BLACKROCK STRATEGIC TERM TRUST INC, N-30D, 1999-03-04

BLACKROCK STRATEGIC TERM TRUST INC
N-30D, 1999-03-04

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

January 31, 1999

Dear Shareholders:

Over the past twelve months, U.S. Treasury securities have experienced a
strong rally, as investors sought a safe haven from global market turmoil and
the Federal Reserve continued to cut interest rates. Other segments of the fixed
income market have lagged behind Treasuries, but still produced generally
positive returns since our last report. We anticipate that the Federal Reserve
will remain prepared to combat any signs of a credit crunch through interest
rate cuts, and given the unstable economic situation in Brazil, the Fed likely
will retain an easing bias.

Despite previous worries of a second half slowdown in 1998, the U.S. economy
continues to expand rapidly, supported by strong consumer spending. This
momentum, however, may not continue as briskly into the new year, based on
weaker corporate profits and a loosening of the labor markets. Already, major
corporations have warned of slower profit growth and announced major layoffs.

This report contains detailed market and portfolio strategy by your Trust's
managers in addition to the Trust's audited financial statements and a detailed
list of the portfolio's holdings. We thank you for your continued investment in
the Trust and look forward to serving your investment needs in the future.

Sincerely,

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

Laurence D. Fink Ralph L. Schlosstein
Chairman President

<PAGE>

January 31, 1999

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, 1998. 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 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 (the market value of its assets per share) over the period:

<TABLE>
<CAPTION>
---------------------------------------------------
12/31/98 12/31/97 CHANGE HIGH LOW
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $9.1875 $8.5000 8.09% $9.19 $8.44
-----------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $10.08 $9.54 5.66% $10.18 $9.53
-----------------------------------------------------------------------------------
5-YEAR U.S. TREASURY NOTE 4.54% 5.71% (20.49%) 5.79% 3.97%
-----------------------------------------------------------------------------------
</TABLE>

THE FIXED INCOME MARKETS

The first half of the Trust's fiscal year saw Treasury yields decline
towards historic lows. These lows were the result of budget surplus projections
as well as the Federal Reserve's decision to move from a tightening bias to a
neutral interest rate policy. The positive economic momentum throughout the
first half of the fiscal year was strengthened by unseasonably warm weather that
led to increased consumer spending and job gains, which softened the negative
impact on trade from the Asian financial crisis.

The second half of the trust's fiscal year witnessed virtually
unparalleled market turbulence. Although consumers continued their spending
domestically, demand for U.S. goods abroad faltered, as the strong dollar and
overseas weakness, especially in Asia, drove prices for U.S. goods higher
relative to foreign goods.

Toward year-end, U.S. GDP growth rebounded; however, the instability in
global financial markets began to rattle investor confidence. The devaluation of
the Russian ruble and the fear of a possible devaluation of the Brazilian
currency caused a flight-to-quality to U.S. Treasuries. Corporate yield spreads
across all credits to Treasuries widened dramatically as a result of the
sell-off. This dramatic shift of investor sentiment culminated in the near
collapse of a prominent hedge fund.

<PAGE>

The Treasury market rally pushed Treasury yields to historic levels below
the 5% barrier. In response to the financial fragility in the third quarter of
1998, the Fed eased interest rates on September 29, 1998 by 25bps and again on
October 15, in an unusual between-meetings move. On November 17, the Fed eased
interest rates again by 25bps.

These rate cuts seem to have had their desired effect on the US
economy--which finished the year with a 3.5% growth rate. Growth in 1999,
however, may decrease significantly and further easing of interest rates by the
Federal Reserve is possible, as the Western economies will need to provide
support for the global economy. With economic growth and labor markets expected
to soften during the first half of 1999, we expect inflation to remain under
control.

The global instability which resulted in a flight-to-quality to US
Treasuries caused mortgages to severely underperform Treasuries. However, as
these markets have regained some stability, investors have begun to regain
confidence in the international markets. Consequently, we believe that current
spreads in the corporate, and mortgage markets will provide the basis for
outperforming Treasuries.

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, 1997 asset
composition.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
--------------------------------------------------------------------------------------------
COMPOSITION DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------------------------------------------------------------------
<S> <C> <C>
Taxable Zero Coupon Bond 24% 27%
--------------------------------------------------------------------------------------------
Corporate Bonds 17% 14%
--------------------------------------------------------------------------------------------
U.S. Government Securities 10% 6%
--------------------------------------------------------------------------------------------
Multiple Class Mortgage Pass-Throughs 9% 15%
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Asset-Backed Securities 6% 4%
--------------------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 5% 6%
--------------------------------------------------------------------------------------------
Mortgage Pass-Throughs 5% 2%
--------------------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities 4% 3%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 4% 8%
--------------------------------------------------------------------------------------------
Taxable Municipal Bonds 4% 6%
--------------------------------------------------------------------------------------------
Interest-Only Commercial Mortgage-Backed Securities 4% --
--------------------------------------------------------------------------------------------
Inverse-Floating Rate Mortgages 3% 3%
--------------------------------------------------------------------------------------------
FHA Project Loans 2% 2%
--------------------------------------------------------------------------------------------
Adjustable Rate Mortgages 1% 2%
--------------------------------------------------------------------------------------------
CMO Residuals 1% 1%
--------------------------------------------------------------------------------------------
FNMA Project Loans 1% 1%
--------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
RATING % OF CORPORATES
-------------------------------------------
CREDIT RATING DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA or Equivalent 5% 7%
--------------------------------------------------------------------------------------------
AA or Equivalent 22% 5%
--------------------------------------------------------------------------------------------
A or Equivalent 34% 34%
--------------------------------------------------------------------------------------------
BBB or Equivalent 39% 54%
--------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

In accordance with the Trust's primary investment objective of returning
the initial offer price upon maturity, the Trust's portfolio management activity
focused on adding securities which offered both attractive yield spreads over
Treasury securities and a maturity date matching the Trust's termination date of
December 31, 2002. Additionally, the Trust has been active in reducing positions
in bonds which have maturity dates or potential cash flows after the Trust's
termination date.

