000 | (4,483,952 | ) | — | (4,483,952 | ) | ||||||||||||||
| 3.43%1 | 3-Month LIBOR | JPMorgan Chase Bank N.A. | 3/28/21 | $ | 6,000 | 596,755 | $ | (135,542 | ) | 732,297 | ||||||||||||||
| 5.41%1 | 3-Month LIBOR | JPMorgan Chase Bank N.A. | 8/15/22 | $ | 9,565 | 2,289,561 | — | 2,289,561 | ||||||||||||||||
| Total | $ | (1,564,855 | ) | $ | (135,542 | ) | $ | (1,429,313 | ) | |||||||||||||||
|
|
|
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| 1 Trust pays a floating rate and receives the fixed rate. |
||||||||||||
| 2 Trust pays a fixed rate and receives the floating rate. |
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| Fair Value Hierarchy as of Period End |
Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:
| • | Level 1 — unadjusted price quotations 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) |
| 6 | BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 |
| Schedule of Investments (continued) |
BlackRock Income Trust, Inc. (BKT) |
| • | 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) |
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 significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments are typically categorized as level 3.
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. 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.
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 |
— | $ | 1,740,828 | $ | 491,852 | $ | 2,232,680 | |||||||||
| Non-Agency Mortgage-Backed Securities |
— | 5,840,773 | 1,862,081 | 7,702,854 | ||||||||||||
| U.S. Government Sponsored Agency Securities |
— | 603,927,849 | 2,706,002 | 606,633,851 | ||||||||||||
| U.S. Treasury Obligations |
— | 24,249,906 | — | 24,249,906 | ||||||||||||
| Short-Term Securities |
||||||||||||||||
| Money Market Funds |
$ | 16,699,662 | — | — | 16,699,662 | |||||||||||
| Borrowed Bond Agreement |
— | 935,340 | — | 935,340 | ||||||||||||
| Liabilities: |
||||||||||||||||
| Investments: | ||||||||||||||||
| Borrowed Bonds |
— | (946,015 | ) | — | (946,015 | ) | ||||||||||
| TBA Sale Commitments |
— | (54,886,755 | ) | — | (54,886,755 | ) | ||||||||||
|
|
|
|||||||||||||||
| Total |
$ | 16,699,662 | $ | 580,861,926 | $ | 5,059,935 | $ | 602,621,523 | ||||||||
|
|
|
|||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments 1 | ||||||||||||||||
| Assets: |
||||||||||||||||
| Interest rate contracts |
$ | 200,339 | $ | 3,054,639 | — | $ | 3,254,978 | |||||||||
| Liabilities: |
||||||||||||||||
| Interest rate contracts |
(747,067 | ) | (4,483,952 | ) | — | (5,231,019 | ) | |||||||||
|
|
|
|||||||||||||||
| Total |
$ | (546,728 | ) | $ | (1,429,313 | ) | — | $ | (1,976,041 | ) | ||||||
|
|
|
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| 1 Derivative financial instruments are swaps and futures contracts. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
| |||||||||||||||
| BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 | 7 |
| Schedule of Investments (concluded) |
BlackRock Income Trust, Inc. (BKT) |
The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Assets: |
||||||||||||||
| Cash pledged for futures contracts |
$ | 2,400,260 | — | — | $ | 2,400,260 | ||||||||
| Collateral - OTC derivatives |
5,040,000 | — | — | 5,040,000 | ||||||||||
| Collateral - Repurchase agreements |
349,769 | — | — | 349,769 | ||||||||||
| Liabilities: |
||||||||||||||
| Bank overdraft |
— | $ | (15 | ) | — | (15 | ) | |||||||
| Collateral - OTC derivatives |
— | (3,330,000 | ) | — | (3,330,000 | ) | ||||||||
| Reverse repurchase agreements |
— | (150,974,913 | ) | — | (150,974,913 | ) | ||||||||
|
|
|
|||||||||||||
| Total |
$ | 7,790,029 | $ | (154,304,928 | ) | — | $ | (146,514,899 | ) | |||||
|
|
|
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During the period ended May 31, 2016, there were no transfers between Level 1 and Level 2
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, 2015 |
$ | 522,965 | $ | 2,114,419 | $ | 3,072,791 | $ | 5,710,175 | ||||||||
| Transfers into Level 3 |
— | — | — | — | ||||||||||||
| Transfers out of Level 3 |
— | — | — | — | ||||||||||||
| Accrued discounts/premiums |
(102,877 | ) | — | (8,796 | ) | (111,673 | ) | |||||||||
| Net realized gain (loss) |
(138,594 | ) | 5 | (8,165 | ) | (146,754 | ) | |||||||||
| Net change in unrealized appreciation/depreciation1 |
210,358 | (252,340 | ) | (12,236 | ) | (54,218 | ) | |||||||||
| Purchases |
— | — | — | — | ||||||||||||
| Sales |
— | (5 | ) | (337,589 | ) | (337,594 | ) | |||||||||
| Closing Balance, as of May 31, 2016 |
$ | 491,852 | $ | 1,862,079 | $ | 2,706,005 | $ | 5,059,936 | ||||||||
|
|
|
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| Net change in unrealized appreciation/depreciation on investments held as of May 31, 20161 |
$ | 210,358 | $ | (252,324 | ) | $ | (11,509 | ) | $ | (53,475 | ) | |||||
|
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|
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| 1 | Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments held as of May 31, 2016 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.
| 8 | BLACKROCK INCOME TRUST, INC. | MAY 31, 2016 |
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 22, 2016 | ||||
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 22, 2016 | ||||
| By: | /s/ Neal J. Andrews |
|||
| Neal J. Andrews | ||||
| Chief Financial Officer (principal financial officer) of | ||||
| BlackRock Income Trust, Inc. | ||||
| Date: July 22, 2016 | ||||