--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
SEMI-ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
May 31, 2002
Dear Shareholder:
With an economy looking to find secure footing, volatility was widespread
through the overall marketplace for the semi-annual period. After the events of
September 11th, investors flocked to the bond market in search of stability.
However, at the onset of the period, returns in the fixed income markets were
depressed as strong consumer and military spending indicated the potential for
an economic recovery. Fluctuations continued into 2002 as bonds posted strong
returns during the first two months of the new year. In the closing days of
March, fixed income securities reversed their positive trend only to once again
rally during April. For the six months ended April 30, 2002, the LEHMAN BROTHERS
AGGREGATE INDEX, a broad measure of the taxable bond market, finished relatively
flat at -0.01%.*
Much of the activity in the market can be attributed to the actions of the
Federal Reserve Board (the "Fed"). After eleven rate reductions in 2001, the Fed
ended its accommodative monetary policy in the first quarter to assess the
impact of 4.75% of monetary stimulus on the economy. While this was an
acknowledgement that the country is in the early stages of economic recovery, it
also signaled that rates might rise on the belief that a comeback in inflation
poses the same risk as further economic weakness. In March, fixed income markets
suffered following the Fed's decision to leave rates unchanged, which led the
investment community to anticipate an economy in the early stages of recovery.
Looking broadly at the fixed income market, mortgage-backed securities
provided strong returns as fears of rising interest rates reduced the volume of
prepayments as the speed of mortgage refinancings decreased. Corporate bonds
experienced mixed returns over the period as concerns surrounding corporate
earnings and accounting practices increased the event risk within that sector
and impeded returns. In the wake of Enron's collapse, many companies have now
begun to reduce their debt and increase their credit quality. Longer-term U.S.
Government bond prices (which move in the opposite direction from yields) lagged
during the period with more promising economic data emerging throughout the
period. However, towards the latter part of the period, we believed Treasuries
were attractively priced and that rates should fall, barring a robust economic
recovery.
Closing out the period, despite rising unemployment numbers in April, U.S.
manufacturing, measured by the ISM (Institute for Supply Management) Index,
remained at expansionary levels while retail sales continued to grow. Inflation
levels remained relatively benign and low inventory levels should continue to
support the manufacturing data. However, we are skeptical about the continued
strength of consumer demand, which is essential to a sustained economic
recovery.
The fluctuations seen in the bond market over the last six months
reemphasize the need for investors to develop a strategy that best suits their
overall goals and risk tolerance. Working with a financial advisor is one of the
best means of doing this, and we encourage you to consult one when making an
investment.
The semi-annual report includes a summary of market conditions over the
period, a review of the strategy employed by your Trust's portfolio managers,
the Trust's unaudited financial statements and a listing of the portfolio's
holdings. We encourage you to read the report and we thank you for making
BlackRock part of your investment program.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
-------------------- ------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President
----------
* The Lehman Brothers Aggregate Index is used to measure the performance of
the U.S. investment grade fixed rate bond market. The Index is unmanaged
and cannot be purchased directly.
1
May 31, 2002
Dear Shareholder:
We are pleased to present the unaudited semi-annual report for The
BlackRock Income Trust Inc. (the "Trust") for the six months ended April 30,
2002. We would like to take this opportunity to review the Trust's stock price
and net asset value (NAV) performance, summarize market developments and discuss
recent portfolio management activity.
The Trust is a diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "BKT". The
Trust's investment objective is to provide high current income consistent with
the preservation of capital. The Trust seeks this objective by investing
primarily in mortgage-backed securities backed by U.S. Government agencies (such
as Fannie Mae, Freddie Mac or Ginnie Mae) and, to a lesser extent, U.S.
Government securities, asset-backed securities and privately issued
mortgage-backed securities. At least 85% of the Trust's assets must be issued or
guaranteed by the U.S. Government or its agencies or rated "AAA" by Standard &
Poor's or "Aaa" Moody's (up to 5% can be unrated and deemed by the Adviser to be
of equivalent credit quality); the remaining 15% of the Trust's assets must be
rated at least "AA" by Standard & Poor's or "Aa" by Moody's at time of purchase.
The table below summarizes the changes in the Trust's stock price and NAV:
--------------------------------------------------
4/30/02 10/31/01 CHANGE HIGH LOW
--------------------------------------------------------------------------------
STOCK PRICE $7.77 $7.26 7.02% $7.77 $7.20
--------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $8.19 $8.06 1.61% $8.19 $7.91
10-YEAR TREASURY NOTE 5.09% 4.23% 20.33% 5.43% 4.18%
--------------------------------------------------------------------------------
THE FIXED INCOME MARKETS
Economic performance was mixed during the semi-annual period although
increasingly positive economic data surfaced as time progressed. The U.S.
economy showed signs of a rebound on the heels of strong consumer and military
spending, which helped to overcome the devastation of September 11th. The Fed
also provided further monetary stimulus by cutting interest rates two additional
times prior to year-end, leaving the federal funds rate at 1.75%. This was in
addition to nine previous interest rate reductions by the Fed during 2001. The
Consumer Confidence Index initially reached its lowest level in eight years
during November, but marked a steady climb during the remainder of the period as
investors readily anticipated an economic recovery. The economy continued to see
increasingly optimistic data emerge throughout the first quarter of 2002. Gross
Domestic Product (GDP) during the first quarter rose 5.6%, the fastest rate in
two years, and the manufacturing sector saw substantial gains as the Purchasing
Managers Index indicated expansion for the first time in 19 months. Although
productivity increased 8.6% during the first quarter, unemployment in April
reached 6.0%. However, the unexpectedly high unemployment number is believed to
be a result of recent legislation prompting many to apply for extended benefits.
After surprising growth in the first quarter of 2002, the fixed income markets
came under pressure following the March 19th announcement by the Federal Open
Market Committee (FOMC) to leave rates steady, citing a bias shift from
"potential weakness" to "neutral." The equity markets did not significantly
benefit from the emergence of the strong growth indicators as they were
challenged by several high profile bankruptcies. Closing out the period, April
saw the largest advancement in retail sales in six months and inflationary
pressures remain relatively in check. However, concerns regarding the corporate
environment and violence in the Middle East and Asia have left many investors
apprehensive about the markets. Going forward, although low inventory levels
should continue to provide support for manufacturing data, concerns exist
surrounding the long-term strength of the highly leveraged consumer.
Following a steepening of the yield curve throughout the majority of 2001,
yields over the period trended higher causing the curve to flatten. Signs of a
recovering economy caused yields to rise in sympathy with expectations of a
higher Fed funds rate by year-end. The 5-to10-year portion of the yield curve
came under the most pressure, rising 93 and 86 basis points, respectively,
during the period. Yields on 2-and30-year maturities also suffered during the
period rising 80 and 72 basis points, respectively. After struggling following
the FOMC's announcement of a bias shift in March, Treasuries bounced back in
April. April's performance was driven by economic pessimism, which surfaced as
enthusiasm for a rapid economic recovery waned amidst tensions in the Middle
East, cautious corporate earnings announcements and government reports of a
slower growth pattern.
2
Looking ahead, a budget surplus of only $78 billion and a 30% decline in
tax revenues for 2001 has caused Treasury finances to deteriorate sharply and
should result in larger auction sizes. However, the allowable debt limit set by
Congress will soon be reached, possibly leading the Treasury to pursue
additional methods of financing. As of April 30, 2002, the 10-year Treasury was
yielding 5.09% versus 4.23% on October 31, 2001.
For the period, the LEHMAN BROTHERS MORTGAGE INDEX returned 1.57% versus
-0.01% for the LEHMAN BROTHERS AGGREGATE INDEX. Mortgages saw poor performance
during the first two months of the period as prepayments increased dramatically
and the volume of refinancing reached record levels. The first quarter of 2002
fared much better for mortgage-backed securities, which benefited from reduced
volatility and increased demand. During the first three months of 2002,
refinancing activity, as measured by the MBAA (Mortgage Bankers Association of
America) Refinance Index, declined 78% from the all-time high it reached in
November, helping mortgages to outperform Treasuries by 1.14% on a duration
adjusted basis. Although lower coupon mortgages outperformed during November and
December, decreased volatility in 2002 allowed higher coupons to outperform
lower coupon issues year-to-date. Prepayments are expected to remain elevated
for several months as over 25% of the mortgage coupons outstanding have an
incentive to refinance. Despite increasing discussions of reform initiatives
that could potentially affect FNMA and FHLMC, there has been little impact on
their performance.
THE TRUST'S PORTFOLIO AND INVESTMENT STRATEGY
BlackRock actively manages the Trust's portfolio holdings consistent with
BlackRock's overall market outlook and the Trust's investment objectives. The
Trust is managed to maintain an interest rate sensitivity (or duration)
resembling that of the Salomon Brothers Mortgage Index; this means that the
portfolio's NAV will change similarly to the price of the Index given a change
in interest rates.
Additionally, the Trust employs leverage to enhance its income by borrowing
at short-term municipal rates and investing the proceeds in longer maturity
issues that have higher yields. The degree to which the Trust can benefit from
its use of leverage may affect its ability to pay high monthly income.
The Trust benefited from enhanced interest income and price appreciation
due to strong performance by mortgages over the period. As mortgage refinancing
spiked to record levels over the final two months of 2001, the Trust was
positioned to minimize prepayment and extension risk with a core position in
seasoned mortgage-backed securities, lower coupon mortgages and 15-year
pass-throughs. The Trust's bias towards 15-years benefited performance as
15-years led 30-years for the semi-annual period. Also, the Trust selectively
added Treasuries towards the latter part of the period on the belief that
Treasuries had become more attractively priced.