We appreciate your investment in The BlackRock Strategic Term Trust Inc.
and look forward to managing the fund 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 weren't answered
in this report. You can also 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 Director and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.

THE BLACKROCK STRATEGIC TERM TRUST INC.
------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BGT
------------------------------------------------------------------------------
Initial Offering Date: December 28, 1990
------------------------------------------------------------------------------
Closing Stock Price as of 12/31/98: $9.19
------------------------------------------------------------------------------
Net Asset Value as of 12/31/98: $10.08
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Yield on Closing Stock Price as of 12/31/98 ($9.19)1: 5.17%
------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.0396
------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.4750
------------------------------------------------------------------------------

- -------------
1Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2Distribution not constant and is subject to change.

<PAGE>
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THE BLACKROCK STRATEGIC TERM TRUST INC.
CONSOLIDATED PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------

LONG-TERM INVESTMENTS--147.7%
MORTGAGE PASS-THROUGHS--12.9%
Federal Home Loan Mortgage Corp.,
$17,972+ 6.50%, 11/01/25-09/01/28 ............... $18,100,694
486 7.50%, 11/01/10, 15 Year ............... 500,022
387 8.00%, 09/01/23 ........................ 400,738
724 9.00%, 11/01/05, 15 Year ............... 750,310
Federal National Mortgage Association,
45,000 6.50%, (TBA) ........................... 45,295,313
5,590 7.25%, 01/01/23, Project 797 ........... 5,724,398
3,923 7.50%, 06/01/08, 15 Year ............... 4,034,742
Government National Mortgage
Association,
69 9.00%, 01/15-03/15/20 .................. 73,664
-----------
74,879,881
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MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--14.5%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
12,811+ Series 90, Class 90-G,
10/15/20 ............................. 13,526,719
672 Series 1218, Class 1218-G,
05/15/14 ............................. 668,148
540 Series 1360, Class 1360-PE,
12/15/17 ............................. 533,077
1,883 Series 1488, Class 1488-F,
09/15/06 ............................. 1,886,163
1,625 Series 1488, Class 1488-PF,
09/15/06 ............................. 1,651,520
398 Series 1590, Class 1590-K,
10/15/23 ............................. 398,829
908 Series 1602, Class 1602-Y,
07/15/22 ............................. 905,574
1,032 Series 1603, Class 1603-MB,
10/15/23 (ARM) ....................... 1,049,827
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,469 Trust G93-17, Class 17-SH,
04/25/23 (ARM). ...................... 1,372,502
10,000+ Trust 1992-43, Class 43-E,
04/15/22. ............................ 10,387,800
12,976 Trust 1992-129, Class 129-G,
06/25/18. ............................ 12,843,424
2,000 Trust 1992-155, Class 155-SB,
12/25/06 (ARM). ...................... 2,171,200
$27,725++ Trust 1992-156, Class 156-H,
04/15/06. ............................ 27,142,578
327 Trust 1993-117, Class 117-SA,
07/25/08 (ARM). ...................... 331,023
1,628 Trust 1993-170, Class 170-SA,
09/25/08 (ARM). ...................... 1,632,176
703 Trust 1993-185, Class 185-SH,
04/25/19 . ........................... 733,165
1,899 TRUST 1993-225, CLASS 225-SB,
07/25/23 . ........................... 1,882,626
2,205 Trust 1994-40, Class 40-H,
10/25/20. ............................ 2,214,261
2,000 Trust 1997-7, Class WC,
04/25/22 ............................. 355,000
Government National Mortgage
Association,
2,019 Trust 1996-3, Class 3-C,
09/20/20. ............................ 2,070,488
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83,756,100
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COMMERCIAL MORTGAGE-BACKED
SECURITIES--12.7%
AAA 2,600 Aetna Commercial Mortgage Trust,
Series 1995-C5, Class B,
6.74%, 12/26/30 ....................... 2,677,656
AAA 92,105 CS First Boston Mortgage Securities,
Series 1997-C1, Class AX,
04/20/22 (I/O) # ...................... 9,158,753
BBB 3,000 DLJ Mortgage Acceptance Corp.,
Series 1993-MF7, Class B,
9.40%, 06/18/03 ....................... 3,175,425
Baa2 4,000 FDIC Trust,
Series 1994-C1, Class IIF,
8.70%, 09/25/25 ....................... 4,167,680
AAA 117,367 First Union Lehman Brothers
Bank Of America
Series 1998-C2, Class IO,
05/18/28 (I/O) ........................ 4,819,737
LTC Commercial Mortgage
Pass-Through Certificates,
AAA 4,043 Series 1996-1, Class A,
7.06%, 04/15/28 # ..................... 4,144,297
BBB+ 1,000 Series 1993-1, Class D,
9.20%, 11/28/12 ....................... 1,036,563
Merrill Lynch Mortgage Investors, Inc.,
A 2,290 Series 1995-C1, Class C,
7.678%, 05/25/15 ...................... 2,326,653
AAA 105,811 Series 1997-C2, Class IO,
12/10/29 (I/O) ........................ 7,745,406
AAA 73,708 Series 1998-C2, Class IO,
02/15/30 (I/O) ........................ 6,001,484

See Notes to Consolidated Financial Statements.

