BLACKROCK 2001 TERM TRUST INC, N-30D, 1996-08-26

BLACKROCK 2001 TERM TRUST INC
N-30D, 1996-08-26

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- - --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISER

- - --------------------------------------------------------------------------------

July 31, 1996

Dear Trust Shareholder:

After posting strong returns during 1995, the fixed income markets have
given back much of their gains in 1996 in response to a strengthening U.S.
economy. Accelerating economic growth has raised concerns about an increased
inflationary environment, which could erode the value of fixed income
investments. The stronger economy also has led some market participants to
consider the possibility that the Federal Reserve may increase interest rates to
thwart inflation threats after three interest rate reductions over the past
twelve months.

Despite the pick-up in economic growth, we believe that current inflationary
fears will subside. Commodity prices have risen but manufacturers will have
difficulty passing along the increased costs of raw materials to consumers,
whose debt levels as a percentage of disposable income are at the highest point
since the recessionary highs of 1990. We believe that the overleveraged consumer
will have to retrench, restricting future economic expansion and creating a
positive environment for bonds in the latter half of this year.

The following annual report provides detailed market commentary and a review
of portfolio management activity. We believe that BlackRock's duration
controlled management style and risk management capabilities will allow each of
our Trusts to achieve its long-term investment objective.

We look forward to maintaining your respect and confidence and to serving
your financial needs in the coming years.

Sincerely,

Laurence D. Fink Ralph L. Schlosstein
Chairman President

<PAGE>

July 31, 1996

Dear Shareholder:

We are pleased to present the annual report for The BlackRock 2001 Term
Trust Inc. ("the Trust") for the fiscal year ended June 30, 1996. We would like
to take this opportunity to review the Trust's stock price and net asset value
(NAV) performance, summarize market developments and discuss recent portfolio
management activity.

The Trust is a diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "BLK". The
Trust's investment objective is to return $10 per share (its initial offering
price) to shareholders on or about June 30, 2001 while providing high current
income. 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 "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:

-----------------------------------------------------
6/30/96 6/30/95 Change High Low
- - --------------------------------------------------------------------------------
Stock Price $7.625 $7.50 1.67% $7.75 $7.125
- - --------------------------------------------------------------------------------
Net Asset Value (NAV) $8.68 $8.72 (0.46%) $9.09 $8.55
- - --------------------------------------------------------------------------------

The Fixed Income Markets

The domestic fixed income markets witnessed two profoundly different
environments during the past twelve months, providing an exciting and
challenging environment in which to manage the Trust. Interest rates fell as the
Treasury market rallied throughout 1995 into the middle of February 1996, as
market demand for fixed income securities remained strong due to a combination
of moderate economic growth, low absolute levels of inflation and two reductions
of the Fed funds target rate. The rally halted during mid-February 1996,
however, as data indicating accelerating economic growth rekindled inflationary
concerns. The strengthening of the economy continued throughout the second
quarter, leading market participants to become more resolute in their belief
that the Federal Reserve will tighten monetary policy during the second half of
1996, which would result in rising interest rates. These fears translated into a
sharp rise in bond yields across the Treasury yield curve, resulting in the
fixed income markets rescinding much of their 1995 gains.

Interest rate movements reflected the change in investor sentiment toward
fixed income securities. Interest rates across the Treasury yield curve fell
dramatically from June 30, 1995 through mid-February 1996, as evidenced by the
decline in yield levels on the 10-year Treasury. Beginning the period at 6.21%,
the yield of the 10-year Treasury fell to 5.52% on January 19, its lowest yield
since October 1993. However, data released during February suggesting renewed
economic vigor placed pressure on bond prices, as the possibility of a stronger
economy dampened investor expectations that interest rates would continue to
fall. These fears translated into a sharp rise in bond yields across the
Treasury yield curve. The yield of the ten-year Treasury ended the annual period
at 6.71%, an increase of 120 basis points (1.20%) from its January 19 low and a
net increase of 50 basis points over the year.

The mortgage-backed securities (MBS) market outperformed Treasuries for the
period, as rising interest rates coupled with a reduction in prepayment risk
provided investors an opportunity to fundamentally reassess mortgages after
1995's Treasury market rally. Still, many investors remained on the sidelines,
convinced that even historically wide mortgage yield

<PAGE>

spreads offered inadequate compensation for the perceived risks of owning
mortgages. As a result of this narrow participation, MBS performance in 1996 has
been good but somewhat short of expectations given the sharp rise in interest
rates.

After outperforming other fixed income sectors during the second half of
1995, corporate bond performance relative to Treasuries year-to-date has been
hampered by heavy net new issue supply, which expanded above 1995 levels despite
rising interest rates. The yield premium, or "spread", offered by corporate
bonds has remained narrow throughout 1996 despite increased supply. Corporate
yield spreads are not expected to widen significantly, as a subsiding of
recessionary fears in response to the strengthening U.S. economy is expected to
support corporate bond prices.

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 June 30, 1995 asset
composition.

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The BlackRock 2001 Term Trust Inc.
- - --------------------------------------------------------------------------------
Composition June 30, June 30,
1996 1995
- - --------------------------------------------------------------------------------
Mortgage Pass-Throughs 24% 33%
- - --------------------------------------------------------------------------------
Taxable Zero Coupon Bonds 18% 23%
- - --------------------------------------------------------------------------------
Corporate Bonds 15% 2%
- - --------------------------------------------------------------------------------
U.S. Treasury Securities 10% 10%
- - --------------------------------------------------------------------------------
Adjustable Rate Mortgages 9% 8%
- - --------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities 8% 4%
- - --------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 7% 15%
- - --------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 3% 2%
- - --------------------------------------------------------------------------------
Asset-Backed Securities 3% 0%
- - --------------------------------------------------------------------------------
Non-Agency Multiple Class Mortgage Pass-Through 1% 1%
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Municipal Bonds 1% 1%
- - --------------------------------------------------------------------------------
CMO Residuals 1% 1%
- - --------------------------------------------------------------------------------

