BLACKROCK STRATEGIC TERM TRUST INC, N-30D, 1997-03-03

BLACKROCK STRATEGIC TERM TRUST INC
N-30D, 1997-03-03

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THE BLACKROCK STRATEGIC TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER
- --------------------------------------------------------------------------------

January 31, 1997

Dear Trust Shareholder:

The domestic fixed income markets over the past twelve months were once
again greatly influenced by interest rate volatility. Significant swings in the
pace of U.S. economic growth influenced the bond market's performance, as every
release of economic data led to market participant speculation regarding the
direction of Federal Reserve monetary policy.

Despite strong growth and rising wage pressures, the Fed's decision not to
raise interest rates at their two most recent policy meetings has markedly
increased the stakes in the bond market. The rationale behind the Fed's decision
not to raise interest rates appears to focus on the benign inflation data
released during the third quarter. Should economic growth slow and inflation
remain benign, the Fed will be proven correct in their inaction and the market
would be expected to rally significantly. On the other hand, signs of a stronger
economy could result in weaker bond prices as the likelihood of a Fed tightening
would increase.

BlackRock maintains a positive view on the bond market. On balance, the
outlook for moderate inflation remains intact, suggesting that further declines
in interest rates are likely. In addition to this favorable fundamental
backdrop, foreign demand for U.S. bonds has increased due to the renewed
attractiveness of the U.S. bond market on a global basis.

This annual report is designed to help you stay informed about your
investment and represents our ongoing commitment to improving our communication
with you. We hope you find this report useful now and in the future. We
appreciate your confidence and look forward to helping you achieve your
long-term investment goals.

Sincerely,

/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
- -------------------- -------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President

1
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January 31, 1997

Dear Shareholder:

We are pleased to present the annual report for The BlackRock Strategic Term
Trust Inc. ("the Trust") for the year ended December 31, 1996. 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 "BGT". The
Trust's investment objective is to return $10 per share (its initial offering
price) to shareholders on or about December 31, 2002 while providing high
current income. Although there can be no guarantee, BlackRock is confident that
the Trust can achieve its investment objectives. The Trust seeks these
objectives by investing in investment grade fixed income securities, including
corporate debt securities, mortgage-backed securities backed by U.S. Government
agencies (such as Fannie Mae, Freddie Mac or Ginnie Mae), asset-backed
securities and commercial mortgage-backed securities. All of the Trust's assets
must be rated at least "BBB" by Standard & Poor's or "Baa" by Moody's at the
time of purchase or be issued or guaranteed by the U.S. Government or its
agencies.

The table below summarizes the performance of the Trust's stock price and
NAV over the period:

---------------------------------------------------
12/31/96 12/31/95 CHANGE HIGH LOW
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STOCK PRICE $8.00 $7.625 4.92% $8.00 $7.25
- --------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $9.15 $9.32 (1.82%) $9.36 $8.71
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THE FIXED INCOME MARKETS

While 1996 featured several major shifts in sentiment and some dramatically
sharp market moves, the net year-over-year yield changes turned out to be
modest. Yields rose sharply across the Treasury yield curve throughout the first
half of the year in response to data indicating accelerating economic growth,
including a sharp rise in commodity prices, which rekindled inflationary
concerns. The possibility of a stronger economy dampened investor expectations
of continued Federal Reserve easing of monetary policy and initiated whispers of
a potentially more restrictive Fed policy.

Largely softer economic data and continued moderation in the broad inflation
measures during the third and fourth quarters allowed the Fed to leave short
term interest rates unchanged at their most recent policy meetings.
Additionally, a stronger dollar, large foreign buying of U.S. Treasuries and
balanced budget hopes following the November elections also supported the
market. However, Alan Greenspan's mention of "irrational exuberance in the
financial markets" on December 4th rattled the Treasury market, leading to a
monthlong rise in rates. A resilient housing market and strong consumer
confidence also contributed to the market decline in late December.

The mortgage-backed securities (MBS) market significantly outperformed
Treasuries during 1996 as lower volatility and benign prepayments prompted
strong investor demand. Supply and demand technical conditions remained positive
throughout the period, as strong demand from the mortgage agencies (Fannie Mae
and Freddie Mac) in the third and fourth quarters helped support MBS prices even
as mortgage rates fell and homeowners refinanced at a faster pace during October
and November. For the year, the MBS market as measured by the LEHMAN BROTHERS
MORTGAGE INDEX posted a 5.35% total return versus the 3.63% return of the LEHMAN
BROTHERS AGGREGATE INDEX.

2
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Corporate bond returns exceeded those of Treasuries and mortgage securities
during the fourth quarter, underscoring a strong year for corporates as they
outperformed Treasuries during every month in 1996. The demand for yield, a
strong fundamental credit environment and the increased participation of foreign
investors were the major influences which drove corporate bond prices higher and
yields spreads to Treasuries narrower. BlackRock enters 1997 cautious on the
corporate sector. Despite the sound credit environment of 1996 and positive
credit momentum going into the new year, corporate bond spreads versus
Treasuries are fairly narrow.

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
following chart compares the Trust's current and December 31, 1995 asset
composition.

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THE BLACKROCK STRATEGIC TERM TRUST INC.
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COMPOSITION DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Taxable Zero Coupon Bonds 26% 24%
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Multiple Class Mortgage Pass-Throughs 16% 22%
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Corporate Bonds 15% 5%
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Stripped Mortgage-Backed Securities 12% 7%
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Mortgage Pass-Throughs 8% 18%
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Adjustable Rate Mortgages 6% 9%
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U.S. Government Securities 5% 7%
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Municipal Zero Coupon Bonds 4% 2%
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Commercial Mortgage-Backed Securities 4% 2%
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Asset-Backed Securities 2% 1%
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CMO Residuals 1% 2%
- --------------------------------------------------------------------------------
FNMA Project Loans 1% 1%
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STANDARD &POOR'S/
MOODY'S/FITCH'S
CREDIT RATING DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------------------------------------------
AA or Equivalent 8% 2%
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A or Equivalent 35% 50%
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BBB or Equivalent 57% 48%
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As we have discussed in the Trust's recent reports, we have been seeking to
achieve the Trust's primary investment objective of returning $10 per share to
investors on or about its termination date by emphasizing the purchase of
investment grade corporate bonds with maturity dates on or shortly before the
Trust's scheduled termination date. As of year-end, 15% of the Trust's assets
were invested in corporates, an increase of 10% since December 31, 1995. To a
lesser degree, the Trust has also been buying commercial mortgage-backed
securities (CMBS), which are securities backed by commercial (as opposed to the
more traditional residential) mortgage loans. CMBS deals are typically issued in
several pieces, or tranches, which carry different maturity dates and credit
ratings. Whenever possible, we have bought tranches which fit the Trust's
maturity profile.