5
<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------

Morgan Stanley Capital Trust I,
AAA $ 1,360 Series 1995-GAL1, Class A1,
7.00%, 08/15/27 # ..................... $ 1,378,190
AAA 99,225 Series 1998-HF1, Class X,
02/15/18 (I/O) ........................ 6,259,398
Paine Webber Mortgage
Acceptance Corp.,
AAA 2,000 Series 1995-M1, Class M1-A,
6.70%, 01/15/07 # ..................... 2,040,562
BBB 1,656 Series 1995-M1, Class M1-D,
7.30%, 01/15/07 # ..................... 1,656,322
Resolution Trust Corp.,
A 1,415 Series 1993-C3, Class C3-D,
7.10%, 12/25/24 ....................... 1,412,968
AA 4,000 Series 1994-C1, Class C1-C,
8.00%, 06/25/26 ....................... 4,032,500
AA 2,702 Salomon Brothers Mortgage
Securities Trust VII,
Series 1997-TZH, Class TZH-A1,
7.15%, 03/25/22 # ....................... 2,795,830
AAA 3,925 Structured Asset Securities Corp.,
Series 1996-CFL, Class B,
6.30%, 02/25/28 ....................... 3,952,728
A 4,500 TVO Southwest, Series 1994-MFI,
Class A2, 9.37%, 11/18/04 # ............. 4,832,247
-----------
73,614,399
-----------
STRIPPED MORTGAGE-BACKED
SECURITIES--15.5%
AAA 502 Bear Stearns Secured Investors Trust,
Series 1988-8, Class C,
12/01/18 (P/O) ........................ 497,818
AAA 2,251@ Collateralized Mortgage Obligation,
Trust 26, Class A,
04/23/17 (P/O) ........................ 1,958,789
Federal Home Loan Mortgage Corp.,
4,447 Series 2, Class 2-M,
07/25/18 (I/O) ........................ 410,840
13,458 Series 4, Class S,
11/25/22 (I/O) ........................ 723,376
2,094 Series 39, Class 39-J,
03/25/24 (I/O) ........................ 222,740
258 Series 186, Class 186-J,
08/15/21 (I/O) ........................ 45,727
5,106 Series 1055, Class 1055-I,
03/15/21 (I/O) ........................ 1,008,501
6,232 Series 1215, Class 1215-P,
06/15/06 (I/O) ........................ 680,095
471 Series 1373, Class 1373-B,
09/15/22 (P/O) ........................ 444,445
348 Series 1375, Class 1375-H,
12/15/05 (I/O) ........................ 41,508
$ 5,505 Series 1379, Class 1379-FB,
08/15/18 (I/O) ........................ 491,732
5,000 Series 1434, Class 1434-LA,
03/15/19 (I/O) ........................ 568,080
14,397 Series 1472, Class 1472-S,
05/15/06 (I/O) ........................ 530,659
13,611 Series 1551, Class 1551-J
07/15/08 (I/O) ........................ 524,826
5,596 Series 1590, Class 1590-JC,
01/15/19 (I/O) ........................ 413,847
2,269 Series 1597, Class 1597-H,
07/15/23 (P/O) ........................ 1,502,117
4,741 Series 1626, Class 1626-PV,
12/15/08 (I/O) ........................ 423,565
2,067 Series 1662, Class 1662-P,
11/15/07 (I/O) ........................ 321,186
3,019 Series 1662, Class 1662-PO,
01/15/09 (P/O) ........................ 2,501,015
8,682 Series 1682, Class 1682-SB,
09/15/23 (I/O) .......................... 439,540
7,966 Series 1938, Class 1938-SB,
08/15/19 (I/O) ........................ 21,268
96,914 Series 1954, Class 1954-BA,
04/15/21 (I/O) ........................ 2,826,988
59,831 Series 1954, Class 1954-BB,
04/15/21 (I/O) ........................ 682,674
26,397 Series 1954, Class 1954-LL,
05/15/21 (I/O) ........................ 308,847
26,397 Series 1954, Class 1954-LM,
05/15/21 (I/O) ........................ 314,126
21,162 Series 1954, Class 1954-MD,
03/15/16 (I/O) ........................ 2,261,359
1,584 Series 2009, Class 2009-A,
12/15/22 (P/O) ........................ 1,455,296
15,351 Series 2049, Class 2049-PK,
06/15/14 (I/O) ........................ 1,611,387
22,670 Series 2054, Class 2054-PL,
10/15/19 (I/O) ........................ 2,153,616
Federal National Mortgage Association,
10,000 Trust G93-22, Class P,
06/25/23 (I/O) ........................ 3,955,370
4,605 Trust G93-25, Class N,
12/25/19 (I/O) ........................ 828,616
11,094 Trust G93-26, Class PT,
12/25/17 (I/O) ........................ 1,030,785
19,459 Trust G93-31, Class PS,
08/25/18 (I/O) ........................ 745,869
824 Trust 225, Class 1,
06/01/23 (P/O) ........................ 693,823
2,031 Trust 1991-49, Class G,
05/25/06 (I/O) ........................ 408,664
1,816 Trust 1992-82, Class IO,
05/25/22 (I/O) ........................ 410,101
3,024 Trust 1992-108, Class 108-L,
07/25/07 (I/O) ........................ 733,697

See Notes to Consolidated Financial Statements.