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Rating % of Corporates
- - --------------------------------------------------------------------------------
Credit Rating June 30, 1996 June 30, 1995
- - --------------------------------------------------------------------------------
A or equivalent 54% 100%
- - --------------------------------------------------------------------------------
BBB or equivalent 34% 0%
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AA or equivalent 11% 0%
- - --------------------------------------------------------------------------------
AAA or equivalent 1% 0%
- - --------------------------------------------------------------------------------

The Trust maintained its focus on the primary investment objective of
returning $10 per share to investors on or about its termination date. In
conjunction with this objective, the Trust has been reducing its holdings which
are subject to cash flow risk or which can extend beyond the Trust's scheduled
maturity date. BlackRock has been opportunistically selling bonds with these
characteristics, or "tail risk", and emphasized securities offering attractive
yield spreads over Treasury securities, cash flows prior to termination date or
fixed maturities approximating the Trust's termination date. To that end, the
Trust significantly increased its allocation to investment grade corporate
bonds, which now comprise approximately 15% of

3
<PAGE>

portfolio assets. Corporate bonds allow the Trust to both match the maturity
date of the bond with the Trust's scheduled termination date by providing a
definite maturity value when they mature and a more defined cash flow. The Trust
also increased its exposure to asset-backed securities (ABS), which are
generally collateralized by auto or credit card loans. ABS offer attractive
yields relative to comparable duration securities in addition to more
predictable cash flows than mortgage-backed securities.

The increased corporate bond and asset-backed security positions were
accompanied by a corresponding decrease in securities which offer less
predictable cash flow streams and maturity dates. Specifically, the Trust has
sold mortgage-backed securities such as agency pass-throughs and collateralized
mortgage-backed obligations, which have characteristics that are typically more
sensitive to interest rate movements than most fixed maturity securities. For
example, the maturity of a mortgage bond can extend if interest rates rise;
conversely, a sharp decline in interest rates can cause a mortgage bond to
prepay, which exposes the Trust to reinvestment risk in a lower interest rate
environment. Over the annual period, and particularly during the first half of
1996, this strategy has worked to the Trust's benefit as mortgages outperformed
most sectors of the taxable fixed income market. The Trust expects to continue
its tail risk reduction strategy as the Trust's maturity date approaches.

We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets. BlackRock
remains confident in the Trust's ability to return its initial offering price at
its scheduled termination date. We thank you for your investment in The
BlackRock 2001 Term Trust Inc. Please feel free to contact our marketing center
at (800) 227-7BFM (7236) if you have specific questions which were not addressed
in this report.

Sincerely,

Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Vice President and Portfolio Manager
BlackRock Financial Management, Inc. BlackRock Financial Management, Inc.

- - ------------
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.
3Distribution rate effective with July 1996 payment.

<PAGE>

(left column)

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The BlackRock 2001 Term Trust Inc.
Portfolio of Investments
June 30, 1996
- - --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- - --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-139.6%
Mortgage Pass-Throughs-40.7%
Federal Home Loan Mortgage
Corporation,
$11,972 6.50%, 09/01/25 - 01/01/99 ........... $ 11,212,586
3,696 7.50%, 07/01/13 - 11/01/23 ........... 3,649,475
19,488 8.00%, 09/01/11 - 03/01/23 ........... 19,731,631
25,789 8.50%, 06/01/11 - 09/01/24 ........... 26,558,909
10,437+ 8.60%, 05/01/02,
7 Year Multifamily ................. 10,939,165
Federal National Mortgage
Association,
8,131 6.125%, Series 1993-M2, Class
M2-H, 11/25/03, Multifamily ........ 7,889,531
111,000 7.00%, 01/01/99, 7 Year .............. 110,652,570
24,066 7.00%, 10/01/22 - 06/01/26 ........... 23,148,464
9,827 7.50%, 09/01/07 - 07/01/23 ........... 9,834,327
6,589 7.66%, 01/01/01,
7 Year Multifamily ................. 6,705,463
10,708 7.695%, 04/01/01, Multifamily ........ 10,847,979
11,442(d) 7.79%, 02/01/01,
7 Year Multifamily ................. 11,700,633
15,196 8.00%, 03/01/01,
7 Year Multifamily ................. 15,617,444
12,333 8.00% 10/01/09 - 10/01/23 ............ 12,544,320
3,746 8.49%, 04/01/01,
7 Year Multifamily ................. 3,902,239
10,729(d) 8.50%, 09/01/96 - 07/01/10 ........... 11,086,174
2,464 8.69%, 04/01/01,
7 Year Multifamily ................. 2,570,140
Government National
Mortgage Association,
9,400 6.00%, 01/20/99,
1 Year CMT (ARM) ................... 9,314,813
18,500 6.50%, 12/15/99,
1 Year CMT (ARM) ................... 18,528,906
48,983(d) 7.00%, 10/20/23 - 10/20/24,
1 Year CMT (ARM) ................... 49,645,135
23,343 7.00%, 01/01/99 - 09/15/24 ........... 22,379,821
9,119 7.125%, 04/20/25,
1 Year CMT (ARM) ................... 9,271,876
10,141 8.00%, 01/15/23 - 06/15/24 ........... 10,230,027
7,902 8.50%, 05/15/18 - 06/15/23 ........... 8,124,243
52,310 9.00%, 04/15/16 - 11/15/17 ........... 55,317,396
18,986 9.50%, 03/15/16 - 12/15/17 ........... 20,383,797
------------
501,787,064
------------

(right column)