The following chart shows the Trust's asset composition:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
--------------------------------------------------------------------------------
COMPOSITION APRIL 30, 2002 OCTOBER 31, 2001
--------------------------------------------------------------------------------
U.S. Government and Agency Securities 28% 17%
--------------------------------------------------------------------------------
Inverse Floating Rate Mortgages 19% 31%
--------------------------------------------------------------------------------
Mortgage Pass-Throughs 15% 6%
--------------------------------------------------------------------------------
Interest Only Mortgage-Backed Securities 13% 17%
--------------------------------------------------------------------------------
Principal Only Mortgage-Backed Securities 10% 12%
--------------------------------------------------------------------------------
FHA Project Loans 6% 7%
--------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 4% 5%
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 3% 3%
--------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage Pass-Throughs 2% 2%
--------------------------------------------------------------------------------
3
We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. We thank you for
your investment and continued interest in The BlackRock Income Trust, Inc.
Please feel free to call our marketing center at (800) 227-7BFM (7236) if you
have any specific questions which were not addressed in this report.
Sincerely,
/s/ Robert S. Kapito /s/ Keith T. Anderson /s/ Michael P. Lustig
Robert S. Kapito Keith T. Anderson Michael P. Lustig
Vice Chairman and Managing Director and Managing Director and
Portfolio Manager Chief Investment Officer-- Portfolio Manager
Fixed Income
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BKT
--------------------------------------------------------------------------------
Initial Offering Date: July 22, 1988
--------------------------------------------------------------------------------
Closing Stock Price as of 4/30/02: $7.77
--------------------------------------------------------------------------------
Net Asset Value as of 4/30/02: $8.19
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 4/30/02 ($7.77)(1): 7.24%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share(2): $0.046875
--------------------------------------------------------------------------------
Current Annualized Distribution per Share(2): $0.562500
--------------------------------------------------------------------------------
(1) Yield on Closing Stock Price is calculated by dividing the current
annualized distribution per share by the closing stock price per share.
(2) Distribution is not constant and is subject to change.
PRIVACY PRINCIPLES OF THE TRUST
The Trust is committed to maintaining the privacy of shareholders and to
safeguarding its non-public personal information. The following information is
provided to help you understand what personal information the Trust collects,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trust does not receive any non-public personal information
relating to its shareholders, although certain nonpublic personal information of
its shareholders may become available to the Trust. The Trust does not disclose
any non-public personal information about its shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trust restricts access to non-public personal information about the
shareholders to BlackRock employees with a legitimate business need for the
information. The Trust maintains physical, electronic and procedural safeguards
designed to protect the non-public personal information of its shareholders.
4
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THE BLACKROCK INCOME TRUST INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--115.0%
MORTGAGE PASS-THROUGHS--17.1%
Federal Home Loan Mortgage Corp.,
$ 515 6.50%, 5/01/29 - 5/01/30 ................ $ 522,268
1,470 7.50%, 7/01/07 - 2/01/23 ................ 1,541,213
371 8.00%, 11/01/15 ......................... 391,256
389 8.50%, 10/01/06 - 3/01/08,
15 Year ............................... 415,995
847 9.00%, 9/01/20 .......................... 924,177
Federal National Mortgage Association,
2,202 5.50%, 12/01/13 - 2/01/14,
15 Year ................................ 2,204,526
6,014 6.50%, 2/01/26 - 6/01/29 ................ 6,098,335
58,850 7.00%, 6/01/26 - 2/01/32 ................ 60,726,619
5,385 7.50%, 11/01/14,
18 Year Multifamily ..................... 5,655,597
57 7.50%, 2/01/22 - 9/01/23 ................ 59,584
1,776 8.00%, 5/01/08 - 5/01/22,
Multifamily ........................... 1,877,130
655 9.497%, 6/01/24, Multifamily ............ 700,165
17 9.50%, 1/01/19 - 6/01/20 ................ 18,295
Government National Mortgage
Association,
374 7.00%, 10/15/17 ......................... 386,267
3,341 7.50%, 8/15/21 - 12/15/23 ............... 3,502,964
2,587 8.00%, 10/15/22 - 2/15/29 ............... 2,752,879
205 9.00%, 6/15/18 - 9/15/21 ................ 219,672
-----------
87,996,942
-----------
FEDERAL HOUSING
ADMINISTRATION--7.2%
2,950 Beachtree, Series 87430,
10.25%, 6/01/32 ......................... 2,957,800
GMAC,
5,230 Series 33, 7.43%, 9/01/21 ............... 5,158,444
1,987 Series 46, 7.43%, 3/01/22 ............... 1,984,949
816 Series 48, 7.43%, 8/01/21 ............... 802,765
-----------
1,140 Series 51, 7.43%, 2/01/23 ............... 1,125,264
-----------
3,669 Series 56, 7.43%, 11/01/22 .............. 3,619,665
804 Merrill,
Series 54, 7.43%, 2/01/23 ............... 793,256
951 Reilly,
Series 41, 8.767%, 12/01/18 ............. 920,719
2,790 Tuttle Grove, 7.25%, 10/01/35 ............. 2,898,231
USGI,
3,991 Polaris, Series 982, 7.43%,
11/01/21 .............................. 3,936,718
775 Series 87, 7.43%, 12/01/22 .............. 772,823
2,923 Series 99, 7.43%, 10/01/23 .............. 2,945,378
2,540 Series 6302, 7.43%, 12/01/21 ............ 2,521,980
6,465 Yorkville, Series 6094, 7.43%,
6/01/21 ............................... 6,376,596
-----------
36,814,588
-----------
AGENCY MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--4.9%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
$ 12,186 Series T-11, Class A-9,
1/25/28 ............................... 9,912,220
1,186 Series 19, Class 19-F,
3/15/20 ............................... 1,274,448
2,506 Series 1104, Class 1104-L,
6/15/21 ............................... 2,687,933
495 Series 1347, Class 1347-HC,
12/15/21 .............................. 495,413
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
849 Trust 1988-16, Class 16-B,
6/25/18 ............................... 906,789
1,372 Trust 1990-12, Class 12-G,
2/25/20 ............................... 1,343,444
2,075 Trust 1992-43, Class 43-E,
4/25/22 ............................... 2,167,453
6,797 Trust 1996-14, Class 14-M,
10/25/21 .............................. 6,627,173
-----------
25,414,873
-----------
NON-AGENCY MULTIPLE CLASS
MORTGAGE PASS-THROUGHS--1.8%
AAA 6,982 Credit Suisse First Boston
Mortgage Certificates,
Series 2000-1, Class 2A,
3/15/15 ................................. 7,103,792
AAA 1,880 Summit Mortgage Trust,
Series 2000-1, Class B1,**
12/28/12 ................................ 1,903,147
-----------
9,006,939
-----------
ADJUSTABLE RATE MORTGAGE
SECURITIES--0.6%
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
696 Trust 1991-38, Class 38-F,
4/25/21 ............................... 780,728
778 Trust 1993-248, Class 248-FB,
9/25/23 ............................... 757,141
1,621 Trust 1993-256, Class 256-F,
11/25/23 .............................. 1,394,367
-----------
2,932,236
-----------
See Notes to Financial Statements.
5
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
INVERSE FLOATING RATE
MORTGAGES--21.9%
Countrywide Funding Corp.,
Mortgage Certificates,
AAA $ 7,735 Series 1993-D, Class A-15,
1/25/09 ............................... $ 8,005,913
AAA 3,394 Series 1993-10, Class A-8,
1/25/24 ............................... 3,574,844
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
247 Series 1160, Class 1160-F,
10/15/21 .............................. 304,068
1,882 Series 1526, Class 1526-SA,
6/15/23 ............................... 1,573,296
1,918 Series 1570, Class 1570-SA, 8/15/23 ..... 1,978,928
1,526 Series 1580, Class 1580-SD,
9/15/08 ............................... 1,578,123
10,236 Series 1584, Class 1584-FB,
9/15/23 ............................... 10,115,861
443 Series 1590, Class 1590-OA,
10/15/23 .............................. 447,946
2,169 Series 1601, Class 1601-SE,
10/15/08 .............................. 2,311,927
1,457@ Series 1616, Class 1616-SB,
11/15/08 .............................. 1,504,513
5,000@ Series 1649, Class 1649-S,
12/15/08 .............................. 5,160,938
417 Series 1666, Class 1666-S,
1/15/24 ............................... 404,150
2,250 Series 1688, Class 1688-S,
12/15/13 .............................. 2,269,688
5,778 Series 1699, Class 1699-ST,
3/15/24 ............................... 4,311,649
1,460 Series 2111, Class 2111-SX,
1/15/29 ............................... 1,306,700
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
80 Trust G93-27, Class 27-SB,
8/25/23 ............................... 89,086
705 Trust 1991-38, Class 38-SA,
4/25/21 ............................... 757,600
686 Trust 1991-87, Class 87-S,
8/25/21 ............................... 822,375
433 Trust 1991-145, Class 145-S,
10/25/06 .............................. 540,731
5,000 Trust 1993-79, Class 79-SE,
1/25/22 ............................... 4,918,750
1,959 Trust 1993-93, Class 93-S,
5/25/08 ............................... 2,076,976
39 Trust 1993-97, Class 97-SB,
5/25/23 ............................... 29,872
2,070 Trust 1993-113, Class 113-SB,
7/25/23 ............................... 2,119,294
268 Trust 1993-116, Class 116-SB,
7/25/23 ............................... 289,847
$ 374 Trust 1993-129, Class 129-SE,
8/25/08 ............................... 385,732
2,064 Trust 1993-147, Class 147-S,
8/25/23 ............................... 2,179,674
88 Trust 1993-167, Class 167-SA,
9/25/23 ............................... 89,179
2,148 Trust 1993-170, Class 170-SC,
9/25/08 ............................... 2,188,964
3,500 Trust 1993-179, Class 179-SB,
10/25/23 .............................. 4,099,375
4,000 Trust 1993-196, Class 196-SC,
10/25/08 .............................. 4,030,000
641 Trust 1993-201, Class 201-SA,
10/25/23 .............................. 516,930
4,493 Trust 1993-214, Class 214-S,
12/25/08 .............................. 4,718,972
1,494 Trust 1993-214, Class 214-SH,
12/25/08 .............................. 1,562,393
1,598 Trust 1993-224, Class 224-SD,
11/25/23 .............................. 1,567,923
2,966 Trust 1993-224, Class 224-SE,
11/25/23 .............................. 3,010,666
2,562 Trust 1993-247, Class 247-SN,
12/25/23 .............................. 2,774,815
801 Trust 1994-19, Class 19-SB,
1/25/24 ............................... 720,755
11 Trust 1994-27, Class 27-SE,
3/25/23 ............................... 11,403
1,029 Trust 1999-1, Class 1-S,
7/25/23 ............................... 1,029,271
395 Trust 2000-40, Class 40-FC,
6/25/29 ............................... 310,194
4,965 Trust 2001-11B, Class 11B-SB,
4/18/29 ............................... 4,955,166
G. E. Capital Mortgage Services, Inc.,
AAA 8,598 REMIC Certificate 94-7,
Class A-17, 2/25/09 ..................... 8,409,847
AAA 716 REMIC Certificate 98-12,
Class 4A-3, 7/25/28 ..................... 634,010
Aaa 2,519 Kidder Peabody Acceptance Corp.,
Series 1993-1, Class A-6,
8/25/23 ............................... 2,514,878
Prudential Home Mortgage
Securities Co.,
Mortgage Pass-Through Certificates,
Aaa 743 Series 1993-43, Class A-16,
10/25/23 .............................. 759,615
Aaa 8,929 Series 1993-50, Class A-12,
11/25/23 .............................. 7,343,805
Aaa 1,000 Series 1993-54, Class A-28,
1/25/24 ............................... 945,000
AAA 1,569 Residential Funding Mortgage
Securities Inc.,
Series 1993-S36, Class A-13,
10/25/08 .............................. 1,603,360
-----------
112,855,002
-----------
See Notes to Financial Statements.