3
<PAGE>

To fund the purchase of finite, or "bullet", maturity securities such as
corporates and CMBS, we have been selling bonds whose maturities may extend
beyond the Trust's termination date (we consider these bonds to have "tail
risk"). In our efforts to eliminate these bonds from the portfolio, a particular
focus has been placed on reducing mortgage-backed securities (MBS), whose actual
maturity dates may fluctuate depending on interest rate movements. Additionally,
MBS offer less predictable cash flows than corporates, which typically pay
semi-annually. We believe that the strategy of reducing the Trust's "tail risk"
will enhance the Trust's ability to return its initial offering price upon
termination. Additionally, the Trust's increased corporate holdings may help
produce a more stable income stream.

We appreciate your continued confidence and look forward to managing The
BlackRock Strategic Term Trust Inc. in the coming years to realize its
investment objectives. Please feel free to contact the mutual fund specialists
at BlackRock's marketing center at (800) 227-7BFM (7236) if you have any
questions that are not answered in this report. Additionally, you can reach us
via e-mail at [email protected].

Sincerely,

/s/ Robert S. Kapito /s/ Michael P. Lustig
- -------------------- ----------------------
Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Principal and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.

- ----------
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 not constant and is subject to change.

4
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THE BLACKROCK STRATEGIC TERM TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------

LONG-TERM INVESTMENTS - 142.2%
MORTGAGE PASS-THROUGHS - 12.3%
Federal Home Loan Mortgage
Corporation,
$ 19,307 6.50%, 01/01/99 ................ $ 18,456,013
859 7.50%, 11/01/10, 15 Year ....... 871,298
22 7.50%, 02/01/17 ................ 21,528
10,008++ 8.00%, 09/01/23 ................ 10,201,988
1,706 9.00%, 11/01/05, 15 Year ....... 1,772,987
Federal National Mortgage
Association,
4,750 6.50%, Trust 1994 - M1,
Class M1-D,
10/25/03 - Multifamily ......... 4,685,430
5,762 7.25%, 01/01/23,
Project 797 .................... 5,797,030
6,582 7.50%, 06/01/08, 15 Year ....... 6,672,385
2,864 8.00%, 08/01/17 ................ 2,917,420
3,282 8.50%, 01/01/25 ................ 3,402,211
2,561 10.50%, 04/01/04, 15 Year ...... 2,729,328
Government National
Mortgage Association,
1,633 7.00%, 10/15/22 ................ 1,597,675
2,029 8.50%, 06/15/17 ................ 2,102,666
3,049 9.00%, 10/15/17 ................ 3,211,964
183 10.00%, 02/15/16 ............... 201,445
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64,641,368
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COMMERCIAL MORTGAGE-BACKED
SECURITIES-6.3%
AAA 2,600 Aetna Commercial Mortgage
Trust, Series 1995-C5,
Class B, 12/26/30 .............. 2,548,629
BBB 4,000 Federal Deposit Ins. Corp.
Trust, Series 1994-C1,
Class IIF, 09/25/25 ............ 4,171,250
AAA 4,623 LTC Commercial MPT Cert.
Series 1996-1,
Class A-144A, 04/15/28 144A .... 4,640,495
A 2,290 Merrill Lynch Mtg. Invs. Co.,
Trust 1995-1,
CLASS C1, 05/25/13 ............. 2,324,561
AAA 3,777 Morgan Stanley Capital I,
Series 1995-GAL1,
Class A1, 08/15/27 144A ........ 3,814,919
Paine Webber Mortgage
Acceptance Corp.,
AAA 2,000 Series 1995-M1, Class M1-A,
01/15/07 144A .................. 1,996,421
A 2,000 Series 1995-M1, Class M1-C,
01/15/07 144A .................. 2,022,750
BBB 1,656 Series 1995-M1, Class M1-D,
01/15/07 144A .................. 1,647,271
A 5,946 Resolution Trust Corp.,
Series 1993-C3,
Class C3-D, 12/25/24 ........... 5,924,546
AAA 3,925 Structured Asset Securities
Corp., Series 1996-CFL,
Class B, 02/25/28 .............. 3,826,192
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32,917,034
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MULTIPLE CLASS MORTGAGE
PASS-THROUGHS - 30.4%
Federal Home Loan Mortgage
Corporation,Multiclass Mortgage
Participation Certificates,
3,433 Series 39, Class 39-J,
03/25/24 (I) ................... 643,372
22,040++ Series 90, Class 90-G,
10/15/20 ....................... 22,889,201
3,000 Series 1218, Class 1218-G,
05/15/14 ....................... 2,862,930
5,000 Series 1295, Class 1295-JB,
03/15/07 ....................... 4,476,500
1,500 Series 1321, Class 1321-E,
01/15/06 ....................... 1,512,285
5,505 Series 1379, Class 1379-FB,
08/15/18 (I) ................... 1,266,073
1,000 Series 1388, Class 1388-FB,
05/15/06 (ARM) ................. 981,660
738 Series 1407, Class 1407-PO,
01/15/22 ....................... 694,955
1,883 Series 1488, Class 1488-F,
09/15/06 ....................... 1,817,829
1,625 Series 1488, Class 1488-PF,
09/15/06 ....................... 1,631,467
25,889 Series 1551, Class 1551-J,
07/15/08 (ARM) ................. 1,197,366
9,717 Series 1590, Class 1590-JC,
01/15/19 (ARM) ................. 582,643
1,658 Series 1602, Class 1602-Y,
07/15/22 ....................... 1,543,476
3,488 Series 1603, Class 1603-MB,
10/15/23 ....................... 3,273,073
4,973 Series 1626, Class 1626-PV,
12/15/08 (I) ................... 865,663
2,067 Series 1662, Class 1662-P,
11/15/07 (I) ................... 502,840

See Notes to Financial Statements.