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Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- - --------------------------------------------------------------------------------
Multiple Class Mortgage
Pass-Throughs-15.8%
AAA $ 626 Collateralized Mortgage
Securities Corporation,
Series F, Class F-4A,
11/01/15 ............................. $ 639,481
Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates,
4,952 Series G-29, Class G-29-IA,
06/25/20 (I) ....................... 625,144
27,631 Series G-30, Class G-30-J,
02/25/22 (I) ....................... 4,482,524
27,223 Series G-32, Class G-32-PT,
02/25/19 (I) ....................... 3,937,260
4,094 Series 269, Class 269-1,
08/01/22 ........................... 4,285,076
4,000 Series 1161, Class 1161-H,
11/15/20 ........................... 4,085,720
29,248 Series 1261, Class 1261-H,
08/15/19 ........................... 29,403,360
78 Series 1388, Class 1388-G,
05/15/06 ........................... 1,437,953
68,612 Series 1546, Class 1546-SF,
12/15/21 (I) ....................... 3,302,962
101,882 Series 1564, Class 1564-S,
05/15/07 ........................... 3,423,230
48,136 Series 1605, Class 1605-S,
08/15/06 (ARM) ...................... 1,534,345
2,825 Series 1606, Class 1606-SB,
11/15/08 (ARM) ..................... 2,627,144
18,780 Series 1621, Class 1621-SJ,
10/15/20 (ARM) ..................... 1,077,972
9,598 Series 1628, Class 1628-SJ,
12/15/23 (ARM) ..................... 8,439,928
7,340 Series 1629, Class 1629-MS,
11/15/21 ........................... 6,187,239
4,648 Series 1704, Class 1704-S,
03/15/09 (ARM) ..................... 3,507,919
52,664 Series 1790, Class 1790-D,
11/15/23 (ARM) ..................... 1,086,198
143,000 Series 1809, Class 1809-SC,
12/15/23 (ARM) ..................... 12,512,500
5,416 Series 1849, Class 1849-EL,
12/15/08 (ARM) ..................... 947,724

See Notes to Financial Statements.

5
<PAGE>

(left column)

- - --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- - --------------------------------------------------------------------------------
Multiple Class Mortgage
Pass-Throughs (cont'd)
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
$ 5,755 Trust 1990-144,
Class 144-W, 12/25/20 .............. $ 6,186,268
93 Trust 1991-163, Class 163-SA,
12/25/21 (ARM) ..................... 1,090,755
15,000 Trust 1992-43, Class 43-SE,
04/25/22 ........................... 14,684,700
3,188 Trust G1992-50, Class 50-S,
08/25/22 (ARM) ..................... 661,468
4,278 Trust G1992-52, Class 52-SB,
08/25/20 (ARM) ..................... 4,181,805
2,386 Trust 1992-93, Class 93-KA,
07/25/07 ........................... 2,364,881
10,000 Trust 1992-122, Class 122-PJ,
06/25/19 ........................... 10,228,900
1,490 Trust 1992-184, Class 184-SA,
06/25/22 (ARM) ..................... 1,345,224
1,500 Trust G1993-17, Class 17-SH,
04/25/23 (ARM) ..................... 850,380
73,688 Trust G1993-31, Class 31-PS,
08/25/18 (ARM) ..................... 2,994,661
1,735 Trust 1993-58, Class 58-C,
04/25/23 (ARM) ..................... 1,267,744
11,318 Trust 1993-68, Class 68-PJ,
11/25/06 (I) ....................... 1,182,589
2,050 Trust 1993-71, Class 71-PG,
07/25/07 ........................... 1,997,561
2,210 Trust 1993-99, Class 99-SB,
07/25/23 (ARM) ..................... 2,061,311
1,899 Trust 1993-117, Class 117-S,
07/25/08 (ARM) ..................... 1,729,793
1,585 Trust 1993-121, Class 121-SE,
02/25/23 (ARM) ..................... 1,121,295
15,350 Trust 1993-152, Class 152-D,
08/25/23 (P) ....................... 11,867,392
10,049 Trust 1993-196, Class 196-SM,
10/25/08 (ARM) ..................... 8,247,105
84,548 Trust 1993-202, Class 202-SL,
11/25/23 (ARM) ..................... 3,936,789
7,698 Trust 1993-214, Class 214-SO,
12/25/08 (ARM) ..................... 6,793,321
39,646 Trust 1993-240, Class 240-PS,
09/25/12 (ARM) ..................... 1,189,371
3,167 Trust 1994-42, Class 42-SM,
01/25/24 (ARM) ..................... 2,989,886
9,292 Trust 1994-46, Class 46-B,
11/25/23 (P) ....................... 8,033,603
7,300 Trust 1996-24, Class 24-SB,
10/25/08 (ARM) ..................... 1,405,250
11,386 Trust 1996-24, Class 24-SV,
02/25/08 (ARM) ..................... 1,394,777
5,785 Government National Mortgage
Association, Trust 1994-1,
Class 1-PL, 06/16/24 (I) ............. 1,001,399
------------
194,351,907
------------

(right column)