6
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--14.9%
$ 638 American Housing Trust III,
Senior Mortgage Pass-Through
Certificates,
Series 1, Class 4, (REMIC),
3/25/19 ............................... $ 80,992
144 American Housing Trust VII,
Senior Mortgage Pass-Through
Certificates,
Series A, Class 2,
11/25/20 .............................. 460,000
BA Mortgage Securities, Inc.,
835 Series 1997-1, Class X,
7/25/26 ............................... 135,221
944 Series 1998-1, Class 2X,
5/28/13 ............................... 136,202
113,211 Commercial Mortgage Acceptance Corp.,
Series 1997-ML1, Class IO,
12/15/30 .............................. 4,369,223
40,244 Credit Suisse First Boston Mortgage
Securities Corp.,
Series 1997-C1, Class C1-AX,**
6/20/29 ............................... 2,608,418
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
19,523 Series G-13, Class 13-PP,
5/25/21 ............................... 1,749,620
64,167 Series G-60, Class 60-HS,
4/25/24 ............................... 2,536,598
18,836 Series 204, Class 204-IO,
5/01/29 ............................... 4,706,304
3 Series 1238, Class 1238-J,
1/15/07 ............................... 19,962
6,697 Series 1353, Class 1353-S,
8/15/07 ............................... 577,573
91 Series 1388, Class 1388-I,
6/15/07 ............................... 990,082
134 Series 1494, Class 1494-PL,
3/15/22 ............................... 735,465
603 Series 1632, Class 1632-S,
4/15/23 ............................... 12,444
3,650 Series 1706, Class 1706-IA,
10/15/23 .............................. 521,319
687 Series 1720, Class 1720-PK,
1/15/24 ............................... 116,156
39,204 Series 1809, Class 1809-SC,
12/15/23 .............................. 3,663,168
967 Series 1882, Class 1882-PJ,
4/15/22 ............................... 22,694
33,828 Series 1914, Class 1914-PC,
12/15/11 .............................. 556,137
1,863 Series 1917, Class 1917-AS,
5/15/08 ............................... 250,773
15,106 Series 2002, Class 2002-HJ,
10/15/08 .............................. 1,073,594
$ 3,860 Series 2037, Class 2037-IB,
12/15/26 .............................. 406,543
3,687 Series 2039, Class 2039-PI,
2/15/12 ............................... 329,491
7,685 Series 2050, Class 2050-PI,
12/15/11 .............................. 708,409
6,199 Series 2063, Class 2063-PI,
4/15/12 ............................... 635,386
18,000 Series 2080, Class 2080-PL,
1/15/27 ............................... 3,352,500
32 Series 2099, Class 2099-JB,
9/15/22 ............................... 894,400
1,534 Series 2102, Class 2102-KI,
9/15/28 ............................... 107,371
6,816 Series 2103, Class 2103-PI,
5/15/12 ............................... 640,089
12,768 Series 2289, Class 2289-S,
2/15/31 ............................... 1,220,987
12,543 Series 2296, Class 2296-IO,
8/15/27 ............................... 681,947
16,208 Series 2296, Class 2296-SA,
3/15/16 ............................... 952,191
8,592 Series 2315, Class 2315-CF,
7/15/20 ............................... 926,341
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
4 Trust G-50, Class 50-G,
12/25/21 .............................. 92,676
1,186 Trust G92-5, Class 5-H,
1/25/22 ............................... 281,712
3 Trust G92-12, Class 12-C,
2/25/22 ............................... 84,242
4,216 Trust G92-60, Class 60-SB,
10/25/22 .............................. 134,493
7,061 Trust 301, Class 301-2,
4/01/29 ............................... 1,646,023
19,011 Trust 302, Class 302-2,
6/01/29 ............................... 4,867,802
3,003 Trust 1993-46, Class 46-S,
5/25/22 ............................... 264,507
6,307 Trust 1993-199, Class 199-SB,
10/25/23 .............................. 441,492
4,797 Trust 1993-201, Class 201-JC,
5/25/19 ............................... 132,116
778 Trust 1993-202, Class 202-QA,
6/25/19 ............................... 15,811
18,603 Trust 1994-33, Class 33-SG,
3/25/09 ............................... 1,415,607
12,371 Trust 1996-68, Class 68-SC,
1/25/24 ............................... 1,366,596
21,487 Trust 1997-37, Class 37-SE,
10/25/22 .............................. 406,342
5,654 Trust 1997-50, Class 50-SI,
4/25/23 ............................... 137,822
35,476 Trust 1997-65, Class 65-SB,
3/25/24 ............................... 1,920,964
27,000 Trust 1997-65, Class 65-SG,
6/25/23 ............................... 2,053,080
See Notes to Financial Statements.
7
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--(CONT'D)
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
(cont'd)
$ 11,139 Trust 1997-76, Class 76-SP,
12/25/23 ................................. $ 1,564,681
51,000 Trust 1997-90, Class 90-M,
1/25/28 .................................. 12,819,870
1,043 Trust 1998-12, Class 12-PL,
7/18/19 .................................. 3,350
3,726 Trust 1998-25, Class 25-PG,
3/18/22 .................................. 125,115
4,446 Trust 1999-56B, Class 56B-SB,
10/25/29 ................................. 377,720
4,657 Trust 1999-W4, Class W4-IO,
12/25/28 ................................. 1,066,770
34,525 Trust 2000-2, Class 2-ID,
3/25/23 .................................. 215,780
5,352 Trust 2002-19, Class 19-PI,
8/25/12 .................................. 615,490
364 First Boston Mortgage Securities Corp.,
Series 1987-C, Class C-IO,
4/25/17 .................................. 85,513
40,241 GMAC Commercial Mortgage
Securities, Inc.,
Trust 1997-C1, Class C1-X,
7/15/29 .................................. 2,548,608
38,759 Goldman Sachs Mortgage
Securities Corp., Mortgage
Participation Certificates,
Series 1998-5, Class 5-IO,**
6/19/27 .................................. 799,397
4,016 Government National Mortgage
Association, REMIC Pass-Through
Certificates,
Trust 2001-7, Class 7-PS,
1/20/28 .................................. 695,218
24,382 Hanover Grantor Trust,
Series 1999-A, Class A1-IO,**
8/28/27 .................................. 300,960
18,638 Headlands Mortgage Securities, Inc.,
Mortgage Certificates,
Series 1997-1, Class 1-X1,
3/25/27 .................................. 104,836
414 Kidder Peabody Acceptance Corp.,
Series B, Class B-A2,
4/22/18 .................................. 86,565
10,852 Merrill Lynch Mortgage Investors, Inc.,
Mortgage Pass-Through Certificates,
Series 95-C2, Class C2-IO,
6/15/21 .................................. 250,952
15,469 Morgan Stanley Capital 1, Inc.,
Series 1997-HF1, Class HF1-X,**
7/15/29 .................................. 814,012
$ 65,560 Prudential Home Mortgage Securities Co.,
Mortgage Pass-Through Certificates,
Series 1994-5, Class 5-A9,
2/25/24 .................................. 204,876
1 Prudential Securities, Inc.,
Trust 15, Class 15-IG,
5/20/21 .................................. 70,628
5,274 Residential Funding Mortgage
Securities Inc., Series 2001-S5,
Class A-9,
3/25/31 .................................. 105,304
41,044 Small Business Administration,
Series 2000-1, Class 1-I0,
4/01/15 .................................. 1,128,712
6 Structured Asset Securities Corp.,
Series 1991-2, Class 2-GA,
12/20/21 ................................. 57,507
361,330 Vendee Mortgage Trust,
Trust 1999-2, Class 1-IO,
5/15/29 .................................. 733,951
8,596 Wells Fargo Mortgage Backed
Securities Trust,
Series 2001-15, Class 2-A9,
7/25/31 .................................. 505,015
-----------
76,719,715
-----------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--11.0%
Aaa 498 Chase Mortgage Finance Corp.,
Mortgage Pass-Through
Certificates,
Series 1994-A, Class AP,
1/25/10 .................................. 417,764
AAA 324 Collateralized Mortgage Obligation Trust,
Trust 29, Class A,
5/23/17 .................................. 278,707
Drexel Burnham Lambert, Inc.,
AAA 122 Trust K, Class K-1,
9/23/17 .................................. 98,099
AAA 1,293 Trust V, Class V-1,
9/01/18 .................................. 1,157,049
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
172 Series G-50, Class 50-AM,
4/25/24 .................................. 171,957
1,466 Series T-8, Class A-10,
11/15/28 ................................. 869,899
642 Series 1418, Class 1418-M,
11/15/22 ................................. 443,348
3,077 Series 1571, Class 1571-G,
8/15/23 .................................. 1,880,109
9,521 Series 1686, Class 1686-B,
2/15/24 .................................. 6,891,171
265 Series 1691, Class 1691-G,
3/15/24 .................................. 263,391
1,559 Series 1739, Class 1739-B,
2/15/24 .................................. 1,375,857
See Notes to Financial Statements.