<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------

$ 2,312 Trust 1992-208, Class S,
11/25/07 (I/O) ........................ $ 575,122
7,763 Trust 1993-67, Class B,
12/25/21 (P/O) ........................ 7,407,609
2,617 Trust 1993-92, Class G,
05/25/23 (P/O) ........................ 1,733,612
6,488 Trust 1993-213, Class H,
09/25/23 (P/O) ........................ 6,291,303
1,225 Trust 1993-237, Class C,
11/25/23 (P/O) ........................ 1,061,203
4,559 Trust 1993-245, Class JA,
03/25/19 (I/O) ........................ 286,778
800 Trust 1994-8, Class D,
11/25/23 (P/O) ........................ 712,744
2,339 Trust 1994-42, Class SO,
03/25/23 (I/O) ........................ 353,242
281 Trust 1994-54, Class C,
11/25/23 (P/O) .......................... 279,084
550 Trust 1994-54, Class E,
11/25/23 (P/O) ........................ 469,095
3,445++ Trust 1994-87, Class E,
03/25/09 (P/O) ........................ 2,818,271
20,598 Trust 1996-15, Class SG,
08/25/08 (I/O) ........................ 2,937,277
12,937 Trust 1996-20, Class SB,
10/25/08 (I/O) ........................ 3,042,134
4,484 Trust 1996-24, Class SB,
10/25/08 (I/O) ........................ 939,912
8,499 Trust 1996-24, Class SJ,
01/25/22 (I/O) ........................ 2,531,868
2,104 Trust 1996-54, Class SM,
09/25/23 (I/O) ........................ 106,501
3,773 Trust 1997-17, Class PJ,
03/18/18 (I/O) ........................ 44,807
2,482 Trust 1997-19, Class C,
09/25/23 (P/O) ........................ 2,259,050
3,433 Trust 1997-19, Class H,
10/25/22 (P/O) ........................ 3,266,821
815 Trust 1997-32, Class ML,
02/25/27 (P/O) ........................ 791,085
2,446 Trust 1997-35, Class PK,
09/18/21 (I/O) ........................ 139,127
41,406 Trust 1997-35, Class SB,
03/25/09 (I/O) ........................ 1,215,915
24,000 Trust 1997-44, Class SC,
06/25/08 (I/O) . ...................... 1,414,488
27,219 Trust 1997-50, Class HJ,
12/25/17 (I/O) ........................ 2,095,020
50,441 Trust 1997-90, Class L,
10/25/19 (I/O) ........................ 5,067,738
51,375 Trust 1998-27, Class L,
03/25/20 (I/O) ........................ 5,029,392
2,168 Government National Mortgage
Association,
Series 1997-16, Class PR,
12/20/20 (I/O) ........................ 204,307
AAA 2,463 Prudential Bache CMO Trust,
Series 10, Class H,
04/01/19 (P/O) ........................ 2,243,313
N/R 1,082 Salomon Brothers Mortgage Securities,
Series 1987-3, Class B,
10/23/17 (I/O) ........................ 296,122
----------
89,805,832
----------
ASSET-BACKED SECURITIES--8.9%
AAA 1,928 Barnett Auto Receivables Trust,
Class A2, 5.92%, 07/15/00 ............... 1,929,124
AAA 7,626 Brazos Student Loan Financial Corp.,
Series 1998-A, Class A1,
5.399%, 06/01/06 ........................ 7,548,344
Broad Index Secured Trust Offering,
Baa2 5,000 Series 1998-1A, Class A,
6.58%, 03/26/01 # ..................... 4,944,759
Baa2 5,000 Series 1998-4A, Class B2,
7.14%, 09/09/01 # ..................... 4,942,500
AAA 20,545 Chase Credit Card Master Trust,
Series 1997-5, Class 5-A,
6.194%, 08/15/05 ...................... 20,990,860
N/R 3,014 Global Rated Eligible Asset Trust,
Series 1998-A,
7.33%, 09/15/07 #/** .................. 2,092,470
Structured Mortgage Asset
Residential Trust #/**
N/R 4,106 Series 1997-2, Class 2,
8.24%, 03/15/06 ....................... 2,483,922
N/R 4,497 Series 1997-3,
8.724%, 04/15/06 ...................... 2,487,977
A1 4,500 Student Loan Marketing Association,
Trust 1995-1, Class 1,
10/25/09 .............................. 4,289,063
-----------
51,709,019
-----------
TAXABLE ZERO COUPON
BONDS--35.2%
Financing Corp (FICO Strips),
18,000 03/07/02 ................................ 15,434,820
29,300 12/27/02 ................................ 24,129,136
Government Trust Certificates (Israel),
25,000 11/15/02 ................................ 20,729,000
U.S. Treasury Strips,
119,800++ 08/15/02 ................................ 101,159,120
51,200++ 10/31/02 ................................ 42,873,344
-----------
204,325,420
-----------
TAXABLE MUNICIPAL BONDS--6.5%
AAA 1,000 Kern County California,
Pension Obligation,
6.39%, 08/15/02 ....................... 1,031,990

See Notes to Consolidated Financial Statements.