Corporate Bonds-21.0%
Banking and Finance-9.8%
A3 1,300 Amsouth Bancorporation,
6.75%, 11/01/25 ...................... 1,246,257
A- 5,000 Aristar Incorporated,
7.25%, 06/15/01 ...................... 5,057,979
Associates Corporation,
AA- 5,000 6.68%, 07/25/00 ...................... 4,973,285
AA- 5,000 7.46%, 03/28/00 ...................... 5,111,459
AA- 1,000 7.875%, 09/30/01 ..................... 1,040,347
BBB 7,500 Erac Usa Finance Company,
7.00%, 06/15/00 ...................... 7,496,191
A+ 6,750 Goldman Sachs Group LP,
6.20%, 12/15/00 ...................... 6,523,065
BBB+ 5,000 Great Western Financial
Corporation, 6.375%, 07/01/00 ........ 4,904,437
Household Finance Corporation,
A 7,000 6.65%, 05/26/98 ...................... 7,025,480
A 4,000 7.45%, 04/01/00 ...................... 4,064,640
A1 5,700 Meridian Bancorp Incorporated,
6.625%, 06/15/00 ..................... 5,657,278
Merrill Lynch & Co. Incorporated,
A+ 7,200 6.00%, 01/15/01 ...................... 6,944,976
A+ 5,800 6.00%, 03/01/01 ...................... 5,591,694
A+ 3,800 Morgan Stanley Incorporated,
5.75%, 02/15/01 ...................... 3,618,952
Salomon Incorporated,
BBB+ 8,000 7.59%, 01/28/00 ...................... 8,095,759
Baa1 4,500 7.75%, 05/15/00 ...................... 4,580,892
Smith Barney Holdings
Incorporated,
A2 3,000 6.00%, 03/15/97 ...................... 2,996,670
A2 3,000 6.625%, 06/01/00 ..................... 2,972,880
A2 3,600 7.00%, 05/15/00 ...................... 3,615,686
A2 6,500 7.98%, 03/01/00 ...................... 6,737,310
BBB- 6,880 Terra Nova Insurance United Kingdom
Holdings PLC, 10.75%, 07/01/05 ....... 7,636,800
A 15,000 Transamerica Finance Corporation,
6.75%, 06/01/00 ...................... 14,916,098
------------
120,808,135
------------

See Notes to Financial Statements.

6
<PAGE>

(left column)

Corporate Bonds-(cont'd)
Utility-0.7%
BBB 9,000 Pacificorp Holdings,
6.75%, 04/01/01 ...................... 8,884,394
------------
Corporate Bonds-(cont'd)
Yankee-5.3%
African Development,
AA1 5,000 7.75%, 12/15/01 ...................... 5,187,792
Aaa 3,350 8.825%, 05/01/01 ..................... 3,596,603
BBB- 8,000 Columbia (Republic of),
8.00%, 06/14/01 ...................... 7,965,247
BBB- 15,000 Empresa Electric Guacolda,
7.60%, 04/30/01 ...................... 14,932,875
AAA 3,000 European Investment Bank,
8.875%, 03/01/01 ..................... 3,242,898
AA 14,000 Italy (Republic of),
Zero Coupon, 01/10/01 ................ 10,304,000
Quebec (Province of),
A+ 8,000 9.00%, 05/08/01 ...................... 8,606,708
A+ 10,000 9.125%, 08/22/01 10,853,601
------------
64,689,724
------------
Asset-Backed Securities-5.0%
AAA 35,000 Citibank Credit Card Trust,
Series 1996-I, Class A, 5.79%
02/07/03 ............................. 25,648,350
AAA 15,000 Discover Card Master Trust,
Series 1994-2, Class A, 5.85%
10/16/04 ............................. 15,096,094
AAA@ 13,000 First Chicago Master Trust,
Series 1994-J, Class A,
01/16/01 ............................. 13,032,500
AAA 8,110 Nationsbank Auto Grantor Trust,
Series 1995-A, Class A, 5.85%
06/15/02 ............................. 8,079,575
------------
61,856,519
------------

(right column)

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Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- - --------------------------------------------------------------------------------
Stripped Mortgage-Backed
Securities-11.9%
Aaa $ 72 CMO Mortgage Investors Trust,
Collateralized Mortgage
Obligations, Trust 7, Series P,
09/22/21 (I/O) ....................... $ 2,307,401
Collateralized Mortgage Securities
Corporation,
AAA 21 Series 1990-5, Class 5-L,
09/20/20 (I/O) ..................... 422,201
AAA 54 Series 1991-9, Class M,
11/20/21 (I/O) ..................... 980,401
Federal Home Loan Mortgage
Corporation,
80 Series G-002, Class G-002-N,
03/25/22 (I/O) ..................... 4,160,000
75 Series 113, Class 113-N,
05/15/21 (I/O) ..................... 2,025,628
135 Series 181, Class 181-F,
08/15/21 (I/O) ..................... 2,970,000
77 Series 1018, Class 1018-I,
11/15/20 (I/O) ..................... 2,677,500
19 Series 1125, Class 1125-F,
08/15/21 (I/O) ..................... 611,265
60 Series 1185, Class 1185-C,
12/15/06 (I/O) ..................... 1,296,082
25 Series 1189, Class 1189-I,
01/15/22 (I/O) ..................... 837,407
25 Series 1190, Class 1190-V,
01/15/22 (I/O) ..................... 1,009,515
42 Series 1274, Class 1274-Y,
05/15/22 (I/O) ..................... 1,391,920
44 Series 1283, Class 1283-X,
06/15/22 (I/O) ..................... 1,467,198
1,116 Series 1338, Class 1338-Q,
08/15/07 (P/O) ..................... 909,423
95 Series 1404, Class 1404-E,
01/15/06 (I/O) ..................... 1,567,033
30 Series 1418, Class 1418-K,
06/15/22 (I/O) ..................... 2,000,100
8,216 Series 1422, Class 1422-IB,
11/15/07 (I/O) ..................... 1,635,563
19,273 Series 1432, Class 1432-JA,
12/15/06 (I/O) ..................... 2,306,693
8,615 Series 1662, Class 1662-PO,
01/15/09 (P/O) ..................... 6,281,108
42,760 Series 1696, Class 1696-A,
11/15/23 (P/O) ..................... 13,442,607
3,271 Series 1721, Class 1721-OC,
05/15/24 (P/O) ..................... 1,149,971
Federal National Mortgage
Association,
31 Trust 1991-G46, Class G46-K,
12/25/09 (I/O) ..................... 819,142
924 Trust 1991-167, Class 167-B,
10/25/17 (P/O) ..................... 435,371

See Notes to Financial Statements.