8
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--(CONT'D)
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates, (cont'd)
$ 781 Series 1750, Class 1750-PC,
3/15/24 .................................. $ 756,367
925 Series 1857, Class 1857-PB,
12/15/08 ................................. 887,431
2,034 Series 1896, Class 1896-PA,
11/15/23 ................................. 1,735,232
4,471 Series 2009, Class 2009-HJ,
10/15/22 ................................. 3,951,635
8,019 Series 2082, Class 2082-PN,
1/15/24 .................................. 5,152,483
139 Series 2087, Class 2087-PO,
9/15/25 .................................. 130,962
1,027 Series 2162, Class 2162-L,
6/15/29 .................................. 626,296
771 Series 2169, Class 2169-EA,
6/15/29 .................................. 703,152
486 Series 2298, Class 2298-PO,
3/15/31 .................................. 425,610
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,428 Trust G93-2, Class 2-KB,
1/25/23 .................................. 931,911
1,394 Trust 225, Class 225-1,
6/01/23 .................................. 1,231,292
3,220 Trust 273, Class 273-1,
7/01/26 .................................. 2,671,524
1,162 Trust 279, Class 279-1,
7/01/26 .................................. 1,015,404
244 Trust 1991-7, Class 7-J,
2/25/21 .................................. 204,262
552 Trust 1996-5, Class 5-NH,
4/25/24 .................................. 421,903
428 Trust 1996-5, Class 5-PV,
11/25/23 ................................. 419,428
14,300@ Trust 1996-14, Class 14-PE,
8/25/23 .................................. 7,570,063
563 Trust 1996-38, Class 38-E,
8/25/23 .................................. 551,599
8,458 Trust 1998-26, Class 26-L,
3/25/23 .................................. 7,230,784
883 Trust 1998-48, Class 48-P,
8/18/28 .................................. 803,869
1,918 Trust 1999-W4, Class W4-PO,
2/25/29 .................................. 1,327,736
AAA 938 First Union Residential, Mortgage
Certificates,
Series 1999-A, Class A-1APO,
3/25/15 .................................. 775,936
AAA 13,000 Fund America Investors Corp.,
Series 1993-C, Class B,
4/29/30 .................................. 2,303,652
$ 358 Government National Mortgage
Association, REMIC Pass-Through
Certificates,
Trust 1999-40, Class 40-N,
6/20/27 .................................. 348,227
AAA 308 Housing Securities, Inc.,
Series 1993-D, Class D-8,
6/25/23 .................................. 254,020
AAA 273 Structured Mortgage Asset Trust,
Series 1993-3C, Class CX,
4/25/24 .................................. 214,679
-----------
56,492,808
-----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--3.2%
AAA 6,000 Merrill Lynch Mortgage Investors, Inc.,
Series 1996-C1, Class A-3,
7.42%, 4/25/28 ........................... 6,146,250
AAA 10,250 NYC Mortgage Loan Trust,
Series 1996, Class A-2,**
6.75%, 6/25/11 ........................... 10,531,875
-----------
16,678,125
-----------
U.S. GOVERNMENT AND AGENCY
SECURITIES--32.3%
Overseas Private Investment Corp.,
8,806 5.46% - 7.35%, 5/29/12 ..................... 9,093,177
Small Business Administration,
3,553 Series 1996-20E-1,
7.60%, 5/01/16 ........................... 3,755,424
4,170 Series 1996-20F-1,
7.55%, 6/01/16 ........................... 4,399,673
2,630 Series 1996-20G-1,
7.70%, 7/01/16 ........................... 2,798,377
3,386 Series 1996-20H-1,
7.25%, 8/01/16 ........................... 3,534,826
5,182 Series 1996-20K-1,
6.95%, 11/01/16 .......................... 5,371,812
2,098 Series 1997-20C-1,
7.15%, 3/01/17 ........................... 2,193,800
2,357 Series 1998-P10A-1,
6.12%, 2/01/08 ........................... 2,376,964
United States Treasury Bonds,
176,000@ Zero Coupon, 2/15/19 ....................... 64,847,200
50,000@ 8.00%, 11/15/21 ............................ 63,320,500
5,000@ United States Treasury Notes,
3.50%, 11/15/06 ............................ 4,814,050
-----------
166,505,803
-----------
COLLATERALIZED MORTGAGE
OBLIGATION RESIDUALS***--0.1%
AAA 45 FBC Mortgage Securities Trust 16,
CMO, Series A-1, 7/01/17 ................... 349,300
-----------
Total long-term investments
(cost $578,361,677) ........................ 591,766,331
-----------
See Notes to Financial Statements.
9
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
RATING* (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--3.3%
DISCOUNT NOTE--3.0%
$ 15,200 Federal Home Loan Bank,
1.79%, 5/01/02
(cost $15,200,000) ..................... $ 15,200,000
------------
CONTRACTS
---------
OUTSTANDING CALL OPTIONS
PURCHASED--0.3%
765 United States Treasury Bond
30 Year Future,
expires 8/24/02 @ $102
(cost $1,150,369) ...................... 1,530,000
------------
Total short-term investments
(cost $16,350,369) ..................... 16,730,000
------------
Total investments before outstanding
options written--118.3%
(cost $594,712,046) .................... 608,496,331
------------
NOTIONAL
AMOUNT
(000)
--------
OUTSTANDING OPTIONS
WRITTEN--(0.7)%
CALL OPTIONS--(0.5)%
Interest Rate Swaps,
$ 80,300 6.07%, over 3 month LIBOR,
expires 8/23/02 ...................... (1,568,018)
32,000 5.46%, over 3 month LIBOR,
expires 10/15/02 ..................... (379,034)
26,000 5.65%, over 3 month LIBOR,
expires 12/03/04 ..................... (503,807)
------------
(2,450,859)
------------
PUT OPTIONS--(0.2)%
Interest Rate Swaps,
$ 99,000 3.98%, over 3 month LIBOR,
expires 6/05/02 ...................... (153,658)
21,000 6.45%, over 3 month LIBOR,
expires 7/29/02 ...................... (65,858)
32,000 6.76%, over 3 month LIBOR,
expires 10/15/02 ..................... (143,744)
26,000 6.65%, over 3 month LIBOR,
expires 12/03/04 ..................... (607,222)
------------
(970,482)
------------
Total outstanding options written
(premium received $3,959,589) .......... (3,421,341)
------------
Total investments, net of outstanding
options written--117.6% ................ 605,074,990
Other liabilities in excess of other
assets--(17.6)% ........................ (90,534,697)
------------
NET ASSETS--100% ......................... $514,540,293
============
----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers. As of April 30, 2002, the
Trust held 3.3% of its net assets in securities restricted as to resale.
*** Illiquid security representing 0.07% of net assets.
@ Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
--------------------------------------------------------------------------------
KEY TO ABBREVIATIONS:
CMO -- Collateralized Mortgage Obligation.
REMIC -- Real Estate Mortgage Investment Conduit.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $594,712,046) (Note 1) ........... $608,496,331
Cash ......................................................... 164,097
Interest receivable .......................................... 8,359,991
Unrealized appreciation on interest rate swaps
(Notes 1 & 3) .............................................. 1,256,832
Receivable for investments sold .............................. 306,370
Due from broker-variation margin (Notes 1 & 3) ............... 277,051
Interest rate caps, at value
(amortized cost $725,846) (Notes 1 & 3) .................... 250
Other assets ................................................. 81,034
------------
618,941,956
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ....................... 97,893,750
Outstanding options written, at value
(premium received $3,959,589) (Notes 1 & 3) ................ 3,421,341
Interest rate floor, at value
(proceeds $954,000) (Notes 1 & 3) .......................... 2,219,392
Investment advisory fee payable (Note 2) ..................... 270,529
Interest payable ............................................. 269,052
Administration fee payable (Note 2) .......................... 82,776
Deferred directors fees (Note 1) ............................. 56,001
Other accrued expenses ....................................... 188,822
------------
104,401,663
------------
NET ASSETS ................................................... $514,540,293
============
Net assets were comprised of:
Common stock, at par (Note 5) .............................. $ 628,499
Paid-in capital in excess of par ........................... 560,052,202
------------
560,680,701
Undistributed net investment income ........................ 27,729,151
Accumulated net realized loss .............................. (88,446,826)
Net unrealized appreciation ................................ 14,577,267
------------
Net assets, April 30, 2002 ................................... $514,540,293
============
NET ASSET VALUE PER SHARE:
(514,540,293 / 62,849,878 shares of
common stock issued and outstanding) ....................... $8.19
=====
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned (including discount/premium
accretion/amortization of $2,227,829 and net
of interest expense of $2,892,004) ......................... $ 38,937,315
------------
Operating expenses
Investment advisory ........................................ 1,628,863
Administration ............................................. 499,864
Reports to shareholders .................................... 80,000
Transfer agent ............................................. 69,000
Custodian .................................................. 67,000
Independent accountants .................................... 50,000
Directors .................................................. 37,000
Registration ............................................... 24,000
Legal ...................................................... 22,000
Miscellaneous .............................................. 84,777
------------
Total operating expenses ................................. 2,562,504
------------
Net investment income ........................................ 36,374,811
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on:
Investments ................................................ 17,070,792
Interest rate swaps ........................................ 3,527,528
Short sales ................................................ 3,284,174
Futures .................................................... 2,365,755
Options written ............................................ 427,153
------------
26,675,402
------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................ (40,212,478)
Interest rate floor ........................................ 1,248,597
Futures .................................................... 988,890
Interest rate caps ......................................... 761,018
Options written ............................................ 538,248
Interest rate swaps ........................................ (922,692)
------------
(37,598,417)
------------
Net loss on investments ...................................... (10,923,015)
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................................. $ 25,451,796
============
See Notes to Financial Statements.