7
<PAGE>

AAA $ 3,510 Long Beach California,
Pension Obligation,
6.56%, 09/01/02 ....................... $ 3,643,029
AAA 5,000 Los Angeles County California,
Pension Obligation,
6.54%, 06/30/02 ....................... 5,178,750
AAA 10,000 New Jersey Economic
Development Auth., Zero Coupon,
02/15/03 .............................. 8,040,400
New York City G.O.,
A- 5,000 6.54%, 03/15/02 ......................... 5,127,750
A- 5,000 7.125%, 08/15/02 ........................ 5,237,300
A- 5,000 7.34%, 04/15/02 ......................... 5,248,800
BBB+ 1,235 New York St. Environ. Fac. Auth.,
6.73%, 09/15/02 ......................... 1,280,411
AAA 1,950 San Francisco California International
Airport, 6.35%, 05/01/02 ................ 2,005,419
AA 1,000 St. Josephs Health System California,
G.O., 7.13%, 07/01/02 ................... 1,050,090
-----------
37,843,939
-----------
CORPORAATE BONDS--24.4%
BANKING & FINANCE--10.9%
A3 4,900 Ahmanson HF & Co.,
8.25%, 10/01/02 ......................... 5,254,400
A3 1,700 Amsouth Bankcorp.,
6.75%, 11/01/25 ......................... 1,752,381
A+ 5,000 Goldman Sachs Group L P,
6.25%, 02/01/03 # ....................... 5,007,872
Lehman Brothers Hldgs Inc
A 5,000 6.625%, 12/27/02 ........................ 5,011,969
A 875 6.75%, 09/24/01 ......................... 882,546
A 5,000 7.25%, 04/15/03 ......................... 5,138,950
AA- 1,665 Merrill Lynch & Co. Inc.,
5.75%, 11/04/02 ......................... 1,669,612
Nationsbank Corp.,
Aa2 5,000 6.65%, 04/09/02 ......................... 5,151,200
Aa2 5,000 7.00%, 09/15/01 ......................... 5,195,200
Paine Webber Group Inc.,
BBB+ 2,190 7.875%, 02/15/03 ........................ 2,314,655
BBB+ 7,790 8.25%, 05/01/02 ......................... 8,254,596
Salomon Inc.,
Aa3 3,000 5.875%, 02/01/01 ........................ 3,021,600
Aa3 1,500 7.00%, 05/15/00 ......................... 1,529,385
Aa3 4,500 7.98%, 03/01/00 ......................... 4,624,290
A- 8,500 Transamerica Finance Corp.,
6.75%, 06/01/00 ......................... 8,608,885
-----------
63,417,541
-----------
INDUSTRIAL--5.3%
A 1,000 Bass America Inc.,
8.125%, 03/31/02 ........................ 1,065,810
A1 1,000 Ford Motor Credit Co.,
8.00%, 06/15/02 ......................... 1,075,430
BBB+ 5,425 Jones Apparel Group Inc.,
6.25%, 10/01/01 # ....................... 5,391,051
BBB+ 5,000 Norfolk Southern Corp.,
6.95%, 05/01/02 ......................... 5,196,400
Baa1 5,265 Raytheon Co., 6.45%, 08/15/02 ............. 5,399,889
BBB- 5,000 RJR Nabisco Inc., 8.625%, 12/01/02 5,079,800
AA- 4,000 TCI Communications Inc.,
9.25%, 04/15/02 ........................ 4,447,800
Baa1 2,700 Tenneco Inc., 8.075%, 10/01/02 ............ 2,815,263
-----------
30,471,443
-----------
UTILITY--2.5%
A3 5,000@ Columbia Energy Group Inc.,
6.61%, 11/28/02 ........................... 5,162,000
BBB+ 5,000 MCI Worldcom Inc. Communications,
6.125%, 04/15/02 .......................... 5,076,100
A 4,000 360 Communications,
7.125%, 03/01/03 .......................... 4,231,040
-----------
14,469,140
-----------
YANKEE BONDS--5.7%
AA1 5,000@ AFRICAN DEVELOPMENT BANK,
7.75%, 12/15/01. .......................... 5,302,048
A3 5,000 Corporacion Andina De Fome,
7.10%, 02/01/03 ........................... 4,850,950
BBB- 3,500 Empresa Elec. Guacolda SA,
7.95%, 04/30/03 (Chile) # ................. 3,211,862
BBB+ 1,650 Empresa Elec. Pehuence,
7.30%, 05/01/03 (Chile) ................... 1,520,077
BBB- 2,000 Korea Development Bank,
6.50%, 11/15/02 ........................... 1,816,580
BBB- 5,000 Transpatadora de Gas Tragas,
10.25%, 04/25/01 (Argentina) .............. 5,100,000
AAA 7,500 U.S. Remittance Master Trust,
Series 1996-1, 01/01/01 # ................. 7,478,906
Baa1 3,669 YPF Sociedad Anonima,
7.50%, 10/26/02 (Argentina) ............... 3,674,790
-----------
32,955,213
-----------
Total corporate bonds ..................... 141,313,337
-----------
UNITED STATES GOVERNMENT
SECURITIES--15.7%
85,000++ United States Treasury Bond,
5.5%, 08/15/28 ............................ 88,971,200
1,680++ United States Treasury Notes,
6.125%, 08/15/07 .......................... 1,834,880
------------
90,806,080
-----------
COLLATERALIZED MORTGAGE
OBLIGATION RESIDUALS **--0.4%
10 Federal Home Loan Mortgage Corp.,
Series 1016, Class 1016-R,
11/15/20 ................................ 58,400
Federal National Mortgage Association,
REMIC,
1 Trust 1991-9, Class 9-R,
02/25/06. ............................... 391,500
1 Trust 1991-9, Class 9-RL,
02/25/06. ............................... 1,000
1 Trust 1991-48, Class 48-R,
05/25/06. ............................... 1,350,000
1 Trust 1991-48, Class 48-RL,
05/25/06. ............................... 1,000
10 Trust 1991-50, Class 50-R,
05/25/06. ............................... 550,260
-----------
2,352,160
-----------
See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
NOTIONAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------

CALL OPTIONS PURCHASED--1.0%
$85,000 Interest Rate Swap,
3 Month LIBOR over 5.60%,
expires 08/07/00 .......................... $ 2,893,409
68,000 Interest Rate Swap,
3 MONTH LIBOR OVER 5.85%,
expires 08/09/10 .......................... 2,966,493
----------
5,859,902
----------
Total long-term investments
(cost $843,373,951) ....................... 856,266,069
-----------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS--9.3%
DISCOUNT NOTES
FederalHome Loan Bank,
$43,400 4.30%, due 01/04/99 ....................... 43,384,448
10,370 4.50%, due 01/04/99 ....................... 10,366,111
----------
Total short-term investments
(cost $53,750,559) ........................ 53,750,559
----------
Total investments before
outstanding call options written
and investments sold
short--157.0%
(cost $897,124,510) ....................... 910,016,628
----------
NOTIONAL
AMOUNT
(000)
---------
CALL OPTION WRITTEN--(0.5%)
$ $136,000 Interest Rate Swap,
3 Month LIBOR over 5.50%,
expires 08/10/99
(PREMIUM RECEIVED $833,000) ............... (3,019,744)
-----------

INVESTMENTS SOLD SHORT--(0.3%)
$1,700 U.S. Treasury Note,
4.75%, 11/15/08
(proceeds $1,718,429) ..................... $(1,713,277)
-----------
Total call options written
and investments sold
short--(0.8%) ............................. (4,733,021)
------------
Total investments net of
call options written and
investments sold
short--156.2%
(cost $894,573,081) ....................... 905,283,607
Liabilities in excess of other
assets--(56.2%) ........................... (325,530,994)
------------
NET ASSETS --100% ........................... $579,752,613
============

- -------------
*Using the higher of Standard & Poor's or Moody's rating **Illiquid securities
representing 1.6% of portfolio assets.
#Security restricted as to resale.
+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
@Entire principal amount pledged as collateral for financial futures contracts.