7
<PAGE>

(left column)

- - --------------------------------------------------------------------------------
Principal
Rating* Amount Value
(Unaudited) (000) Description (Note 1)
- - --------------------------------------------------------------------------------
Stripped Mortgage-Backed
Securities-(Con't)
Federal National Mortgage
Association,
$ 3,265 Trust 2, Class 2, 02/01/17 (I/O) ..... $ 1,120,782
4,470 Trust 3, Class 1, 02/01/17 (P/O) ..... 3,224,108
3,465 Trust 5, Class 1, 09/01/17 (P/O) ..... 2,484,269
5,516 Trust 6, Class 2, 01/01/17 (I/O) ..... 1,922,378
18,359 Trust 25, Class 2,
02/01/13 (I/O) ..................... 1,979,363
2,263 Trust 34, Class 2,
05/01/18 (I/O) ..................... 696,338
885 Trust 58, Class 2,
12/01/18 (I/O) ..................... 286,289
1,901 Trust 60, Class 1,
01/01/19 (P/O) ..................... 1,437,370
9,880 Trust 95, Class 2,
10/01/20 (I/O) ..................... 3,113,804
60,733 Trust 226, Class 2,
06/01/23 (I/O) ..................... 18,124,637
24 Trust 1990-76, Class 76-N,
07/25/20 (I/O) ..................... 75,731
31 Trust 1990-106, Class 106-K,
09/25/20 (I/O) ..................... 973,629
38 Trust 1991-17, Class 17-H,
03/25/21 (I/O) ..................... 1,360,412
14 Trust 1991-29, Class 29-J,
04/25/21 (I/O) ..................... 499,622
42 Trust 1991-80, Class 80-Q,
07/25/21 (I/O) ..................... 1,395,421
44 Trust 1991-160, Class 160-PM,
12/25/21 (I/O) ..................... 2,211,437
1,365 Trust 1991-167, Class 167-B,
10/25/17 (P/O) ..................... 388,875
30 Trust G1992-5, Class 5-E,
01/25/22 (I/O) ..................... 1,467,270
74 Trust 1992-44, Class 44-L,
04/25/07 (I/O) ..................... 2,520,190
16,118 Trust 1992-G45, Class G45-B,
08/25/22 (I/O) ..................... 4,608,629
26 Trust 1992-48, Class 48-J,
04/25/07 (I/O) ..................... 880,775
128 Trust 1993-20, Class 20-PT,
02/25/19 (I/O) ..................... 2,965,201
1,667 Trust 1993-32, Class 32-C,
09/25/23 (P/O) ..................... 1,357,423
5,369 Trust 1993-48, Class 48-B,
04/25/08 (P/O) ..................... 4,063,756
4,786 Trust 1993-128, Class 128-B,
07/25/23 (P/O) ..................... 4,198,219
10,000 Trust 1993-150, Class 150-B,
09/25/20 (P/O) ..................... 8,991,000
2,402 Trust 1993-151, Class 151-E,
05/25/23 (P/O) ..................... 2,187,351

(right column)

Collateralized Mortgage
Obligation Residuals**-0.3%
3 Federal Home Loan Mortgage
Corporation, Multiclass
Mortgage Participation
Certificates, Series 1017,
Class 1017-R (REMIC), 11/15/20 ....... 584,942
AAA 10 Fleet Mortgage Securities, Inc.,
Series 1989-3, Class R,
09/01/19# ............................ 700,821
AAA 10,000 Residential Resources
Incorporated, Mortgage
Collateral Bond, Series 9,
Class R, 10/01/18# ................... 1,786,425
AAA 499 Shearson Lehman Brothers,
Series F, Class R, 02/20/18# ......... 420,252
AAA 10,000 Smith Barney Mortgage Capital
Trust, Series 10, Class R,
10/01/19# ............................ 227,079
------------
3,719,519
------------
U.S. Government Security-13.4%
102,350(d) U.S. Treasury Bonds,
6.875%, 8/15/25 ...................... 101,310,124
U.S. Treasury Notes,
22,000(d) 5.000%, 02/15/99 ..................... 21,343,520
8,600 5.125%, 02/28/98 ..................... 8,473,666
21,125(dd) 5.250%, 01/31/01 ..................... 20,164,446
250 5.500%, 11/15/98 ..................... 246,055
13,600(d) 6.375%, 05/15/99 ..................... 13,629,784
------------
165,167,595
------------

Taxable Zero Coupon Bonds-25.2%
Financing Corporation
(FICO Strips),
5,311 02/08/01 ............................. 3,926,635
4,472 03/26/01 ............................. 3,277,529
1,660 04/05/01 ............................. 1,214,506
7,334 05/02/01 ............................. 5,337,465
2,513 05/11/01 ............................. 1,826,549
22,134 06/06/01 ............................. 16,014,613
26,270 06/27/01 ............................. 18,934,365
2,000 08/03/01 ............................. 1,430,140
5,311 08/08/01 ............................. 3,794,285
2,360 10/05/01 ............................. 1,667,434
Government Trust Certificates,
2,500 11/15/99 ............................. 2,005,500
20,340 11/15/01 ............................. 14,214,202
6,597 05/15/02 ............................. 4,441,166
4,000 11/15/02 ............................. 2,597,920
U.S. Treasury Receipt,
30,000(d) 02/15/01 ............................. 22,334,100
282,000(d) 05/15/01 ............................. 206,572,160
1,016 U.S. Treasury Obligation,
11/15/01 ............................. 719,775
------------
310,308,344
------------
See Notes to Financial Statements.

8
<PAGE>

(left column)

(right column)

- - ---------------
*Using the higher of Standard & Poor's or Moody's rating.
**Illiquid securities representing 0.2% of portfolio assets.
#Private placements restricted as to resale.
(d)Partial principal amount pledged as collateral for reverse repurchase
agreements.
(dd)Entire principal amount pledged as collateral for reverse repurchase
agreements.
@Partial principal amount pledged as collateral for futures transactions.

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

See Notes to Financial Statements.