5
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PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
Federal National Mortgage
Association, REMIC Pass-
Through Certificates,
$ 640 Trust 1991-146, Class 146-SB,
10/25/06 (ARM) ................. $ 664,764
10,000+ Trust 1992-43, Class 43-E,
04/25/22 ....................... 9,975,300
4,895 Trust 1992-129, Class 129-G,
06/25/18 ....................... 4,414,213
7,072 Trust 1992-155, Class 155-SA,
10/25/05 (ARM) ................. 7,470,065
2,000 Trust 1992-155, Class 155-SB,
12/25/05 (ARM) ................. 1,938,480
35,550++ Trust 1992-156, Class 156-H,
04/25/06 ....................... 31,621,725
4,000 Trust 1992-210, Class 210-KB,
10/25/20 (I) ................... 1,913,508
1,469 Trust 1993-G17, Class G17-SH,
04/25/23 (ARM) ................. 920,939
2,498 Trust 1993-G22, Class G22-SA,
09/25/09 (ARM) ................. 2,361,265
10,000 Trust 1993-22, Class 22-F,
06/25/23 (I) ................... 5,000,000
4,532 Trust 1993-26, Class 26-PT,
12/25/17 (I) ................... 872,821
35,957 Trust 1993-G31, Class G31-PS,
08/25/18 (ARM) ................. 1,313,157
10,500++ Trust 1993-67, Class 67-B,
12/25/21 (P) ................... 8,769,285
3,376 Trust 1993-O71, Class O71-SB,
06/25/07 (ARM) ................. 3,156,117
9,800 Trust 1993-124, Class 124-D,
08/25/22 (P) ................... 8,620,864
536 Trust 1993-132, Class 132-CA,
10/25/22 (P) ................... 331,068
32,744 Trust 1993-156, Class 156-SA,
05/25/16 (ARM) ................. 1,064,177
6,305+ Trust 1993-170, Class 170-SA,
09/25/08 (ARM) ................. 5,842,828
3,534 Trust 1993-179, Class 179-SD
10/25/23 (ARM) ................. 2,969,605
5,000 Trust 1993-245, Class 245-JA,
03/25/19 (I) ................... 797,150
2,205 Trust 1994-40, Class 40-H,
10/25/20 ....................... 2,134,881
3,166 Trust 1994-42, Class 42-SO,
03/25/23 (ARM) ................. 449,147
12,937 Trust 1996-20, Class 20-SB,
10/25/08 (ARM) ................. 4,717,834
4,484 Trust 1996-24, Class 24-SB,
10/25/08 (ARM) ................. 908,074
8,499 Trust 1996-24, Class 24-SJ,
01/25/22 (ARM) ................. 2,374,423
AAA 3,250 Prudential Bache Collateralized
Mortgage Obligation,
Trust 10-H, Class H,
04/01/19 (P) ................... $ 2,587,812
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159,930,835
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COLLATERALIZED MORTGAGE
OBLIGATION RESIDUALS ** - 1.9%
AAA 593 American Housing Trust 8,
Senior Mortgage
Pass-Through Certificate,
Series 8, Class R (REMIC),
01/25/21# ........................ 494,234
Federal Home Loan Mortgage
Corporation, REMIC Multiclass
Mortgage Participation
Certificates,
10 Series 1016, Class 1016-R,
11/15/20 ....................... 121,600
100 Series 1033, Class 1033-R,
01/15/06 ....................... 995,520
1 Series 1073, Class 1073-R,
05/15/21 ....................... 1,424,000
1 Series 1073, Class 1073-RS,
05/15/21 ....................... 1,000
2 Series 1075, Class 1075-R,
05/15/21 ....................... 1,653,971
101 Series 1102, Class 1102-R,
06/15/21 ....................... 903,667
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, GUARANTEED REMIC
PASS-THROUGH Certificates,
1 Trust 1991-9, Class 9-R,
02/25/06 ....................... 872,300
1 Trust 1991-9, Class 9-RL,
02/25/06 ....................... 1,000
2 Trust 1991-48, Class 48-R,
05/25/06 ....................... 2,952,600
2 Trust 1991-48, Class 48-RL,
05/25/06 ....................... 1,000
19 Trust 1991-50, Class 50-R,
05/25/06 ....................... 669,431
AAA 831 Ryland Acceptance Corp.,
Collateralized Mortgage
Obligation, Series 1983-R
Class R, 10/01/18# ............. 38,000
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10,128,323
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TAXABLE ZERO COUPON
BONDS - 37.3%
Financing Corp (FICO Strips),
6,339 02/08/02 ....................... 4,591,464
18,000+ 03/07/02 ....................... 12,980,700
6,754 03/26/02 ....................... 4,850,993
12,950 04/06/02 ....................... 9,277,768
3,667 05/02/02 ....................... 2,615,158
9,425 06/27/02 ....................... 6,661,401

See Notes to Financial Statements.

6
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PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
Financing Corp. (FICO Strips) (cont'd)
$ 5,311 08/08/02 ....................... $ 3,721,046
5,400 09/07/02 ....................... 3,766,770
4,472 09/26/02 ....................... 3,106,788
2,992 10/06/02 ....................... 2,072,648
3,667 11/02/02 ....................... 2,528,580
4,535 11/11/02 ....................... 3,124,343
3,616 12/06/02 ....................... 2,480,178
29,300+ 12/27/02 ....................... 20,022,155
Aid to Israel,
2,932 02/15/02 ....................... 2,087,981
2,932 08/15/02 ....................... 2,049,882
Government Trust Certificates,
5,880 11/15/01 ....................... 4,352,141
15,350 05/15/02 ....................... 10,969,899
25,000 11/15/02 ....................... 17,363,250
15,425 Tennessee Valley Authority,
04/15/02 ....................... 11,052,976
U.S. Treasury Strip,
33,000++ 08/15/02 ....................... 23,338,920
61,750++ 11/15/02 ....................... 42,997,760
280 05/15/04 ....................... 175,969
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196,188,770
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UNITED STATES GOVERNMENT
SECURITIES - 7.7%
United States Treasury Notes,
2,800++ 6.25%, 02/15/03 ................ 2,796,500
13,250+ 6.50%, 10/15/06 ................ 13,322,478
United States Treasury Bond,
25,000++ 6.50%, 11/15/26 ................ 24,535,250
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40,654,228
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STRIPPED MORTGAGE-BACKED
SECURITIES - 16.9%
AAA 2,974 BEAR STEARNS SECURED INVESTORS
TRUST, SERIES 1988-8,
CLASS C, 12/01/18 (P/O) ........ 2,632,322
AAA 3,339 Collateralized Mortgage Obligation
Trust 26, Class A,
04/23/17 (P/O) ................. 2,697,490
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates:
109 Series G2, Class G2-M,
07/25/18 (I/O) ................. 2,036,219
47 Series 186, Class 186-J,
08/15/21 (I/O) ................. 907,296
47 Series 1360, Class 1360-PT,
12/15/17 (I/O) ................. 1,445,555
15 Series 1375, Class 1375-H,
12/15/05 (I/O) ................. 254,019
6,724 Series 1570, Class 1570-J,
08/15/23 (P/O) ................. 5,577,903
2,269 Series 1597, Class 1597-H,
07/15/23 (P/O) ................. 897,503
4,150 Series 1662, Class 1662-PO,
01/15/09 (P/O) ................. 3,133,502
1,520 Series 1900, Class 1900-SD,
01/15/23(I/O) .................. 435,575
Federal National Mortgage Association
REMIC Pass-Through Certificates,
3,583 Trust 11, Class 2,
02/01/17 (I/O) ................. 1,026,879
11,935 Trust 19, Class 2,
06/01/17 (I/O) ................. 3,621,553
8,185 Trust 22, Class 2,
11/01/16 (I/O) ................. 2,056,546
7,044 Trust 63, Class 2,
06/01/18 (I/O) ................. 2,130,925
5,512 Trust 116, Class 2,
01/01/17 (I/O) ................. 1,598,510
1,504 Trust 225, Class 1,
02/01/23, (P/O) ................ 1,127,818
77 Trust 1991-79, Class 79-B,
07/25/98 (P/O) ................. 71,029
3,319 Trust 1992-82, Class 82-IO,
05/25/22 (I/O) ................. 968,416
2,497 Trust 1992-132, Class 132-J,
12/25/18 (I/O) ................. 376,244
750 Trust 1993-17, Class 17-N,
10/25/22 (I/O) ................. 362,726
8,290 Trust 1993-G20, Class G20-PT,
02/25/19 (I/O) ................. 1,750,191
3,624 Trust 1993-23, Class 23-PN,
04/25/22 (I/O) ................. 1,517,723
2,721 Trust 1993-31, Class 31-N,
04/25/22 (I/O) ................. 896,460
59 Trust 1993-92, Class 92-G,
12/25/19 (I/O) ................. 1,777,817
2,617 Trust 1993-92, Class 92-G,
05/25/23 (P/O) ................. 959,515
6,292 Trust 1993-161, Class 161-E,
02/25/23 (P/O) ................. 4,364,670
15,230++ Trust 1993-213, Class G213-CL,
09/25/23 (P/O) ................. 11,989,345
853 Trust 1993-237, Class G237-E,
11/25/23 (P/O) ................. 635,157
1,956 Trust 1993-249, Class G249-PE,
11/25/23 (P/O) ................. 1,398,813
4,188 Trust 1994-16, Class 16-D,
11/25/23 (P/O) ................. 3,426,671
4,297+ Trust 1994-24, Class 24-B,
11/25/23 (P/O) ................. 3,543,638
550 Trust 1994-54, Class 54-B,
11/25/23 (P/O) ................. 269,335
3,377 Trust 1994-54, Class 54-C,
11/25/23 (P/O) ................. 2,647,956
19,313+ Trust 1994-61, Class 61-DB,
03/25/24 (P/O) ................. 12,263,928
7,379 Trust 1994-87, Class 87-E,
03/25/09 (P/O) ................. 5,536,269