11
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)
--------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets resulting from
operations ................................................... $ 25,451,796
------------
Decrease in investments ........................................ 2,396,581
Net realized gain .............................................. (26,675,402)
Decrease in unrealized appreciation ............................ 37,598,417
Decrease in interest rate caps ................................. 2,085
Decrease in interest rate floor ................................ (1,427,472)
Decrease in interest receivable ................................ 430,430
Decrease in due from broker-variation margin ................... 76,511
Decrease in other assets ....................................... 3,174
Increase in receivable for investments sold .................... (101,118)
Increase in options written .................................... 3,421,341
Decrease in interest rate swaps ................................ 875,683
Increase in interest payable ................................... 191,667
Decrease in due to broker--collateral on
interest rate swaps .......................................... (3,929,000)
Decrease in other accrued expenses and
liabilities .................................................. (49,270)
------------
Total adjustments ............................................ 12,813,627
------------
Net cash flows provided by operating activities................. $ 38,265,423
============
INCREASE (DECREASE) IN CASH
Net cash flows provided by operating activities................. $38,265,423
Cash flows used for
financing activities:
Decrease in reverse repurchase agreements..................... (20,740,500)
Cash dividends paid........................................... (17,675,951)
------------
Net cash flows used for financing activities.................... (38,416,451)
------------
Net decrease in cash.......................................... (151,028)
Cash at beginning of period................................... 315,125
------------
Cash at end of period......................................... $ 164,097
============
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
STATEMENTS OF CHANGES
IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2002 2001
---------- ----------
INCREASE (DECREASE)
IN NET ASSETS
Operations:
Net investment income ................ $ 36,374,811 $ 34,923,300
Net realized gain (loss) ............. 26,675,402 (16,446,601)
Net change in unrealized
appreciation (depreciation) .......... (37,598,417) 69,129,322
------------ ------------
Net increase in
net assets resulting from
operations ............................. 25,451,796 87,606,021
Dividends from net
investment income .................... (17,675,951) (35,351,946)
------------ ------------
Total increase ....................... 7,775,845 52,254,075
NET ASSETS
Beginning of period .................... 506,764,448 454,510,373
------------ ------------
END OF PERIOD (INCLUDING UNDIS-
tributed net investment
income of $27,729,151 and
$9,030,291, respectively) ............ $514,540,293 $506,764,448
============ ============
See Notes to Financial Statements.
12
------------------------------------------------------------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 8.06 $ 7.23 $ 7.31 $ 7.94 $ 8.12 $ 7.61
-------- -------- -------- -------- -------- --------
Net investment income (net of interest
expense of $0.05, $0.11, $0.12, $0.16,
$0.19 and $0.18, respectively) .................. .58 .56 .50 .73 .62 .58
Net realized and unrealized gain (loss) ........... (.17) .83 (.02) (.80) (.24) .49
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment operations .. .41 1.39 .48 (.07) .38 1.07
-------- -------- -------- -------- -------- --------
Dividends from net investment income ................ (.28) (.56) (.56) (.56) (.56) (.56)
-------- -------- -------- -------- -------- --------
Net asset value, end of period* ..................... $ 8.19 $ 8.06 $ 7.23 $ 7.31 $ 7.94 $ 8.12
======== ======== ======== ======== ======== ========
Market value, end of period* ........................ $ 7.77 $ 7.26 $ 6.38 $ 6.13 $ 6.94 $ 6.88
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ ............................ 11.04% 23.23% 14.01% (4.04)% 9.29% 19.68%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Operating expenses .................................. 1.02%+++ 1.03% 1.05% 1.01% 1.01% 1.02%
Operating expenses and interest expense ............. 2.18%+++ 2.54% 2.78% 3.03% 3.33% 3.44%
Net investment income ............................... 14.52%+++ 7.43% 7.11% 9.54% 7.74% 7.63%
SUPPLEMENTAL DATA:
Average net assets (000) ............................ $505,342 $470,185 $448,027 $482,685 $506,858 $474,903
Portfolio turnover .................................. 23% 32% 114% 144% 214% 220%
Net assets, end of period (000) ..................... $514,540 $506,764 $454,510 $459,399 $499,075 $510,230
Reverse repurchase agreements outstanding,
end of period (000) ............................... $ 97,894 $118,634 $ 64,460 $186,451 $198,336 $228,530
Asset coverage++ .................................... $ 6,256 $ 5,272 $ 8,095 $ 3,478 $ 3,520 $ 3,233
----------
* Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
+ Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of the period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Past performance
is no guarantee of future results. Total investment return for the period of
less than one full year is not annualized.
++ Per $1,000 of reverse repurchase agreement outstanding.
+++ Annualized.
The information above represents the unaudited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for the periods indicated. This
information has been determined based upon financial information provided in the
financial statements and market value data for the Trust's shares.
See Notes to Financial Statements.
13
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
The BlackRock Income Trust Inc. (the "Trust"), a Maryland corporation, is a
diversified closed-end management in-vestment company. The investment objective
of the Trust is to achieve high monthly income consistent with preservation of
capital. The ability of issuers of debt securities held by the Trust to meet
their obligations may be affected by economic developments in a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.
The following is a summary of significant accounting policies followed by the
Trust.
SECURITIES VALUATION: The Trust values mortgage-backed, asset-backed and other
debt securities, interest rate swaps, caps, floors and non-exchange traded
options on the basis of current market quotations provided by dealers or pricing
services approved by the Trust's Board of Directors. In determining the value of
a particular security, pricing services may use certain information with respect
to transactions in such securities, quotations from dealers, market transactions
in comparable securities, various relationships observed in the market between
securities, and calculated yield measures based on valuation technology commonly
employed in the market for such securities. Exchange-traded options are valued
at their last sales price as of the close of options trading on the applicable
exchanges. In the absence of a last sale, options are valued at the average of
the quoted bid and asked prices as of the close of business. A futures contract
is valued at the last sale price as of the close of the commodities exchange on
which it trades. Short-term securities may be valued at amortized cost. Any
securities or other assets for which such current market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the general supervision and responsibility
of the Trust's Board of Directors.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements,
the Trust's custodian takes possession of the underlying collateral securities,
the value of which at least equals the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Trust may be delayed or limited.
OPTION SELLING/PURCHASING: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.
Options, when used by the Trust, help in maintaining a targeted duration.
Duration is a measure of the price sensitivity of a security or a portfolio to
relative changes in interest rates. For instance, a duration of "one" means that
a portfolio's or a security's price would be expected to change by approximately
one percent with a one percent change in interest rates, while a duration of
five would imply that the price would move approximately five percent in
relation to a one percent change in interest rates.
Option selling and purchasing is used by the Trust to effectively "hedge"
positions, or collections of positions, so that changes in interest rates do not
change the duration of the portfolio unexpectedly. In general, the Trust uses
options to hedge a long or short position or an overall portfolio that is longer
or shorter than the benchmark security. A call option gives the purchaser of the
option the right (but not obligation) to buy, and obligates the seller to sell
(when the option is exercised), the underlying position at the exercise price at
any time or at a specified time during the option period. A put option gives the
holder the right to sell and obligates the writer to buy the underlying position
at the exercise price at any time or at a specified time during the option
period. Put options can be purchased to effectively hedge a position or a
portfolio against price declines if a portfolio is long. In the same sense, call
options can be purchased to hedge a portfolio that is shorter than its benchmark
against price changes. The Trust can also sell (or write) covered call options
and put options to hedge portfolio positions.
The main risk that is associated with purchasing options is that the option
expires without being exercised. In this case, the option expires worthless and
the premium paid for the option is considered the loss. The risk associated with
writing call options is that the Trust may forego the opportunity for a profit
14
if the market value of the underlying position increases and the option is
exercised. The risk in writing put options is that the Trust may incur a loss if
the market value of the underlying position decreases and the option is
exercised. In addition, as with futures contracts, the Trust risks not being
able to enter into a closing transaction for the written option as the result of
an illiquid market.
INTEREST RATE SWAPS: In a simple interest rate swap, one investor pays a
floating rate of interest on a notional principal amount and receives a fixed
rate of interest on the same notional principal amount for a specified period of
time. Alternatively, an investor may pay a fixed rate and receive a floating
rate. Interest rate swaps are efficient as asset/liability management tools. In
more complex swaps, the notional principal amount may decline (or amortize) over
time.
During the term of the swap, changes in the value of the swap are recognized
as unrealized gains or losses by "marking-to-market" to reflect the market value
of the swap. When the swap is terminated, the Trust will record a realized gain
or loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Trust's basis in the contract, if any.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the swap. However, the Trust closely monitors swaps and does not
anticipate non-performance by any counterparty.
SWAP OPTIONS: Swap options are similar to options on securities except that
instead of selling or purchasing the right to buy or sell a security, the writer
or purchaser of the swap option is granting or buying the right to enter into a
previously agreed upon interest rate swap agreement at any time before the
expiration of the option. Premiums received or paid from writing or purchasing
options are recorded as liabilities or assets and are subsequently adjusted to
the current market value of the option written or purchased. Premiums received
or paid from writing or purchasing options which expires unexercised are treated
by the Trust on the expiration date as realized gains or losses. The difference
between the premium and the amount paid or received on effecting a closing
purchase or sale transaction, including brokerage commission, is also treated as
a realized gain or loss. If an option is exercised, the premium paid or received
is added to the proceeds from the sale or cost of the purchase in determining
whether the Trust has realized a gain or loss on investment transactions.
The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option.
Swap options may be used by the Trust to manage the duration of the Trust's
portfolio in a manner similar to more generic options described above.
INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate over a specified fixed or floating rate.