- -------------------------------------------------------------------------------
KEY TO ABBREVIATIONS
ARM - Ajustable Rate Mortgage
CMO - Collateralized Mortgage Obligation
G.O. - General Obligation
I/O - Interest Only Class
LIBOR - London InterBank Offer Rate
P/O - Principal Only Class
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Allocated
-------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES
DECEMBER 31, 1998
- -------------------------------------------------------------------------------

ASSETS
Investments, at value (cost $897,124,510)
(Note 1) .................................................. $910,016,628
Cash ........................................................ 534,896
Receivable for investments sold ............................. 38,141,709
Interest receivable ......................................... 8,285,557
Deposit with broker for investments sold short
(Note 1) .................................................. 1,727,626
Unrealized appreciation on interest rate swap
(Note 1 & 3) .............................................. 465,937
Due from broker--variation margin ........................... 135,343
------------
959,307,696
------------
LIABILITIES
Reverse repurchase agreements (Note 4) ...................... 286,008,300
Payable for investments purchased ........................... 83,828,030
Swap option written, at value
(proceeds $833,000) (Note 1) .............................. 3,019,744
Dividend payable ............................................ 2,276,444
Investments sold short, at value
(proceeds $1,718,429) (Note 1) ............................ 1,713,277
Interest payable ............................................ 1,702,290
Advisory fee payable (Note 2) ............................... 245,326
Administration fee payable (Note 2) ......................... 67,452
Other accrued expenses and liabilities ...................... 694,220
------------
379,555,083
------------
NET ASSETS .................................................. $579,752,613
============
Net assets were comprised of:
Common stock, at par (Note 5) ............................. $ 575,106
Paid-in capital in excess of par .......................... 535,541,670
------------
536,116,776
Undistributed net investment income ....................... 29,916,991
Accumulated net realized gain ............................. 2,319,689
Net unrealized appreciation ............................... 11,399,157
------------
Net assets, December 31, 1998 ............................. $579,752,613
============
Net asset value per share:
($579,752,613 / 57,510,639 shares of
common stock issued and outstanding) ...................... $10.08
======

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest (including net reduction of discount
of $546,034, and net of interest
expense of $13,335,783) .................................. $ 46,048,616
------------
Expenses
Investment advisory ........................................ 2,542,392
Administration ............................................. 706,220
Reports to shareholders .................................... 230,000
Custodian .................................................. 136,000
Audit ...................................................... 120,000
Directors .................................................. 85,000
Transfer agent ............................................. 84,000
Legal ...................................................... 58,000
Registration ............................................... 49,000
Miscellaneous .............................................. 210,400
------------
Total operating expenses ................................. 4,221,012
------------
Net investment income before excise tax ...................... 41,827,604
Excise tax ................................................. 401,000
------------
Net investment income ........................................ 41,426,604
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments ................................................ 10,227,875
Short sales ................................................ (15,529,502)
Options written ............................................ 799,788
Futures .................................................... 12,840,687
Swaps ...................................................... (689,119)
------------
7,649,729
------------
Change in net unrealized appreciation (depreciation) on:
Investments ................................................ (2,652,302)
Short sales .................................................. 13,078,459
Interest rate cap .......................................... 583,977
Options written ............................................ (1,908,554)
Futures .................................................... (44,144)
Swaps ...................................................... 419,851
------------
9,477,287
------------
Net gain on investments ...................................... 17,127,016
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................ $ 58,553,620
============

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH Cash flows used for operating activities:
Interest received ................................................. $ 57,352,214
Operating expenses paid ........................................... (4,091,904)
Interest expense paid ............................................. (13,969,747)
Cash paid for purchase of short-term
portfolio investments, net ...................................... (52,710,732)
Variation margin on futures ....................................... 13,144,593
Purchase of long-term portfolio investments ....................... (947,502,680)
Proceeds from disposition of long-term
portfolio investments ........................................... 901,433,047
------------
Net cash flows used for operating activities .................... (46,345,209
------------
Cash flows provided by financing activities:
Net increase in reverse repurchase agreements73,764,610
Cash dividends paid ............................................... (27,317,174)
-----------
Net cash flows provided by financing activities ................... 46,447,436
-----------
Net increase in cash ................................................ 102,227
Cash at beginning of year ........................................... 432,669
-----------
Cash at end of year ................................................. $ 534,896
===========

RECONCILIATION OF NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH FLOWS
USED FOR OPERATING ACTIVITIES
Net increase in net assets resulting
from operations ................................................... $ 58,553,620
------------
Increase in investments ............................................. (115,481,361)
Decrease in interest rate cap ....................................... 1,015,665
Net realized gain ................................................... (7,649,729)
Increase in unrealized appreciation ................................. (9,477,287)
Increase in unrealized appreciation on interest
rate swap ......................................................... (419,851)
Increase in receivable for investments sold ......................... (34,576,610)
Decrease in receivable for variation margin ......................... 303,906
Increase in interest receivable ..................................... (2,578,219)
Decrease in other assets ............................................ 13,642
Increase in payable for investments purchased ....................... 63,036,702
Increase in swap options written .................................... 1,047,994
Decrease in deposits with broker
for short sales ................................................... 58,313,625
Decrease in payable for securities sold short ....................... (58,343,448)
Decrease in interest payable ........................................ (633,964)
Increase in accrued expenses and
other liabilities ................................................. 530,106

------------
Total adjustments ................................................. (104,898,829)
------------
Net cash flows used for operating activities ........................ $ (46,345,209)
=============
</TABLE>
<PAGE>

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

FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997
------------ -----------
INCREASE IN NET ASSETS

Operations:

Net investment income ..... $ 41,426,604 $ 36,419,362

Net realized gain ......... 7,649,729 6,829,343

Net change in unrealized
appreciation ............ 9,477,287 6,468,860
------------- -------------

Net increase in net assets
resulting from operations 58,553,620 49,717,565

Dividends from net
investment income ....... (27,317,150) (27,317,264)
------------- -------------

Total increase ............ 31,236,470 22,400,301

NET ASSETS

Beginning of year ........... 548,516,143 526,115,842
------------- -------------

End of year ................. $ 579,752,613 $ 548,516,143
============= =============

See Notes to Consolidated Financial Statements.