See Notes to Financial Statements.

7
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AAA 4,500 Student Loan Marketing Assoc.,
Trust 1995-1, Class 1,
10/25/09 (ARM) ................. 4,500,000
-----------
12,093,707
-----------
MUNICIPAL BOND - 5.5%
AAA 1,000 Kern County California,
Pension Series
6.54%, 08/15/02 ................ 987,690
AAA 3,510 Long Beach California ,
Pension Series
6.56%, 09/01/02 ................ 3,487,747
Los Angeles County California,
BBB 6,250 Pension Series A
7.60%, 06/30/98 ................ 6,366,750
AAA 5,000 Pension Series D
6.54%, 06/30/02 ................ 4,978,300
BBB 5,000 New York, New York
Taxable Series 1,
6.54%, 03/15/02 ................ 4,941,500
BBB 5,000 New York, New York
7.125%, 08/15/02 ............... 5,073,300
AAA 1,950 San Francisco California International
Airport, Taxable 2nd Series,
Issue 13 A,
6.35%, 05/01/02 ................ 1,934,497
AA 1,000 St. Josephs Health System California,
Direct Obligation NTS Series A,
7.13% 07/01/02 ................. 1,013,290
-----------
28,783,074
-----------
CORPORATE BONDS - 20.8%
BANKING & FINANCE - 11.0%
BBB 4,960 Ahmanson HF & Co.
8.25%, 10/01/02 ................ 5,292,599
BBB 1,700 Amsouth Bankcorporation
6.75%, 11/01/25 ................ 1,653,659
BBB 5,000 Fireman's FD Mortgage Corp.
8.875%, 10/15/01 ............... 5,359,600
A 5,000 Goldman Sachs Group L.P.
6.25%, 02/01/03 144A ........... 4,840,877
A 2,800 Merrill Lynch & Co. Inc.
6.00%, 01/15/01 ................ 2,746,128
A 5,000 Nationbank Corp, Series E
6.65%, 04/09/02 ................ 4,983,250
A 5,000 Nationsbank Corp.
7.00%, 09/15/01 ................ 5,065,550
BBB 2,190 Paine Webber Group Inc.
7.875%, 02/15/03 ............... 2,274,884
BBB 3,000 Salomon Inc.
7.50%, 12/01/03 ................ 3,037,530
AA 5,000 SANWA Business Credit
7.25%, 09/15/01 ................ 5,099,709
Smith Barney Holdings Inc.,
A 3,000 6.625%, 06/01/00 3,007,110
A 1,500 7.00%, 05/15/00 1,519,740
A 4,500 7.98%, 03/01/00 4,684,185
A 8,500 Transamerica Finance Corporation
6.75%, 06/01/00 ................ 8,555,306
-----------
58,120,127
-----------
CORPORATE BONDS (CONT'D)
INDUSTRIAL- 2.7%
A 1,000 Bass America Inc.
8.125%, 03/31/02 ............... 1,068,490
A 1,000 Ford Motor Credit Co.
8.00%, 06/15/02 ................ 1,063,380
BBB 5,000 RJR Nabisco Inc.
8.625%, 12/01/02 ............... 5,103,700
BBB 4,000 Tele Communications Inc.
9.25%, 04/15/02 ................ 4,237,080
BBB 2,700 Tenneco Inc.
8.08%, 10/01/02 ................ 2,864,160
-----------
14,336,810
-----------
CORPORATE BONDS (CONT'D)
UTILITY- 1.7%
BBB 5,000 Columbia Gas Systems Inc
6.610%, 11/28/02 ............... 4,961,250
BBB 4,000 360 Communications
7.125%, 03/01/03 ............... 3,948,760
-----------
8,910,010
-----------
CORPORATE BONDS (CONT'D)
YANKEE BONDS - 5.4%
AA 5,000 African Dev. Bank
7.75%, 12/15/01 ................ 5,246,150
BBB 5,000 Corporacion Andina De Fome
7.10%, 02/01/03 ................ 5,006,900
BBB 3,500 Empresa Elec. Guacolda SA
7.95%, 04/30/03 (Chile) 144A ... 3,562,237
BBB 2,000 Empresa Elec. Pehuence
7.30%, 05/01/03 (Chile) ........ 2,021,065
AAA 7,500 U.S. Remittance Master,
Series 1996-1,
SR CTF, 01/01/01 ............... 7,444,922
BBB 5,205 YPF Sociedad Anonima
7.50%, 10/26/02 (Argentina) .... 5,308,878
-----------
28,590,152
-----------

See Notes to Financial Statements.
8
<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
CONTRACTS ## PUT OPTION- 0.8%
2,700 U.S. Treasury Note 7.00%
7/15/06 @$102
Expires 7/02/97 ................ $ 4,092,120
------------

Total long-term investments
142.2% (Cost $744,819,922) ..... 748,519,787

SHORT TERM INVESTMENT- 1.5%
CERTIFICATE OF DEPOSIT
8,000 Bank of Tokyo 5.80% 01/21/97
(Cost $8,000,044) .............. 8,000,044
------------
Total Investments before
securities sold short--143.7%
(Cost $752,819,966) ............ 756,519,831
------------

SECURITIES SOLD SHORT (10.6%)
48,000@ U.S. Treasury Bond
7.50%, 11/15/24 ................ (52,500,000)

3,500@ U.S. Treasury Bond
6.75%, 08/15/26 ................ (3,526,250)
------------
Total Securities Sold Short
(Proceeds $47,943,125) ......... (56,026,250)
------------
Total Investments net of short
sales - 133.1%
(Cost $704,876,841) ............ 700,493,581

Liabilities in excess of other
assets - (33.1%) ............... (174,377,739)
------------

NET ASSETS - 100% .............. $526,115,842
============

- ----------
* Using the higher of Standard & Poor's or Moody's rating.
** Illiquid securities representing 1.3% of portfolio assets. See Note 3.
# Private placement restricted as to resale. See Note 3.
## One contract equals 100,000 face value.
+ Partial principal amount pledged as collateral for reverse repurchase
agreements. See Note 4.
++ Entire principal amount pledged as collateral for reverse repurchase
agreements. See Note 4.
@ Amount pledged as collateral for Financial Futures.