Interest rate caps are intended to both manage the duration of the Trust's
portfolio and its exposure to changes in short term rates. Owning interest rate
caps reduces the portfolio's duration, making it less sensitive to changes in
interest rates from a market value perspective. The effect on income involves
protection from rising short term rates, which the Trust experiences primarily
in the form of leverage.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trust does not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate cap. The asset or liability is subsequently adjusted
to the current market value of the interest rate cap purchased or sold. Changes
in the value of the interest rate cap are recognized as unrealized gains and
losses.
INTEREST RATE FLOORS: Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate under a specified fixed or floating rate.
Interest rate floors are used by the Trust to both manage the duration of the
portfolio and its exposure to changes in short-term interest rates. Selling
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The Trust's
leverage provides extra income in a period of falling rates. Selling floors
reduces some of that advantage by partially monetizing it as an up front payment
which the Trust receives.
The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trust does not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate floor. The asset or liability is subsequently adjusted
to the current market value of the interest rate floor purchased or sold.
Changes
15
in the value of the interest rate floor are recognized as unrealized gains and
losses.
FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Futures contracts can be sold to effectively shorten an
otherwise longer duration portfolio. In the same sense, futures contracts can be
purchased to lengthen a portfolio that is shorter than its duration target.
Thus, by buying or selling futures contracts, the Trust can effectively "hedge"
positions so that changes in interest rates do not change the duration of the
portfolio unexpectedly.
The Trust may invest in financial futures contracts primarily for the purpose
of hedging its existing portfolio securities or securities the Trust intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets. The Trust is also at the risk of not being able to
enter into a closing transaction for the futures contract because of an illiquid
secondary market. In addition, since futures are used to shorten or lengthen a
portfolio's duration, there is a risk that the portfolio may have temporarily
performed better without the hedge or that the Trust may lose the opportunity to
realize appreciation in the market price of the underlying positions.
SHORT SALES: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as to
dollar amount, will be recognized upon the termination of a short sale if the
market price is greater or less than the proceeds originally received.
SECURITIES LENDING: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trust receives compensation
for lending its securities in the form of interest on the loan. The Trust also
continues to receive interest on the securities loaned, and any gain or loss in
the market price of the securities loaned that may occur during the term of the
loan will be for the account of the Trust.
SECURITIES TRANSACTIONS AND NET INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis, and the Trust accretes discount and amortizes premium on
securities purchased using the interest method.
SEGREGATION: In cases in which the Investment Company Act of 1940, as amended
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that the Trust segregate assets in connection with certain Trust
investments (e.g., when issued securities, reverse repurchase agreements or
futures contracts), the Trust will, consistent with certain interpretive letters
issued by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
FEDERAL INCOME TAXES: It is the Trust's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient amounts of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS: The Trust declares and pays dividends and
distributions monthly; first from net investment income, then from realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards are distributed at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America.
16
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
DEFERRED COMPENSATION PLAN: Under a deferred compensation plan approved by the
Board of Directors on February 24, 2000, non-interested Directors may elect to
defer receipt of all, or a portion of their annual compensation.
Deferred amounts earn a return as though equivalent dollar amounts had been
invested in common shares of other BlackRock funds selected by the Directors.
This has the same economic effect as if the Directors had invested the deferred
amounts in such other BlackRock funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. The
Trust may, however, elect to invest in common shares of those funds selected by
the Directors in order to match its deferred compensation obligations.
NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Advisors, Inc.
(the "Advisor"), which is a wholly-owned subsidiary of BlackRock, Inc., which in
turn is an indirect, majority-owned subsidiary of PNC Financial Services Group,
Inc. The Trust has an Administration Agreement with Prudential Investments LLC
("PI"), an indirect, wholly-owned subsidiary of Prudential Financial, Inc.
The investment advisory fee paid to the Advisor is computed weekly and
payable monthly at an annual rate of 0.65% of the Trust's average weekly net
assets. The total dollar amounts paid to the Advisor by the Trust under the
Investment Advisory Agreement for the six months ended April 30, 2002 and the
years ended October 31, 2001, 2000 and 1999 were $1,628,863, $3,064,600,
$2,928,176 and $3,147,152, respectively. The administration fee paid to PI is
also computed weekly and payable monthly at an annual rate of 0.20% of the first
$500 million of the Trust's average weekly net assets and 0.15% of any excess.
The total dollar amounts paid to PI by the Trust under the Administration
Agreement for the six months ended April 30, 2002 and the years ended October
31, 2001, 2000 and 1999 were $499,864, $942,954, $900,977 and $968,355,
respectively.
Pursuant to the agreements, the Advisor provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Advisor. PI pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses
which include reimbursement to the Advisor for certain operational support
services provided to the Trust.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the six months ended April 30, 2002 aggregated
$201,905,950 and $146,730,510, respectively.
The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by affiliates or
mortgage related securities containing loans or mortgages originated by PNC Bank
or its affiliates, including Midland Loan Services, Inc. It is possible under
certain circumstances, an affiliate of PNC or its affiliates, including Midland
Loan Services, Inc. could have interests that are in conflict with the holders
of these mortgage-backed securities, and such holders could have rights against
an affiliate of PNC or its affiliates, including Midland Loan Services, Inc.
The federal income tax basis of the Trust's investments at April 30, 2002 was
$595,273,646 and, accordingly, net unrealized appreciation for federal income
tax purposes was $13,222,685 (gross unrealized appreciation $31,453,001; gross
unrealized depreciation $18,230,316).
For federal income tax purposes, the Trust had a capital loss carryforward at
October 31, 2001 of approximately $114,560,600 of which approximately
$23,358,000 will expire in 2002, approximately $15,428,300 will expire in 2003,
approximately $27,373,200 will expire in 2004, approximately $33,108,000 will
expire in 2007, approximately $1,352,200 will expire in 2008 and approximately
$13,940,900 will expire in 2009. Accordingly, no capital gains distribution is
expected to be paid to shareholders until net gains have been realized in excess
of such amounts.
17
Details of open financial futures contracts at April 30, 2002 were as
follows:
VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE APRIL 30, UNREALIZED
CONTRACTS TYPE DATE DATE 2002 APPRECIATION
--------- ---- ---------- -------- -------- ------------
Long
positions:
806 30 Yr.
U.S. T-Bond June '02 $81,474,985 $82,463,875 $988,890
=========== =========== ========
The Trust held two interest rate caps. Under all agreements, the Trust
receives the excess, if any, of a floating rate over a fixed rate. The Trust
paid a transaction fee for each cap. Transaction fees are amortized through the
termination of the agreement. Details of the caps at April 30, 2002 were as
follows:
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED APRIL 30, UNREALIZED
(000) RATE RATE DATE COST 2002 DEPRECIATION
------ ----- ------------ ----------- --------- -------- ------------
$100,000 7.25% 3 mth. LIBOR 4/23/03 $469,683 $ 10 $(469,673)
100,000 7.75% 3 mth. LIBOR 5/4/03 256,163 240 (255,923)
-------- ---- ---------
$725,846 $250 $(725,596)
======== ==== =========
The Trust held one interest rate floor. Under the agreement, the Trust pays
the excess, if any, of a fixed rate over a floating rate. The Trust received a
transaction fee for the floor. Transaction fee is amortized through the
termination of the agreement. Details of the interest rate floor held at April
30, 2002 were as follows:
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED APRIL 30, UNREALIZED
(000) RATE RATE DATE COST 2002 DEPRECIATION
------ ----- ------------ ----------- --------- -------- ------------
$56,000 6.00% 1 mth. LIBOR 1/25/05 $(954,000) $(2,219,392) $(1,265,392)
========= =========== ===========
Details of open interest rate swaps at April 30, 2002 were as follows:
NOTIONAL
AMOUNT FIXED FLOATING TERMINATION UNREALIZED
(000) RATE RATE DATE APPRECIATION
-------- -------- ------------ ----------- ------------
$ 24,000 5.71%(a) 3 mth. LIBOR 5/22/06 $1,021,104
18,800 5.73%(a) 3 mth. LIBOR 12/14/11 235,728
----------
$1,256,832
==========
----------
(a) Trust pays floating interest rate and receives fixed rate.
Transactions in options written during the period ended April 30, 2002, were
as follows:
NOTIONAL
AMOUNT PREMIUM
(000) RECEIVED
-------- ----------
Options outstanding at October 31, 2001 -- --
Options written $461,100 $4,560,385
Options terminated in closing purchase transactions (144,800) (600,796)
-------- ----------
Options outstanding at April 30, 2002 $316,300 $3,959,589
======== ==========
NOTE 4. BORROWINGS
REVERSE REPURCHASE AGREEMENTS: The Trust may enter into reverse repurchase
agreements with qualified, third party broker-dealers as determined by and under
the direction of the Trust's Board of Directors. Interest on the value of
reverse repurchase agreements issued and outstanding is based upon competitive
market rates at the time of issuance. At the time the Trust enters into a
reverse repurchase agreement, it establishes and maintains a segregated account
with the lender containing liquid investment grade securities having a value not
less than the repurchase price, including accrued interest, of the reverse
repurchase agreement.
The average daily balance of reverse repurchase agreements outstanding during
the six months ended April 30, 2002 was approximately $154,403,000 at a weighted
average interest rate of approximately 1.89%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the period was
$185,961,750 as of January 31, 2002, which was 23.46% of total assets.
DOLLAR ROLLS: The Trust may enter into dollar rolls in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period the Trust forgoes principal and
interest paid on the securities. The Trust will be compensated by the interest
earned on the cash proceeds of the initial sale and by the lower repurchase
price at the future date.
The Trust did not enter into any dollar roll transactions during the six
months ended April 30, 2002.
NOTE 5. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. Of
the 62,849,878 shares outstanding at April 30, 2002, the Advisor owned 10,753
shares.
NOTE 6. DIVIDENDS
Subsequent to April 30, 2002, the Board of Directors of the Trust declared
dividends from undistributed earnings of $0.046875 per share payable May 31,
2002 to shareholders of record on May 15, 2002.