11
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 9.54 $9.15 $9.32 $ 8.12 $ 9.36
------ ----- ----- ------ ------
Net investment income (net of interest expense
of $0.23, $0.18, $0.19, $0.34 and $0.19,
respectively) 0.72 0.67 0.58 0.62 0.46
Net realized and unrealized gain (loss) on investments 0.30 0.20 (0.22) 1.14 (1.07)
------ ----- ----- ------ ------
Net increase (decrease) from investment operations 1.02 0.87 0.36 1.76 (0.61)
------ ----- ----- ------ ------
Dividends from net investment income (0.48) (0.48) (0.53) (0.56) (0.49)
Distributions in excess of net investment income -- -- -- -- (0.14)
------ ----- ----- ------ ------
Net asset value, end of year* $10.08 $9.54 $9.15 $ 9.32 $ 8.12
====== ===== ===== ====== ======
Market value, end of year* $ 9.19 $8.50 $8.00 $ 7.63 $ 7.13
====== ===== ===== ====== ======
TOTAL INVESTMENT RETURN+: 14.02% 12.56% 11.79% 14.68% (20.28%)
RATIOS TO AVERAGE NET ASSETS:

Operating Expenses** 0.75% 0.73% 0.74% 0.78% 0.98%
Net Investment Income 7.35% 6.84% 6.39% 7.13% 5.32%
SUPPLEMENTAL DATA:

Average net assets (in thousands) $563,470 $531,101 $518,963 $501,869 $491,747
Portfolio turnover rate 61% 110% 107% 135% 133%
Net assets, end of year (000) $579,753 $548,516 $526,116 $535,741 $467,125
Reverse repurchase agreements
outstanding, end of year (000) $286,008 $212,244 $213,085 $232,396 $184,672
Asset coverage++ $ 3,027 $ 3,584 $ 3,469 $ 3,305 $ 3,529
</TABLE>

- -------------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday.
** The ratios of operating expenses, including interest expense, to average
net assets, were 3.12%, 3.05%, 3.87%, 4.68% and 3.18% for the years
indicated above, respectively. The ratios of operating expenses, including
interest expense and excise tax, to average net assets, were 3.19%, 3.05%,
3.87%, 4.68% and 3.18% for the years indicated above, respectively.
+ 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 each year 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 years 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 Consolidated Financial Statements.

12
<PAGE>

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

NOTE 1. ORGANIZATION & The BlackRock Strategic
ACCOUNTING Term Trust Inc., (the "Trust")
POLICIES 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 shortly
before 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 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 60 days or less are valued at amortized
cost, if their term to maturity from date of purchase is 60 days or less.
Short-term securities with a term to maturity greater than 60 days from the date
of purchase are valued at current market quotations until maturity.

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 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

<PAGE>

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) overtime.
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: Swap options are similar to options 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 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, bears the market risk of an
unfavorable change in the value of the swap contract underlying the written
option. 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. 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.

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

<PAGE>

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.

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: 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.

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
income 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 amounts.

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 exdividend 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.

RECLASSIFICATION OF CAPITAL ACCOUNTS: The trust accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect caused by
applying this statement was to decrease paid-in capital and increase
undistributed net investment income by $401,000 due to certain expenses not
being deductible for tax purposes. Net investment income, net realized gains and
net assets were not affected by this change.

NOTE 2. AGREEMENTS
The Trust has an Investment Advisory Agreement with BlackRock Financial
Management Inc. (the "Adviser"), a wholly-owned corporate subsidiary of
BlackRockAdvisors, Inc., which is an indirect majority-owned subsidiary of PNC
Bank, N.A., and an Administration Agreement with MorganStanley Dean Witter
Advisors Inc. ("MSDWA"), formerly DeanWitter InterCapital, Inc.

The investment advisory fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.45%. The administration fee paid to MSDWA is also
computed weekly and payable monthly at an annual rate 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. MSDWA 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 for short-term
investments, for the year ended December 31, 1998, aggregated $908,677,890 and
$689,136,102, 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, 1998, the Trust
held 11% of its portfolio assets in securities restricted as to resale.

The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNC Mortgage
Securities Corp. (or Sears

<PAGE>

Mortgage if PNC Mortgage Securities Corp. succeeded to rights and duties of
Sears) 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, PNC Mortgage Securities Corp. 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 PNC Mortgage Securities Corp. or its
affiliates, including Midland Loan Services, Inc.

The federal income tax basis of the Trust's investments at December 31, 1998
was substantially the same as the basis for financial reporting, and,
accordingly, net unrealized appreciation for federal income tax purposes was
$12,892,118 (gross unrealized appreciation--$38,125,687; gross unrealized
depreciation--$25,233,569).

For federal income tax purposes, the Trust has a capital loss carryforward as
of December 31, 1998 of approximately $7,584,199 of which $2,265,008 expires in
2001 and $5,319,191 expires at the termination of the Trust.

Details of open financial futures contracts at December 31, 1998 were as
follows:

VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE DECEMBER 31, UNREALIZED
CONTRACTS TYPE DATE DATE 1998 APPRECIATION
- --------- ----- ----------- ------- ----------- ------------
Long position:
500 30 Yr. T-Bond Mar. 1999 $63,756,531 $63,890,625 $134,094
Short position:
(80) 5 Yr. T-Bond Mar. 1999 (9,156,100) (9,067,500) 88,600
----------
$222,694
==========

THE TRUST HAD NO OPEN INTEREST RATE CAPS AS OF DECEMBER 31, 1998.

Details of open interest rate swaps at December 31, 1998 were as follows:

<TABLE>
<CAPTION>
NOTIONAL FIXED/ UNREALIZED
AMOUNT FLOATING FLOATING TERMINATION APPRECIATION
(000) TYPE RATE RATE PREMIUM (DEPRECIATION)
- ------- ----- ------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
$(150,000) Interest Rate 6.421% 3 Mo. LIBOR 07/27/01 $(7,188,141)
218,250 Interest Rate 6.365% 3 Mo. LIBOR 07/27/00 7,937,076
35,000 Floating Rate 3 Mo T-Bill 3 Mo. LIBOR 09/10/03 (168,000)
+ 80.25 bps
30,000 Floating Rate 3 Mo. T-Bill 3 Mo. LIBOR 09/10/03 (114,998)
+81.75 bps
-----------
$ 465,937
-----------
</TABLE>

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 daily balance of reverse repurchase agreements outstanding during
the year ended December 31, 1998 WAS $33,497,623 AT a weighted average interest
rate of approximately 4.97%. The maximum amount of reverse repurchase agreements
outstanding at any month-end during the year was $288,914,875 as of September
30, 1998 which was 26.0% 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 average monthly balance of dollar rolls outstanding during the year ended
December 31, 1998 was approximately $12,900,000. The maximum amount of dollar
rolls outstanding at any month-end during the period was $18,598,281 as of
December 31, 1998 which was 2.0% 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, 1998, the Adviser owned 10,724
shares.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGICTERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