- --------------------------------------------------------------------------------
KEY TO ABBREVIATIONS

ARM -- Adjustable Rate Mortgage
CMO -- Collateralized Mortgage Obligation
CMT -- Constant Maturity Treasury
I -- Denotes a CMO with Interest Only Characteristics
I/O -- Interest Only Class
P -- Denotes a CMO with Principal Only Characteristics
P/O -- Principal Only Class
REMIC -- Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------

See Notes to Financial Statements.

9
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------

ASSETS
Investments, at value
(cost $752,819,966) (Note 1) ............................ $ 756,519,831
Cash ...................................................... 466,040
Deposit with broker as collateral for investments
sold short (Note 1) ..................................... 57,215,625
Interest receivable ....................................... 5,328,691
Receivable for investments sold ........................... 543,453
Other assets (Note 1) ..................................... 59,040
-------------
820,132,680
-------------

LIABILITIES
Reverse repurchase agreement (Note 4) ..................... 213,085,375
Investment sold short, at value
(proceeds $47,943,125) (Note 1) ......................... 56,026,250
Swap option written, at value
(Proceeds $2,112,500) (Note 1) .......................... 2,234,250
Payable for investments purchased ......................... 18,092,908
Dividends payable ......................................... 2,276,444
Interest payable .......................................... 1,790,231
Due to broker - variation margin .......................... 15,663
Advisory fee payable (Note 2) ............................. 198,786
Administration fee payable (Note 2) ....................... 55,218
Other accrued expenses and liabilities .................... 241,713
-------------
294,016,838
-------------
NET ASSETS ................................................ $ 526,115,842
=============
Net assets were comprised of:
Common stock, at par (Note 5) ........................... 575,106
Paid-in capital in excess of par ........................ 535,942,670
-------------
536,517,776
Undistributed net investment income ..................... 6,304,439
Accumulated net realized losses ......................... (12,159,383)
Net unrealized depreciation ............................. (4,546,990)
-------------
Net assets, December 31, 1996 ........................... $ 526,115,842
=============

Net asset value per share:
($526,115,842 / 57,510,639 shares of
common stock issued and outstanding) .................... $9.15
=====

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest (net of premium amortization
of $2,695,985 and net of interest
expense of $16,259,620) .................................... $ 37,009,602
------------

Expenses
Investment advisory ........................................ 2,366,077
Administration ............................................. 657,573
Reports to shareholders .................................... 245,120
Custodian .................................................. 133,152
Transfer agent ............................................. 113,004
Directors .................................................. 75,602
Audit ...................................................... 71,654
Legal ...................................................... 20,130
Miscellaneous .............................................. 156,325
------------
Total operating expenses ................................. 3,838,637
------------
Net investment income ...................................... 33,170,965
------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments .............................................. 12,942,356
Short Sales .............................................. (1,538,025)
Futures .................................................. (14,202,710)
Options .................................................. 745,833
------------
(2,052,546)
------------
Change in net unrealized appreciation (depreciation) on:
Investments .............................................. (18,020,228)
Short Sales .............................................. 9,186,328
Futures .................................................. (1,474,080)
Options .................................................. (121,750)
------------
(10,429,730)
------------
Net loss on investments ...................................... (12,482,276)
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ $ 20,688,689
============

See Notes to Financial Statements

10
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH
Cash Flows used for operating activities:
Interest received (excluding net premium
amortization of $2,695,985) .......................... $ 55,923,601
Operating expenses paid ............................... (3,879,959)
Interest Expense paid .................................. (16,550,586)
Cash used for acquisition of short-term
portfolio investments, net ........................... (6,680,255)
Variation Margin on Futures ............................ (15,351,758)
Purchase of long term portfolio investments ............ (768,805,447)
Proceeds from disposition of long-term
portfolio investments ................................ 803,152,880
-------------
Net cash flows provided by operating
activities ........................................... 47,808,476
-------------

Cash flows used for financing activities:
Net proceeds from issuance of reverse
repurchase agreements ................................ (19,310,375)
Cash dividends paid .................................... (28,037,471)
-------------
Net cash used for financing activities ................. (47,347,846)
-------------
Net increase in cash ..................................... 460,630
Cash at beginning of year ................................ 5,410
-------------
Cash at end of year ...................................... $ 466,040
=============

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 ........................................ $ 20,688,689
-------------
Decrease in investments .................................. 18,492,457
Net realized loss ........................................ 2,052,546

INCREASE IN UNREALIZED DEPRECIATION ...................... 10,429,730
Increase in receivable for investments sold .............. (529,271)
Decrease in receivable for variation margin .............. 325,032
Increase in interest receivable .......................... (49,169)
Increase in other assets ................................. (58,943)
Decrease in payable for investments purchased ............ (4,284,556)
Increase in swap options written ......................... 2,234,250
Decrease in deposits with brokers
for short sales ........................................ 17,940,625
Decrease in payable for securities sold short ............ (19,100,625)
Decrease in interest payable ............................. (290,966)
Decrease in accrued expenses and
other liabilities ...................................... (41,323)
-------------
Total adjustments ...................................... 27,119,787
-------------
Net cash flows used for operating activities ............. $ 47,808,476
=============

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
STATEMENTS OF CHANGES
IN NET ASSETS
- --------------------------------------------------------------------------------

FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------- -------------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income ................ $ 33,170,965 $ 35,797,123
Net realized gain (loss) ............. (2,052,546) 814,320
Net change in
unrealized appreciation
(depreciation) on
investments, futures, options
and short sales ..................... (10,429,730) 64,354,396
------------- -------------

Net increase in net assets
resulting from operations .......... 20,688,689 100,965,839
Dividends from net
investment income .................. (30,313,915) (32,349,734)
------------- -------------
Total increase
(decrease) .................... (9,625,226) 68,616,105

NET ASSETS
Beginning of year ...................... 535,741,068 467,124,963
------------- -------------
End of year ............................ $ 526,115,842 $ 535,741,068
============= =============

See Notes to Financial Statements.