9
<PAGE>

(left column)

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Statement of Assets and Liabilities
June 30, 1996
- - --------------------------------------------------------------------------------

Assets
Investments, at value
(cost $1,783,086,533) (Note 1) .............................. $1,720,573,432
Cash .......................................................... 63,249
Deposits with brokers as collateral for
investments sold short (Note 1) ............................. 186,480,000
Receivable for investments sold ............................... 21,826,677
Interest receivable ........................................... 17,653,543
Due from broker-variation margin .............................. 3,592
Deferred organization expenses and
other assets ................................................ 106,898
--------------
1,946,707,391
--------------

Liabilities
Reverse repurchase agreements (Note 4) ........................ 352,757,438
Investments sold short, at value
(proceeds $176,209,922) (Note 1) ............................ 182,220,960
Payable for investments purchased ............................. 170,358,856
Interest payable .............................................. 6,182,971
Unrealized depreciation on interest rate cap
(Notes 1 & 3) ............................................... 751,500
Dividends payable ............................................. 634,244
Advisory fee payable (Note 2) ................................. 401,147
Administration fee payable (Note 2) ........................... 100,287
Other accrued expenses ........................................ 498,056
--------------
713,905,459
--------------
Net Assets .................................................... $1,232,801,932
==============

Net assets were comprised of:
Common stock, at par (Note 5) ............................... $ 1,420,106
Paid-in capital in excess of par ............................ 1,338,223,236
--------------
1,339,643,342

Undistributed net investment income ......................... 22,156,596
Accumulated net realized loss ............................... (59,728,906)
Net unrealized depreciation ................................. (69,269,100)
--------------
Net assets, June 30, 1996 ................................... $1,232,801,932
==============

Net asset value per share:
($1,232,801,932 / 142,010,583 shares of
common stock issued and outstanding) ........................ $8.68
=====

(right column)

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Statement of Operations
For the Year Ended June 30, 1996
- - --------------------------------------------------------------------------------

Net Investment Income

Income
Interest (including net accretion of premium
of $1,988,487 and net of interest expense
of $31,637,184) ............................................. $90,062,717
-----------
Operating expenses
Investment advisory ........................................... 4,994,716
Administration ................................................ 1,248,679
Custodian ..................................................... 599,092
Reports to shareholders ....................................... 486,668
Transfer agent ................................................ 139,677
Audit ......................................................... 86,497
Directors ..................................................... 71,597
Legal ......................................................... 37,681
Miscellaneous ................................................. 274,148
-----------
Total operating expenses .................................... 7,938,755
-----------
Net investment income before excise tax ....................... 82,123,962
Excise tax .................................................... 81,036
-----------
Net investment income ......................................... 82,042,926
-----------

Realized and Unrealized Gain (Loss) on
Investments (Note 3)

Net realized gain (loss) on:
Investments ................................................... 8,398,413
Short sales ................................................... 1,903,750
Futures ....................................................... (13,009,966)
-----------
(2,707,803)
-----------

Net change in unrealized appreciation
(depreciation) on:
Investments ................................................... (21,928,771)
Short sales ................................................... 829,479
Futures ....................................................... 81,352
(21,017,940)
-----------
Net loss on investments ......................................... (23,725,743)
-----------
Net Increase in Net Assets
Resulting from Operations ..................................... $58,317,183
===========

See Notes to Financial Statements.

10
<PAGE>

(left column)

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Statement of Cash Flows
For the Year Ended June 30, 1996
- - --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows provided by operating activities:
Interest received, net of interest purchased ................ $115,714,390
Operating expenses and excise taxes paid .................... (8,078,461)
Interest expense paid (27,553,416)
Purchase of long-term portfolio investments ................. (4,704,022,681)
Sale of long-term portfolio investments ..................... 4,821,799,653
Other ....................................................... 22,312
-------------
Net cash flows provided by operating activities ............. 197,881,797
-------------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements ................... (136,577,156)
Dividends paid .............................................. (64,253,612)
-------------
Net cash flows used for financing activities ................ (200,830,768)
-------------
Net decrease in cash .......................................... (2,948,971)
Cash at beginning of year ..................................... 3,012,220
-------------
Cash at end of year ........................................... $ 63,249
=============

Reconciliation of Net Increase in Net
Assets Resulting from Operations to Net
Cash Flows Provided by Operating Activities
Net increase in net assets resulting from operations .......... $ 58,317,183
-------------
Decrease in investments ....................................... 32,067,600
Net realized gain ............................................. 2,707,803
Increase in unrealized depreciation ........................... 21,017,940
Increase in unrealized depreciation on interest rate cap ...... 751,500
Increase in interest receivable ............................... (5,985,511)
Decrease in receivable for investments sold ................... 69,558,493
Decrease in broker-variation margin ........................... 9,781
Increase in deposits with brokers ............................. (106,234,125)
Decrease in deferred and prepaid assets ....................... 22,312
Increase in payable for investments purchased ................. 18,500,400
Increase in payable for securities sold short ................. 103,123,323
Increase in interest payable .................................. 4,083,768
Decrease in accrued expenses and other liabilities ............ (58,670)
-------------
Total adjustments ........................................... 139,564,614
-------------
Net cash flows provided by operating activities ............... $ 197,881,797
=============

(Right Column)

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Statements of Changes
in Net Assets
- - --------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1996 June 30, 1995
------------- -------------
Increase (Decrease) in
Net Assets

Operations:
Net investment income ..................... $ 82,042,926 $ 86,059,039

Net realized gain (loss)
on investments, short
sales and futures ....................... (2,707,803) (33,684,786)

Net change in unrealized
appreciation (depreciation) on
investments, short sales and futures .... (21,017,940) 92,654,488
-------------- --------------

Net increase
in net assets resulting
from operations ......................... 58,317,183 145,028,741

Dividends from net investment income ........ (63,904,500) (88,759,294)
-------------- --------------

Net increase (decrease) ................... (5,587,317) 56,269,447

Net Assets
Beginning of year ........................... 1,238,389,249 1,182,119,802
-------------- --------------
End of year ................................. $1,232,801,932 $1,238,389,249
============== ==============

See Notes to Financial Statements.