NOTE 7. COMMITMENT
On October 9, 1997, the Trust entered into a commitment to purchase an aggregate
of up to $20,000,000 of Overseas Private Investment Corp. securities prior to
the commitment expiration on September 30, 2003. To date, the Trust has
purchased such securities with a market value of $9,093,177 at April 30, 2002.
18
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
reinvested by EquiServe Trust Company, N.A. (the "Plan Agent") in Trust shares
pursuant to the Plan. shareholders who do not participate in the Plan will
receive all distributions in cash paid by check in United States dollars mailed
directly to the shareholders of record (or if the shares are held in street or
other nominee name, then to the nominee) by the transfer agent, as dividend
disbursing agent.
The Plan Agent serves as agent for the shareholders in administering the
Plan. After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will acquire shares for the participants' accounts,
depending upon the circumstances described below, either (i) through receipt of
unissued but authorized shares from the Trust ("newly issued shares") or (ii) by
purchase of outstanding shares on the open market, on the New York Stock
Exchange or elsewhere ("open-market purchases"). If, on the dividend payment
date, the net asset value per share is equal to or less than the market price
per share plus estimated brokerage commissions (such condition being referred to
herein as "market premium"), the transfer agent will invest the dividend amount
in newly issued shares on behalf of the participants. The number of newly issued
shares to be credited to each participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share (but
in no event less than 95% of the then current market price per share) on the
date the shares are issued. If, on the dividend payment date, the net asset
value per share is greater than the market value per share (such condition being
referred to herein as "market discount"), the transfer agent will invest the
dividend amount in shares acquired on behalf of the participants in open-market
purchases.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment will be made for any fraction of a Trust share.
The Plan Agent's fees for the handling of the reinvestment of dividends
and distributions will be paid by the Trust. However, each participant will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.
The Trust reserves the right to amend or terminate the Plan as applied to
any dividend or distribution paid subsequent to written notice of the change
sent to all shareholders of the Trust at least 90 days before the record date
for the dividend or distribution. The Plan also may be amended or terminated by
the Plan Agent upon at least 90 days' written notice to all shareholders of the
Trust. All correspondence concerning the Plan should be directed to the Plan
Agent at (800) 699-1BFM. The addresses are on the front of this report.
19
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
There have been no material changes in the Trust's investment objectives
or policies that have not been approved by the shareholders or to its charter or
by-laws or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.
Quarterly performance and other information regarding the Trust may be found
on BlackRock's website, which can be accessed at http://www.blackrock.com/
funds/cefunds.html. This reference to BlackRock's website is intended to allow
investors public access to quarterly information regarding the Trust and is not
intended to incorporate BlackRock's website into this report.
The Annual Meeting of Trust Shareholders was held May 23, 2002 to vote on the
following matter:
To elect two directors as follows:
DIRECTOR: CLASS TERM EXPIRING
-------- ----- ---- --------
Richard E. Cavanagh ............... I 3 years 2005
James Clayburn La Force, Jr. ...... I 3 years 2005
Directors whose term of office continues beyond this meeting are Andrew F.
Brimmer, Kent Dixon, Frank J. Fabozzi, Laurence D. Fink, Walter F. Mondale and
Ralph L. Schlosstein.
Shareholders elected the two Directors. The results of the voting were as
follows:
VOTES FOR VOTES AGAINST ABSTENTIONS
--------- ------------- -----------
Richard E. Cavanagh ............... 57,263,318 -- 681,908
James Clayburn La Force, Jr. ...... 57,120,195 -- 825,031
Laurence D. Fink, Chairman of the Trust's Board of Directors and certain of
the officers of the Trust listed on the cover of this Report to Shareholders,
are also officers of the Advisor. They serve in the following capacities for the
Advisor: Laurence D. Fink--Chief Executive Officer, Ralph L. Schlosstein--
Director and President, Robert S. Kapito--Director and Vice Chairman, Henry
Gabbay--Managing Director, and Anne Ackerley--Managing Director.
20
--------------------------------------------------------------------------------
THE BLACKROCK INCOME TRUST INC.
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock Income Trust's investment objective is to manage a portfolio of
high quality securities to achieve high monthly income consistent with
preservation of capital. The Trust will seek to distribute monthly income that
is greater than that obtainable on an annualized basis by investment in United
States Treasury securities having the same maturity as the average dollar
weighted maturity of the Trust's investments.
WHO MANAGES THE TRUST?
BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is a
wholly-owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the
largest publicly traded investment management firms in the United States with
$238 billion of assets under management as of March 31, 2002. BlackRock manages
assets on behalf of institutional and individual investors worldwide through a
variety of equity, fixed income, liquidity and alternative investment products,
including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In
addition, BlackRock provides risk management advice and investment system
services to a growing number of institutional investors under the BLACKROCK
SOLUTIONS name. Clients are served from the Company's headquarters in New York
City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo
and Wilmington. BlackRock is a member of The PNC Financial Services Group
(NYSE:PNC), and is majority-owned by PNC and by BlackRock employees.
WHAT CAN THE TRUST INVEST IN?
The Trust will invest at least 65% of its assets in mortgage-backed securities.
At least 85% of the Trust's assets must be rated at least "AAA" by Standard &
Poor's or "Aaa" by Moody's at the time of purchase (up to 5% can be unrated but
deemed by the Advisor to be of comparable quality). Additionally, 15% of the
Trust's assets can be invested in securities rated at least "AA" by Standard &
Poor's or "Aa" by Moody's at time of purchase. Under current market conditions,
BlackRock expects that the primary investments of the Trust will be U.S.
Government securities, securities backed by government agencies (such as
mortgage-backed securities), privately issued mortgage-backed securities,
commercial mortgage-backed securities and asset-backed securities.
WHAT IS THE ADVISOR'S INVESTMENT STRATEGY?
The Advisor will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to provide high monthly income consistent with the
preservation of capital. The Trust will seek to provide monthly income that is
greater than that which could be obtained by investing in U .S. Treasury
securities with an average life similar to that of the Trust's assets. Under
current market conditions, the average life of the Trust's assets is expected to
be in the range of seven to ten years. Under other market conditions, the
Trust's average life may vary and may not be predictable using any formula. In
seeking the investment objective, the Advisor may actively manage among various
types of securities in different interest rate environments.
Traditional mortgage pass-through securities make interest and principal
payments on a monthly basis and can be a source of attractive levels of income
to the Trust. While mortgage-backed securities in the Trust are of high credit
quality, they typically offer a yield spread above Treasuries due to the
uncertainty of the timing of their cash flows as they are subject to changes in
the rate of prepayments when interest rates change and either a larger or
smaller proportion of mortgage holders refinance their mortgages or move. While
mortgage-backed securities offer the opportunity for attractive yields, they
subject a portfolio to interest rate risk and prepayment exposure which result
in reinvestment risk when prepaid principal must be reinvested.
Multiple-class mortgage pass-through securities, or collateralized mortgage
obligations (CMOs), are also an investment that may be used in the Trust's
portfolio. These securities are issued in multiple classes each of which has a
different coupon rate, stated maturity and prioritization on the timing of
receipt of cash flows coming from interest and principal payments on the
underlying mortgages. Principal prepayments can be allocated among the different
classes of a CMO in a number of ways; for instance, they can be applied to each
of the classes in the order of their respective stated maturities. This feature
allows an investor to better plan the average life of their investment.
Additionally, in order to protect the portfolio from interest rate risk, the
Advisor will attempt to locate securities with call protection, such as
commercial mortgage-backed securities with prepayment penalties or lockouts.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates.
21
HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?
The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial advisor. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the Trust through the Trust's transfer agent, EquiServe
Trust Company, N.A. Investors who wish to hold shares in a brokerage account
should check with their financial advisor to determine whether their brokerage
firm offers dividend reinvestment services.
LEVERAGE CONSIDERATIONS IN THE TRUST
Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in
longer-term assets is the benefit to the Trust from leverage. In general, the
portfolio is allowed to leverage at approximately 33 1/3% of total assets.
Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the Trust in a declining rate
environment, but can cause net assets to decline faster than the market in a
rapidly rising rate environment. The Advisor's portfolio managers continuously
monitor and regularly review the Trust's use of leverage and the Trust may
reduce, or unwind, the amount of leverage employed should the Advisor consider
that reduction to be in the best interests of the shareholders.
SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO THE TRUST
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.
INVESTMENT OBJECTIVE. Although the objective of the Trust is to provide high
monthly income consistent with preservation of capital, there can be no
assurance that this objective will be achieved.
DIVIDEND CONSIDERATIONS. Dividends paid by the Trust are likely to vary over
time as fixed income market conditions change. Future dividends may be higher or
lower than the dividend the Trust is currently paying.
INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on such security's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Trust may fail to recoup fully its initial investment in these
securities even if the securities are rated AAA by S&P or Aaa by Moody's.
INVERSE FLOATING RATE MORTGAGE-BACKED SECURITIES. ARMs with interest rates that
adjust at periodic intervals in the opposite direction from the market rate of
interest to which they are indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate may vary by a magnitude that
exceeds the magnitude of the change in the index rate of interest.
LEVERAGE. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, which involves special risks. The Trust's net asset value and
market value may be more volatile due to its use of leverage.
MARKET PRICE OF SHARES. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange (NYSE symbol: BKT) and as such
are subject to supply and demand influences. As a result, shares may trade at a
discount or a premium to their net asset value.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.
CORPORATE DEBT SECURITIES. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.
ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity;
therefore, interim price movement on the securities are generally more sensitive
to interest rate movements then securities that make periodic coupon payments.
ILLIQUID SECURITIES. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.
ANTITAKEOVER PROVISIONS. Certain antitakeover provisions will make a change in
the Trust's business or management more difficult without the approval of the
Trust's Board of Directors and may have the effect of depriving shareholders of
an opportunity to sell their shares at a premium above the prevailing market
price.
22
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THE BLACKROCK INCOME TRUST INC.
GLOSSARY
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ADJUSTABLE RATE MORTGAGE- Mortgage instruments with interest rates that
BACKED SECURITIES (ARMS): adjust at periodic intervals at a fixed
amount over the market levels of interest
rates as reflected in specified indexes. ARMS
are backed by mortgage loans secured by real
property.