11
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,
-----------------------------------------
PER SHARE OPERATING PERFORMANCE: 1996 1995 1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Net asset value, beginning of period .......................... $9.32 $8.12 $9.36
----- ----- -----
Net investment income (net of interest expense of $.19, $.34,
$.19, $.12, and $.17, respectively) ....................... 0.58 .62 .46
Net realized and unrealized gain (loss) on investments ...... (0.22) 1.14 (1.07)
----- ----- -----
Net increase (decrease) from investment operations ............ 0.36 1.76 (.61)
Dividends from net investment income ........................ (0.53) (.56 (.49)
Distribution in excess of net investment income ............. -- -- (.14)
----- ----- -----
Net asset value, end of period* ............................... $9.15 $9.32 $8.12
===== ===== =====
Market value, end of period* .................................. $8.00 $7.63 $7.13
===== ===== =====
TOTAL INVESTMENT RETURN+ ...................................... 11.79% 14.68% (20.28%)
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses** .......................................... 0.74% 0.78% 0.98%
Net Investment Income ......................................... 6.39% 7.13% 5.32%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ............................. $518,963 $501,869 $491,747
Portfolio turnover rate ....................................... 107% 135% 133%
Net assets, end of period (000) ............................... $526,116 $535,741 $467,125
Reverse repurchase agreements outstanding, end of period (000) $213,085 $232,396 $184,672
Asset coverage++ .............................................. $3,469 $3,305 $3,529

</TABLE>

YEAR ENDED DECEMBER 31,
----------------------
PER SHARE OPERATING PERFORMANCE: 1993 1992
----- -----
<S> <C> <C>
Net asset value, beginning of period .......................... $9.76 $10.13
----- -----
Net investment income (net of interest expense of $.19, $.34,
$.19, $.12, and $.17, respectively) ....................... .82 .82
Net realized and unrealized gain (loss) on investments ...... (.39 (.29)
----- -----
Net increase (decrease) from investment operations ............ .43 .53
Dividends from net investment income ........................ (.83) (.90)
Distribution in excess of net investment income ............. -- --
----- -----
Net asset value, end of period* ............................... $9.36 $9.76
===== =====
Market value, end of period* .................................. $9.75 $9.88
===== =====
TOTAL INVESTMENT RETURN+ ...................................... 7.24% 1.29%
RATIOS TO AVERAGE NET ASSETS:
Operating Expenses** .......................................... 0.93% 0.89%
Net Investment Income ......................................... 8.40% 8.32%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ............................. $560,543 $568,959
Portfolio turnover rate ....................................... 94% 18%
Net assets, end of period (000) ............................... $538,465 $561,407
Reverse repurchase agreements outstanding, end of period (000) $175,569 $249,768
Asset coverage++ .............................................. $4,067 $3,248

</TABLE>

- ----------

* NAV and market value published in THE WALL STREET JOURNAL each Monday.

** The ratios of operating expenses, including interest expense, to average net
assets, were 3.87%, 4.68%, 3.18%, 2.12%, and 2.64%, for the periods indicated
above, respectively. The ratios of operating expenses, including interest
expense and excise tax, to average net assets, were 3.87%, 4.68%, 3.18%,
2.12%, and 2.67% for the periods indicated above respectively.
+ Total investment return is calculated assuming a purchase of common stock at
the current market value on the first day and a sale at the current market
value on the last day of each 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.
++ Per $1,000 of reverse repurchase agreement outstanding.

The information above represents the audited operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for each of 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.

12
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERMTRUST INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ACCOUNTING POLICIES
The BlackRock Strategic Term Trust Inc., (the "Trust") a Maryland
corporation, is a diversified, closed-end management investment company. The
investment objective of the Trust is to manage a portfolio of investment grade
fixed income securities that will return at least $10 per share to investors on
or about December 31, 2002, while providing high monthly income. 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, municipal
and other debt securities 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 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 unless the Trust's Board of
Directors determines that such price does not reflect its fair value, in which
case it will be valued at its fair value as determined by the Trust's Board of
Directors. Any securities or other assets for which such current market
quotations are not readily available are valued at fair market value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Directors.

Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase
was 60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their original term to maturity from date of purchase exceeded 60
days.

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 agreement,
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 a 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 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

13
<PAGE>

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
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. Rate swaps were conceived 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 does not anticipate non-performance
by any counterparty.

SWAP OPTIONS: The swap option is similar to an option on securities except
that instead of purchasing the right to buy a security, the purchaser of the
swap option has the right to enter into a previously agreed upon interest rate
swap agreement at any time before the expiration of the option. Premiums
received from writing options are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. The Trust, as writer of an option, bears the market risk of an unfavorable
change in the value of the swap contract underlying the written option. Written
interest rate swap options may be used as part of an income producing strategy
reflecting the view of the Trust's management on the direction of interest
rates.

FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two
parties to buy or 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 that 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. 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. 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 more volatile 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

14
<PAGE>

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 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.

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. The Trust did not engage in
securities lending during the year ended December 31, 1996.

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 less or greater than the proceeds originally received.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Security 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.

TAXES: It is the Trust's intention to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
tax provision is required. As part of the tax planning strategy the Trust may
retain a portion of its taxable income and pay an excise tax on the
undistributed amount.

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, may be distributed 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 generally accepted
accounting principles.

ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles 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 ORGANIZATION EXPENSES: A total of $67,520 was incurred in connection
with the organization of the Trust. These costs have been deferred and are being
amortized ratably over a period of sixty months from the date the Trust
commenced operations.

NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc., (the "Adviser"), a wholly-owned corporate subsidiary of
PNCAsset Management Group, Inc., the holding company for PNC's asset management
business, and an Administration Agreement with Dean Witter InterCapital Inc.
("DWI").

The investment advisory fee paid to the Adviser is computed weekly and
payable monthly at an annual rate of 0.45% from January 1, 1995 through December
31, 1998 and 0.30% from January 1, 1999 to the termination or liquidation of the
Trust. The administration fee paid to DWI is also computed weekly and payable
monthly at an annual rate

15
<PAGE>

of 0.125% from January 1, 1995 through December 31, 1998 and 0.10% from January
1, 1999 to the termination of the Trust.

Pursuant to the agreements, the Adviser provides continuous supervision of
the investment portfolio and pays the compensation of officers of the Trust who
are affiliated persons of the Adviser. DWI pays occupancy and certain clerical
and accounting costs of the Trust. The Trust bears all other costs and expenses.

NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments and dollar rolls, for the year ended December 31, 1996 aggregated
$764,520,991 and $798,793,751 respectively.

The Trust may invest up to 60% of its total assets in securities which are
not readily marketable, including those which are restricted as to disposition
under securities law ("restricted securities"). At December 31, 1996, the Trust
held 1.3% of its portfolio assets in illiquid securities including 0.1% of its
portfolio assets in securities restricted as to resale.