11
<PAGE>

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Financial Highlights
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 28,
1992*
Year Ended June 30, to
--------------------------------------- June 30,
1996 1995 1994 1993
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........................ $ 8.72 $ 8.32 $ 9.62 $ 9.45
---------- ---------- ---------- ----------
Net investment income (net of $0.22, $0.27, $0.12 and
$0.04, respectively, of interest expense) ............... 0.58 0.61 0.64 0.66
Net realized and unrealized gain (loss) on investments,
short sales and futures ................................. (0.17) 0.42 (1.23) 0.07
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations .......... 0.41 1.03 (0.59) 0.73
---------- ---------- ---------- ----------
Dividends from net investment income ........................ (0.45) (0.63) (0.71) (0.54)
---------- ---------- ---------- ----------
Capital charge with respect to issuance of shares ........... - - - (0.02)
---------- ---------- ---------- ----------
Net asset value, end of year** .............................. $ 8.68 $ 8.72 $ 8.32 $ 9.62
========== ========== ========== ==========
Market value, end of year** ................................. $ 7.625 $ 7.50 $ 8.00 $ 9.375#
========== ========== ========== ==========
TOTAL INVESTMENT RETURN(d) .................................. 7.83% 1.61% (7.73)% 4.99%

RATIOS TO AVERAGE NET ASSETS:
Operating expenses(ddd) ..................................... 0.64% 0.63% 0.67% 0.60%(dd)
Net investment income 6.57% 7.28% 6.97% 8.41%(dd)

SUPPLEMENTAL DATA:
Average net assets (in thousands) ........................... $1,248,679 $1,181,411 $1,295,131 $1,327,571
Portfolio turnover 216% 107% 91% 210%
Net assets, end of period (in thousands) .................... $1,232,802 $1,238,389 $1,182,120 $1,366,284
Reverse repurchase agreements outstanding, end of period
(in thousands) .............................................. $ 352,757 $ 489,335 $ 395,559 $ 498,618
Asset coverage@ ............................................. $ 4,495 $ 3,531 $ 3,988 $ 3,740
<FN>
- - ----------

* Commencement of investment operations.
** Net asset value and market value published in The Wall Street Journal
each Monday.
# Net asset value immediately after the closing of the first public
offering was $9.44.
(d) Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day and a sale at the
current market price on the last day of the periods 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. Total investment return for periods of less than
one full year are not annualized.
(dd) Annualized.
(ddd) The ratios of operating expenses, including interest expense, to
average net assets were 3.17%, 3.89%, 1.98%, and 0.97% for the periods
indicated above, respectively. The ratios of operating expenses,
including interest expense and excise taxes, to average net assets were
3.17%, 3.89%, 1.99% and 1.01% for the periods indicated above,
respectively.
@ Per $1,000 of reverse repurchase agreements 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 the
periods indicated. This information has been determined based upon
financial information provided in the financial statements and market
value data for the Trust's shares.
</FN>
</TABLE>
See Notes to Financial Statements.

12
<PAGE>

(left column)

- - --------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc.
Notes to Financial Statements
- - --------------------------------------------------------------------------------

Note 1. Organization and Accounting Policies

The BlackRock 2001 Term Trust Inc. (the "Trust"), a Maryland corporation, is a
diversified, closed-end management investment company. The investment objective
of the Trust is to manage a portfolio of investment grade fixed income
securities that will return $10 per share (the initial public offering price per
share) to investors on or about June 30, 2001 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, 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
determine that such price does not reflect its fair value, in which case it will
be valued at its fair value as determined by the Trust's Board of Directors. Any
securities or other assets for which such current market quotations are not
readily available are valued at fair market value as determined in good faith
under procedures established by and under the general supervision and
responsibility of the Trust's Board of Directors.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized

(Right Column)

cost, if their term to maturity from date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if their original term
to maturity from date of purchase exceeded 60 days.

In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase 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" more
volatile 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

13
<PAGE>

(Left Column)

long or short position or an overall portfolio that is longer or shorter than
the benchmark security. A call option gives the purchaser of the option the
right (but not obligation) to buy, and obligates the seller to sell (when the
option is exercised), the underlying position at the exercise price at any time
or at a specified time during the option period. A put option gives the holder
the right to sell and obligates the writer to buy the underlying position at the
exercise price at any time or at a specified time during the option period. Put
options can be purchased to effectively hedge a position or a portfolio against
price declines if a portfolio is long. In the same sense, call options can be
purchased to hedge a portfolio that is shorter than its benchmark against price
changes. The Trust can also sell (or write) covered call options and put options
to hedge portfolio positions.

The main risk that is associated with purchasing options is that the option
expires without being exercised. In this case, the option expires worthless and
the premium paid for the option is considered the loss. The risk associated with
writing call options is that the Trust may forego the opportunity for a profit
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.

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 futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.

Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of the price sensitivity of a security
or a portfolio to relative changes in interest rates. For instance, a duration
of "one" means that a portfolio 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

(Right Column)

percent in relation to a one percent change in interest rates. Futures contracts
can be sold to effectively shorten an otherwise longer duration portfolio. In
the same sense, futures contracts can be purchased to lengthen a portfolio that
is shorter than its duration target. Thus, by buying or selling futures
contracts, the Trust can effectively hedge more volatile positions so that
changes in interest rates do not change the duration of the portfolio
unexpectedly.

The Trust may invest in financial futures contracts primarily for the purpose
of hedging its existing portfolio securities or securities the Trust intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets. The Trust is also at risk of not being able to
enter into a closing transaction for the futures contract because of an illiquid
secondary market. In addition, since futures are used to shorten or lengthen a
portfolio's duration, there is a risk that the portfolio may have temporarily
performed better without the hedge or that the Trust may lose the opportunity to
realize appreciation in the market price of the underlying positions.