ASSET-BACKED SECURITIES: Securities backed by various types of
receivables such as automobile and credit
card receivables.
CLOSED-END FUND: Investment vehicle which initially offers a
fixed number of shares and trades on a stock
exchange. The fund invests in a portfolio of
securities in accordance with its stated
investment objectives and policies.
COLLATERALIZED MORTGAGE Mortgage-backed securities which separate
OBLIGATIONS (CMOS): mortgage pools into short-, medium-, and
long- term securities with different
priorities for receipt of principal and
interest. Each class is paid a fixed or
floating rate of interest at regular
intervals. Also known as multiple-class
mortgage pass-throughs.
COMMERCIAL MORTGAGE Mortgage-backed securities secured or backed
BACKED SECURITIES (CMBS): by mortgage loans on commercial properties.
DISCOUNT: When a fund's net asset value is greater than
its stock price the fund is said to be
trading at a discount.
DIVIDEND: Income generated by securities in a portfolio
and distributed to shareholders after the
deduction of expenses. This Trust declares
and pays dividends on a monthly basis.
DIVIDEND REINVESTMENT: Shareholders may elect to have all dividends
and distributions of capital gains
automatically reinvested into additional
shares of the Trust.
FHA: Federal Housing Administration, a government
agency that facilitates a secondary mortgage
market by providing an agency that guarantees
timely payment of interest and principal on
mortgages.
FHLMC: Federal Home Loan Mortgage Corporation, a
publicly owned, federally chartered
corporation that facilitates a secondary
mortgage market by purchasing mortgages from
lenders such as savings institutions and
reselling them to investors by means of
mortgage-backed securities. Obligations of
FHLMC are not guaranteed by the U.S.
Government, however; they are backed by
FHLMC's authority to borrow from the U.S.
Government. Also known as Freddie Mac.
FNMA: Federal National Mortgage Administration, a
publicly owned, federally chartered
corporation that facilitates a secondary
mortgage market by purchasing mortgages from
lenders such as savings institutions and
reselling them to investors by means of
mortgage-backed securities. Obligations of
FNMA are not guaranteed by the U.S.
Government, however; they are backed by
FNMA's authority to borrow from the U.S.
Government. Also known as Fannie Mae.
GNMA: Government National Mortgage Association, a
U.S. Government agency that facilitates a
secondary mortgage market by providing an
agency that guarantees timely payment of
interest and principal on mortgages. GNMA's
obligations are supported by the full faith
and credit of the U.S. Treasury. Also known
as Ginnie Mae.
GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S.
Government, or one of its agencies or
instrumentalities, such as GNMA, FNMA and
FHLMC.
23
INTEREST-ONLY SECURITIES: Mortgage securities including CMBS that
receive only the interest cash flows from an
underlying pool of mortgage loans or
underlying pass-through securities. Also
known as a strip.
INVERSE-FLOATING Mortgage instruments with coupons that adjust
RATE MORTGAGE: at periodic intervals according to a formula
which sets inversely with a market level
interest rate index.
MARKET PRICE: Price per share of a security trading in the
secondary market. For a closed-end fund, this
is the price at which one share of the fund
trades on the stock exchange. If you were to
buy or sell shares, you would pay or receive
the market price.
MORTGAGE DOLLAR ROLLS: A mortgage dollar roll is a transaction in
which the Trust sells mortgage-backed
securities for delivery in the current month
and simultaneously contracts to repurchase
substantially similar (although not the same)
securities on a specified future date. During
the "roll" period, the Trust does not receive
principal and interest payments on the
securities, but is compensated for giving up
these payments by the difference in the
current sales price (for which the security
is sold) and lower price that the Trust pays
for the similar security at the end date as
well as the interest earned on the cash
proceeds of the initial sale.
MORTGAGE PASS-THROUGHS: Mortgage-backed securities issued by Fannie
Mae, Freddie Mac or Ginnie Mae.
NET ASSET VALUE (NAV): Net asset value is the total market value of
all securities and other assets held by the
Trust, plus income accrued on its
investments, minus any liabilities including
accrued expenses, divided by the total number
of outstanding shares. It is the underlying
value of a single share on a given day. Net
asset value for the Trust is calculated
weekly and published in BARRON'S on Saturday
and THE WALL STREET JOURNAL on Monday.
PRINCIPAL-ONLY SECURITIES: Mortgage securities that receive only the
principal cash flows from an underlying pool
of mortgage loans or underlying pass-through
securities. Also known as strips.
PROJECT LOANS: Mortgages for multi-family, low- to
middle-income housing.
PREMIUM: When a fund's stock price is greater than its
net asset value, the fund is said to be
trading at a premium.
REMIC: A real estate mortgage investment conduit is
a multiple-class security backed by
mortgage-backed securities or whole mortgage
loans and formed as a trust, corporation,
partnership, or segregated pool of assets
that elects to be treated as a REMIC for
federal tax purposes. Generally, FNMA REMICs
are formed as trusts and are backed by
mortgage-backed securities.
RESIDUALS: Securities issued in connection with
collateralized mortgage obligations that
generally represent the excess cash flow from
the mortgage assets underlying the CMO after
payment of principal and interest on the
other CMO securities and related
administrative expenses.
REVERSE REPURCHASE In a reverse repurchase agreement, the Trust
AGREEMENTS: sells securities and agrees to repurchase
them at a mutually agreed date and price.
During this time, the Trust continues to
receive the principal and interest payments
from that security. At the end of the term,
the Trust receives the same securities that
were sold for the same initial dollar amount
plus interest on the cash proceeds of the
initial sale.
STRIPPED MORTGAGE-BACKED Arrangements in which a pool of assets is
SECURITIES: separated into two classes that receive
different proportions of the interest and
principal distributions from underlying
mortgage-backed securities. IO's and PO's are
examples of strips.
24
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BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
TAXABLE TRUSTS
------------------------------------------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
----- -----
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A
BlackRock Core Bond Trust BHK N/A
BlackRock Strategic Bond Trust BHD N/A
TERM TRUSTS
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09
TAX-EXEMPT TRUSTS
------------------------------------------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
----- -----
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD N/A
BlackRock California Municipal Income Trust BFZ N/A
BlackRock Municipal Income Trust BFK N/A
BlackRock New York Municipal Income Trust BNY N/A
BlackRock New Jersey Municipal Income Trust BNJ N/A
BlackRock Florida Municipal Income Trust BBF N/A
BlackRock New York Municipal Bond Trust BQH N/A
BlackRock Virginia Municipal Bond Trust BHV N/A
BlackRock Florida Municipal Bond Trust BIE N/A
BlackRock Municipal Bond Trust BBK N/A
BlackRock Maryland Municipal Bond Trust BZM N/A
BlackRock New Jersey Municipal Bond Trust BLJ N/A
BlackRock California Municipal Bond Trust BZA N/A
TERM TRUSTS
The BlackRock Municipal Target Term Trust Inc. BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. BMT 12/10
BlackRock California Municipal 2018 Term Trust BJZ 12/18
BlackRock New York Municipal 2018 Term Trust BLH 12/18
BlackRock Municipal 2018 Term Trust BPK 12/18
IF YOU WOULD LIKE FURTHER INFORMATION PLEASE DO NOT HESITATE TO CALL
BLACKROCK AT (800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.
25
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BLACKROCK ADVISORS, INC.
AN OVERVIEW
--------------------------------------------------------------------------------
BlackRock Advisors, Inc. (the "Advisor") manages the Trust. The Advisor is
a wholly-owned subsidiary of BlackRock, Inc. ("BlackRock"), which is one of the
largest publicly traded investment management firms in the United States with
$238 billion of assets under management as of March 31, 2002. BlackRock manages
assets on behalf of institutional and individual investors worldwide through a
variety of equity, fixed income, liquidity and alternative investment products,
including the BLACKROCK FUNDS and BLACKROCK PROVIDENT INSTITUTIONAL FUNDS. In
addition, BlackRock provides risk management advice and investment system
services to a growing number of institutional investors under the BLACKROCK
SOLUTIONS name. Clients are served from the Company's headquarters in New York
City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo
and Wilmington. BlackRock is a member of The PNC Financial Services Group
(NYSE:PNC), and is majority-owned by PNC and by BlackRock employees.
BlackRock's fixed income product was introduced in 1988 by a team of
highly seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.
BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals are dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating, and
designing fixed income investment strategies for client portfolios. Securities
purchased include mortgages, corporate bonds, municipal bonds and a variety of
hedging instruments.
BlackRock has developed investment products that respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. In fact, BlackRock introduced the first closed-end mortgage fund, the
first taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAA rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
Currently, BlackRock's closed-end funds have dividend reinvestment plans, some
of which are designed to provide ongoing demand for the stock in the secondary
market. BlackRock manages a wide range of investment vehicles, each having
specific investment objectives and policies.
In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
that you may have about your BlackRock funds and we thank you for the continued
trust that you place in our abilities.
IF YOU WOULD LIKE FURTHER INFORMATION
PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM
26
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[LOGO] BLACKROCH
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DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Clayburn La Force, Jr.
Walter F. Mondale
Ralph L. Schlosstein
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Anne Ackerley, SECRETARY
INVESTMENT ADVISOR
BlackRock Advisors, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
ADMINISTRATOR
Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
CUSTODIAN
State Street Bank and Trust Company
1 Heritage Drive
North Quincy, MA 02171
TRANSFER AGENT
Equiserve Trust Company, N.A.
150 Royall Street
Canton, MA 02021
(800) 699-1BFM
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, NY 10036
LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of April 30, 2002 were not audited
and accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of any securities.
Statements and other information contained in this report are as dated and
are subject to change.
THE BLACKROCK INCOME TRUST INC.
c/o Prudential Investments LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 227-7BFM
[Logo] Printed on recycled paper 09247F-10-0
THE [BLACKROCK LOGO]
INCOME
TRUST INC.
================================================================================
SEMI-ANNUAL REPORT
APRIL 30, 2002
[BLACKROCK LOGO] (SM)