The portfolio may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNCMortgage
Securities Corp. (or Sears Mortgage if PNCMortgage Securities Corp. succeeded to
rights and duties of Sears) or mortgage related securities containing loans or
mortgages originated by PNCBank or its affiliates. It is possible under certain
circumstances for PNC Mortgage Securities Corp. or its affiliates to have
interests that are in conflict with the holders of these mortgage-backed
securities, and such holders could have rights against PNCMortgage Securities
Corp. or its affiliates.

The federal income tax basis of the Trust's investments at December 31, 1996
was substantially the same as the basis for financial reporting, and,
accordingly, net unrealized appreciation for federal income tax purposes was
$3,699,865 (gross unrealized appreciation--$23,650,775; gross unrealized
depreciation--$19,950,910).

For federal income tax purposes the Trust has a capital loss carryforward of
$12,134,000 of which $9,420,600 expires in 2001 and $2,713,400 expires in 2004.

During the year ended December 31, 1996, the Trust entered into financial
futures contracts. Details of open contracts at December 31, 1996 are as
follows:

VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE DEC. 31, UNREALIZED
CONTRACTS TYPE DATE DATE 1996 DEPRECIATION
- --------- ---- ---- ---- ---- ------------
Long
positions:
10 Yr.
20 T-Note Mar.1997 $2,224,480 $2,182,500 ($41,980)
---------

The Trust sold a swap option ("swaption")which settled on October 31, 1996
with a notional amount of $250 million. Under this swaption, the Trust received
$2,112,500. The contract consists of an option for the purchaser to enter into a
swap agreement with the trust. The swap would involve the Trust receiving a
variable rate of 3-month LIBOR and the Trust paying a fixed rate of 5.00%, both
based on the $250 million notional amount for a period of ten years beginning
June 19, 2001. The option expires on June 15, 2001. At December 31, 1996,
unrealized depreciation was $121,750.

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 the
reverse repurchase agreements issued and outstanding will be based upon
competitive market rates at the time of issuance. At the time the Trust enters
into a reverse repurchase agreement, it will establish and maintain a segregated
account with the lender the value of which at least equals the principal amount
of the reverse repurchase transaction, including accrued interest.

The average monthly balance of reverse repurchase agreements outstanding
during the year ended December 31, 1996 was $203,812,763 at a weighted average
interest rate of approximately 5.50%. The maximum amount of repurchase

16
<PAGE>

agreements outstanding at any month-end during the year was $255,006,750 as of
January 31, 1996 which was 25.81% of total assets. The amount of reverse
repurchase agreements outstanding at December 31, 1996 was $213,085,375, which
was 25.98% 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 the lower repurchase price
at the future date.

The average monthly balance of dollar rolls outstanding during the year
ended December 31, 1996 was approximately $17,200,000. The maximum amount of
dollar rolls outstanding at any month end during the period was $20,437,400 as
of January 31, 1996 which was 2.1% of total assets.

NOTE 5. CAPITAL
There are 200 million shares of $.01 par value common stock authorized. Of
the 57,510,639 shares outstanding at December 31, 1996 the adviser owned 10,639
shares.

NOTE 6. DIVIDENDS AND DISTRIBUTIONS
Subsequent to December 31, 1996, the Board of Directors of the Trust
declared a dividend from undistributed earnings of $.03958 per share payable
February 28, 1997 to shareholders of record on February 14, 1997.

NOTE 7. QUARTERLY DATA
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE (DECREASE)
UNREALIZED IN NET ASSETS
NET INVESTMENT GAIN (LOSS) RESULTING FROM
QUARTERLY TOTAL INCOME ON INVESTMENTS OPERATIONS
PERIOD INCOME AMOUNT PER SHARE AMOUNT PER SHARE AMOUNT PER SHARE
------ ------ ------------------ --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1995 to
March 31, 1995 .... $11,217,003 $10,207,637 $.18 $25,752,043 $.45 $35,959,680 $.63
April 1, 1995 to
June 30, 1995 ..... 9,182,551 8,009,072 .14 18,596,436 .33 26,595,508 .47
July 1, 1995 to
September 30, 1995. 9,683,299 8,804,290 .15 (442,396) (.01) 8,361,894 .14
October 1, 1995 to
December 31, 1995.. 9,636,633 8,776,124 .15 21,272,633 .37 30,048,757 .52
January 1, 1996 to
March 31, 1996 .... 10,023,028 9,051,736 .16 (22,776,515) (.40) (13,724,779) (.24)
March 31, 1996 to
June 30, 1996 ..... 8,707,103 7,680,599 .13 (4,289,024) (.07) 3,391,575 .06
July 1, 1996 to
September 30, 1996. 8,360,707 7,373,059 .13 4,613,798 .08 11,986,857 .21
October 1, 1996 to
December 31, 1996.. 9,918,764 9,065,571 .16 9,969,465 .17 19,035,036 .33

</TABLE>

DIVIDENDS PERIOD
AND END
QUARTERLY DISTRIBUTIONS SHARE PRICE NET ASSET
PERIOD AMOUNT PER SHARE HIGH LOW VALUE
------ -------------------- -------------- -----
January 1, 1995 to
March 31, 1995 .... $8,985,462 $.15 $7 5/8 $7 1/8 $8.46
April 1, 1995 to
June 30, 1995 ..... 8,985,462 .15 8 1/8 7 9/16 8.90
July 1, 1995 to
September 30, 1995. 7,189,405 .13 7 3/4 7 1/4 8.92
October 1, 1995 to
December 31, 1995. 7,189,405 .13 7 7/8 7 1/2 9.32
January 1, 1996 to
March 31, 1996 .... 7,189,405 .13 7 7/8 7 3/8 8.95
March 31, 1996 to
June 30, 1996 ..... 7,189,405 .13 7 5/8 7 1/4 8.89
July 1, 1996 to
September 30, 1996. 6,829,328 .12 7 7/8 7 3/8 8.98
October 1, 1996 to
December 31, 1996.. 9,105,777 .15 8 7 1/2 9.15
- --------------------------------------------------------------------------------

17
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
The BlackRock Strategic Term Trust Inc.:

We have audited the accompanying statement of assets and liabilities of The
BlackRock Strategic Term Trust Inc. including the portfolio of investments, as
of December 31, 1996, and the related statements of operations and of cash flows
for the year then ended, the statement of changes in net assets for the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1996, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock
Strategic Term Trust Inc. as of December 31, 1996, and the results of its
operations, its cash flows, the changes in its net assets and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.

/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP

New York, New York
February 3, 1997

18
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
TAX INFORMATION
- --------------------------------------------------------------------------------
We wish to advise you as to the Federal Tax status of dividends and
distributions paid by the Trust during its fiscal year ended December 31, 1996.

During its fiscal year ended December 31, 1996, the Trust paid aggregate
dividends and distributions totalling $0.5271 per share from net investment
income. For federal income tax purposes, the aggregate of any dividends and
short-term capital gains distributions you received are reportable in your 1996
federal income tax return as ordinary income. Further, we wish to advise you
that your income dividends do not qualify for the dividends received deduction.

For the purposes of preparing your 1996 federal income tax return, however,
you should report the amounts as reflected on the appropriate Form 1099 DIV
which will be mailed to you in January 1997.