The Shareholders and Board of Directors of
The BlackRock Strategic Term Trust Inc.:

We have audited the accompanying consolidated statement of assets and
liabilities of The BlackRock Strategic Term Trust Inc., including the
consolidated portfolio of investments, as of December 31, 1998, and the related
consolidated statements of operations and of consolidated cash flows for the
year then ended, the consolidated statement of changes in net assets for each of
the two years in the period then ended and the consolidated financial highlights
for each of the five years in the period then ended. These consolidated
financial statements and consolidated financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these consolidated financial statements and consolidated financial
highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements and
consolidated financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. Our procedures included
confirmation of securities owned at December 31, 1998, 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 consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements and consolidated
financial highlights present fairly, in all material respects, the consolidated
financial position of The BlackRock Strategic Term Trust Inc. as of December 31,
1998, and the results of its consolidated operations, its consolidated cash
flows, the changes in its consolidated net assets and the consolidated financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP
- ---------------------
Deloitte & Touche LLP

New York, New York
February 12, 1999

<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 the fiscal year ended Decebmber 31, 1998.

During the fiscal year ended December 31, 1998, the Trust paid aggregate
dividends and distributions of $.475 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 1998 federal
income tax returns as ordinary income. Further, we wish to advise you that your
income dividends do not qualify for the dividends received deduction.

For the purpose fo preparing your 1998 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which was mailed to you in January 1999.

- -------------------------------------------------------------------------------
DIVIDENDS 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 Morgan Stanley Dean Witter FSB (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 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, 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 or elsewhere 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, state or local income tax that may
be payable on such dividend 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) 576-3143 or BlackRock Financial Management at (800) 227-7BFM. The
addresses are on the front of this report.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK STRATEGIC TERM 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.

YEAR 2000 READINESS DISCLOSURE. The Trust is currently in the process of
evaluating its information technology infrastructure for Year 2000 compliance.
Substantially all of the Trust's information systems are supplied by the
Adviser. The Adviser has advised the Trust that it is currently evaluating
whether such systems are year 2000 compliant and that it expects to incur costs
of up to approximately five hundred thousand dollars to complete such evaluation
and to make any modifications to its systems as may be necessary to achieve Year
2000 compliance. The Adviser has advised the Trust that it has fully tested its
systems for Year 2000 compliance. The Trust may be required to bear a portion of
such cost incurred by the Adviser in this regard. The Adviser has advised the
Trust that it does not anticipate any material disruption in the operations of
the Trust as a result of any failure by the Adviser to achieve Year 2000
compliance. There can be no assurance that the costs will not exceed the amount
referred to above or that the Trust will not experience a disruption in
operations.

The Adviser has advised the Trust that it is in the process of evaluating
the Year 2000 compliance of various suppliers of the Adviser and the Trust. The
Adviser has advised the Trust that it intends to communicate with such suppliers
to determine their Year 2000 compliance status and the extent to which the
Adviser or the Trust could be affected by any supplier's Year 2000 compliance
issues. To date, however, the Adviser has not received responses from all such
suppliers with respect to their Year 2000 compliance, and there can be no
assurance that the systems of such suppliers, who are beyond the Trust's
control, will be Year 2000 compliant. In the event that any of the Trust's
significant suppliers do not successfully and timely achieve Year 2000
compliance, the Trust's business or operations could be adversely affected. The
Adviser has advised the Trust that it is in the process of preparing a
contingency plan for Year 2000 compliance by its suppliers. There can be no
assurance that such contingency plan will be successful in preventing a
disruption of the Trust's operations.

The Trust is designating this disclosure as its Year 2000 readiness
disclosure for all purposes under the Year 2000 Information and Readiness
Disclosure Act and the foregoing information shall constitute a Year 2000
statement for purposes of that Act.

<PAGE>

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

THE TRUST'S INVESTMENT OBJECTIVE

The BlackRock Strategic Term Trust Inc.'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") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $132
billion on behalf of taxable and tax-exempt clients worldwide. Strategies
include fixed income, equity and cash any may incorporate both domestic and
international securities. Domestic fixed income strategies utilize the
government, mortgage, corporate and municipal bond sectors.BlackRock manages
twenty-one closed-end funds that are traded on either the New York or American
stock exchanges, and a $24 billion family of open-end equity and bond funds.
Current institutional clients number 425, domiciled in the United States and
overseas.

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
on 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.

<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 adviser. 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 adviser 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
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.

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 repaid 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.

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.

<PAGE>

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

ADJUSTABLE RATE MORTGAGE- Mortgage instruments with interest rates that
BACKED SECURITIES (ARMS): adjust at periodic intervals at a fixed amount
relative to 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-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.

COMMERCIAL MORTGAGE Mortgage-backed securities secured or backed by
BACKED SECURITIES (CMBS): 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: 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 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.

<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).

INVERSE-FLOATING RATE Mortgage instruments with coupons that adjust at
MORTGAGES: periodic intervals according to a formula which
sets inversely with a market level interest rate
index.

INTEREST-ONLY Mortgage securities including CMBS that receive
SECURITIES (I/O): only the interest 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
MULTIPLE-CLASS Mae, Freddie Mac or Ginnie Mae. Collateralized
PASS-THROUGHS: 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 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
PREMIUM: housing. 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 In a reverse repurchase agreement, the Trust
REPURCHASE 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.

<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.
Walter F. Mondale
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
Morgan Stanley Dean Witter Advisors 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
Morgan Stanley Dean Witter FSB
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 Morgan Stanley Dean Witter Advisors Inc.
71st Floor
Two World Trade Center
New York, NY 10048
Call toll free (800) 227-7BFM

[logo] Printed on recycled paper 9247P-10-8

THE BLACKROCK
STRATEGIC TERM
TRUST INC.
- -------------------------------
Consolidated
Annual Report
December 31, 1998

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