- --------------------------------------------------------------------------------
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
automatically reinvested by Dean Witter Trust Company (the "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 Custodian, 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, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market on the New York
Stock Exchange, for the participants' accounts. The Trust will not issue shares
under the Plan.

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 income tax that may be payable on
such dividends or distributions.

Experience under the Plan may indicate that changes are desirable.
Accordingly, 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) 576-3143 or BlackRock Financial Management
at (800) 227-7BFM. The addresses are on the front of this report.

- --------------------------------------------------------------------------------
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.

19
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------

THE TRUST'S INVESTMENT OBJECTIVE
The Trust's investment objective is to manage a portfolio of investment grade
fixed income securities that will return at least $10 per share (the initial
public offering price per share) to investors on or shortly before December 31,
2002 while providing high monthly income.

WHO MANAGES THE TRUST?
BlackRock Financial Management, Inc. (BlackRock or the Adviser) is the
investment adviser for the Trust. BlackRock is a registered investment adviser
specializing in fixed income securities. Currently, BlackRock manages
approximately $43 billion of assets across the government, mortgage, corporate
and municipal sectors. These assets are managed on behalf of institutional and
individual investors in 21 closed-end funds traded either on the New York Stock
Exchange or the American Stock Exchange, several open-end funds and separate
accounts for more than 100 clients in the U.S. and overseas. BlackRock is a
subsidiary of PNC Asset Management Group, Inc. which is a division of PNC Bank,
one of the nation's largest banking organizations.

WHAT CAN THE TRUST INVEST IN?
The Trust may invest in all fixed income securities rated investment grade or
higher ("AAA", "AA", "A" or "BBB"). Examples of securities in which the Trust
may invest include U.S. government and government agency securities, zero coupon
securities, mortgage-backed securities, corporate debt securities, asset-backed
securities, U.S. dollar-denominated foreign debt securities and municipal
securities. 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) and corporate debt
securities.

WHAT IS THE ADVISER'S INVESTMENT STRATEGY?
The Adviser will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($10 per share)
at maturity. The Trust will implement a conservative strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment at the end of 2002. At the Trust's termination,
BlackRock expects that the value of the securities which have matured, combined
with the value of the securities that are sold, will be sufficient to return the
initial offering price to investors. On a continuous basis, the Trust will seek
its objective by actively managing its assets in relation to market conditions,
interest rate changes and, importantly, the remaining term to maturity of the
Trust.

In addition to seeking the return of the initial offering price, the Adviser
also seeks to provide high monthly income to investors. The portfolio managers
will attempt to achieve this objective by investing in securities that provide
competitive income. In addition, leverage will be used (in an amount up to
331/3% of total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
the remaining term of the Trust. Since shorter-term securities typically yield
less than longer-term securities, this strategy will likely result in a decline
in the Trust's income over time. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
in the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.

20
<PAGE>

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 fund through the Trust's transfer agent, Dean Witter
Trust Company. 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 A TERM 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 typically leveraged at approximately 331/3% 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 fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rising rate environment. BlackRock'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 BlackRock consider that reduction
to be in the best interests of the shareholders.

SPECIAL CONSIDERATIONS AND RISK FACTORS RELEVANT TO TERM TRUSTS
THE TRUST IS INTENDED TO BE A LONG-TERM INVESTMENT AND IS NOT A SHORT-TERM
TRADING VEHICLE.

RETURN OF INITIAL INVESTMENT. Although the objective of the Trust is to return
its initial offering price upon termination, there can be no assurance that this
objective will be achieved.

DIVIDEND CONSIDERATIONS. The income and dividends paid by the Trust are likely
to decline to some extent over the term of the Trust due to the anticipated
shortening of the dollar-weighted average maturity of the Trust's assets.

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 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 movements on these securities are generally more
sensitive to interest rate movements than securities that make periodic coupon
payments. These securities appreciate in value over time and can play an
important role in helping the Trust achieve its primary objective.

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.

NON-U.S SECURITIES. The Trust may invest less than 10% of its assets in non-U.S.
dollar-denominated securities which involve special risks such as currency,
political and economic risks, although under current market conditions does not
do so.

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.

21
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
GLOSSARY
- --------------------------------------------------------------------------------

ADJUSTABLE RATE MORTGAGE-
BACKED SECURITIES (ARMS): Mortgage instruments with interest rates that
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 OBLIGATIONS (CMOS): Mortgage-backed securities which separate 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.

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: This is income generated by securities in a
portfolio and distributed to shareholders after
deduction of expenses. This Trust declares and
pays dividends on a monthly basis.

DIVIDEND REINVESTMENT: Shareholders may elect to have all distributions
of dividends and 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 Association, 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 payments 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.

22
<PAGE>

GOVERNMENT SECURITIES: Securities issued or guaranteed by the U.S.
government, or one of its agencies or
instrumentalities, such as GNMA (Government
National Mortgage Association), FNMA (Federal
National Mortgage Association) and FHLMC (Federal
Home Loan Mortgage Corporation).

INTEREST-ONLY Mortgage securities that receive only the interest
SECURITIES (I/O): cash flows from an underlying pool of mortgage
loans or underlying pass-through securities. Also
known as a Strip.

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.

MULTIPLE-CLASS PASS-THROUGHS: Collateralized Mortgage Obligations.

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 NEW
YORK TIMES or THE WALL STREET JOURNAL each Monday.

PRINCIPAL-ONLY Mortgage securities that receive only the
SECURITIES (P/O): principal cash flows from an underlying pool of
mortgage loans or underlying pass-through
securities.

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, Fannie
Mae 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 sells
AGREEMENTS: 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
distribution from underlying mortgage-backed
securities. IO's and PO's are examples of strips.

23
<PAGE>

BLACKROCK

DIRECTORS
Laurence D. Fink, CHAIRMAN
Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
James Grosfeld
James Clayburn La Force, Jr.
Ralph L. Schlosstein

OFFICERS
Ralph L. Schlosstein, PRESIDENT
Keith T. Anderson, VICE PRESIDENT

Michael C. Huebsch, VICE PRESIDENT
Scott Amero, VICE PRESIDENT
Robert S. Kapito, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX
Henry Gabbay, TREASURER
James Kong, ASSISTANT TREASURER
Karen H. Sabath, SECRETARY

INVESTMENT ADVISER
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
(800) 227-7BFM

ADMINISTRATOR
Dean Witter InerCapital Inc.
Two World Trade Center
New York, NY 10048
(800) 729-8855

CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
(800) 699-1BFM

TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311-3977
(800) 526-3143

INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434

LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022

This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of any securities.

THE BLACKROCK STRATEGIC TERM TRUST INC.
c/o Dean Witter InterCapital, Inc.
71st Floor
Two World Trade Center
New York, NY 10048
Call toll free (800) 227-7BFM

09247P-10-8
[Logo] Printed on recycled paper

THE BLACKROCK
STRATEGIC TERM
TRUST INC.
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1996

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