Short Sales: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as to
dollar amount, will be recognized upon the termination of a short sale if the
market price is greater or less than the proceeds originally received.

Securities Lending: The Trust may lend its portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trust may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trust receives compensation
for lending its securities in the form of interest on the loan. The Trust also
continues to receive interest on the securities loaned, and any gain or loss in
the market price of the securities loaned that may occur during the term of the
loan will be for the account of

14
<PAGE>

(Left Column)

the Trust. The Trust did not engage in securities lending during the year ended
June 30, 1996.

Interest Rate Caps: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the excess
if any, of a floating rate over a specified fixed rate.

Interest rate caps are intended to both manage the duration of the Trust's
portfolio and its exposure to changes in short-term rates. 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. Owning interest rate caps reduces the
portfolio's duration, making it less sensitive to changes in interest rates from
a market value perspective. The effect on income involves protection from rising
short term rates, which the Trust experiences primarily in the form of leverage.

The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trust does not anticipate
non-performance by any counterparty.

Interest Rate Floors: Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
deficiency, if any, of a floating rate under a specified fixed rate.

Interest rate floors are used by the Trust to both manage the duration of the
portfolio and its exposure to changes in short-term interest rates. 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. Owning interest rate floors
reduces the portfolio's duration, making it less sensitive to changes in
interest rates from a market value perspective. The effect on income involves
protection from falling short term rates, which the Trust experiences primarily
in the form of leverage.

The Trust is exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trust does not anticipate
non-performance by any counterparty.

Securities Transactions and Investment Income: Security transactions are
recorded on the trade date. Realized and

(Right Column)

unrealized gains and losses are calculated on the identified cost basis.
Interest income is recorded on the accrual basis and the Trust amortizes premium
and accretes discount on securities purchased using the interest method.

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

Dividends and Distributions: The Trust declares and pays dividends and
distributions monthly, first from net investment income, then from realized
short-term capital gains and other sources, if necessary. Net long-term capital
gains, if any, in excess of loss carryforwards, are distributed annually.
Dividends and distributions are recorded on the ex-dividend date.

Deferred Organization Expenses: A total of $75,000 was incurred in connection
with the organization of the Trust. These costs have been deferred and are being
amortized ratably over a period of sixty months from the date the Trust
commenced operations.

Note 2. Agreements

The Trust has an Investment Advisory Agreement with BlackRock Financial
Management, Inc. (the "Adviser") a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
business, and an Administration Agreement with Mitchell Hutchins Asset
Management Inc. (the "Administrator"), a wholly-owned subsidiary of PaineWebber
Incorporated.

The investment advisory fee paid to the Adviser is computed weekly and payable
monthly at an annual rate of 0.40% of the Trust's average weekly net assets. The
administration fee paid to the Administrator is also computed weekly and payable
monthly at an annual rate of 0.10% of the Trust's average weekly net assets.

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. The Administrator pays occupancy and certain
clerical and accounting costs of the Trust. The Trust bears all other costs and
expenses.

On February 28, 1995, the Adviser was acquired by PNC Bank, NA. Following the
acquisition, the Adviser has become a wholly-owned corporate subsidiary of PNC
Asset Management Group, Inc., the holding company for PNC's asset management
businesses.

15
<PAGE>

(Left Column)

Note 3. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the year ended June 30, 1996 aggregated $3,824,039,271 and
$3,834,994,316, respectively.

The Trust may invest up to 40% 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 June 30, 1996, the Trust held 0.2%
of its portfolio assets in illiquid securities including 0.1% of its portfolio
assets in securities restricted as to resale.

The portfolio may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNC Mortgage
Securities Corp. (or Sears 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. It is possible under
certain circumstances, PNC Mortgage Securities Corp. or its affiliates 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.

The federal income tax basis of the Trust's investments at June 30, 1996 was
the same as the basis for financial reporting and, accordingly, net unrealized
depreciation for federal income tax purposes was $69,269,100 (gross unrealized
appreciation-$14,966,559; gross unrealized depreciation-$84,235,659).

For federal income tax purposes, the Trust had a capital loss carryforward
at June 30, 1996 of approximately $59,730,000 which will expire in 2001.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.

During the year ended June 30, 1996, the Trust entered into financial futures
contracts. Details of open contracts at June 30, 1996 are as follows:

Value at Value at
Number of Expiration Trade June 30, Unrealized
Contracts Type Date Date 1996 Appreciation
- - --------- ------ ------ ------- ------- ------------
Long positions:
5 10 yr. T-Note Sept. 1996 $530,961 $537,500 $6,539

The Trust entered into two interest rate caps which settled on April 3,
1996 with notional amounts of $500 million. Under one agreement, the Trust
receives the excess, if any,

(Right Column)

of 3-month LIBOR over the fixed rate of 8%. Under the other agreement, the Trust
pays the excess, if any, of 3-month LIBOR over the fixed rate of 7%. The
agreements terminate on April 15, 1999. At June 30, 1996 net unrealized
depreciation was $751,500.

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 June 30, 1996, was approximately $467,370,000 at a weighted
average interest rate of approximately 5.40%. The maximum amount of reverse
repurchase agreements outstanding at any month end during the year ended June
30, 1996, was $477,002,875 as of January 31, 1996 which was 22.20% of total
assets. The amount of reverse repurchase agreements outstanding at June 30, 1996
was $352,757,438, which was 18.12% 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
June 30, 1996, was approximately $136,138,604. For the year ended June 30, 1996,
the maximum amount of dollar rolls outstanding at any month end was $191,759,700
as of September 30, 1995, which was 9.77% of total assets.

Note 5. Capital

There are 200 million shares of $.01 par value common stock authorized. Of the
142,010,583 common shares outstanding at June 30, 1996, the Adviser owned 10,583
shares.

<PAGE>

(Left Column)

Note 6. Dividends

Subsequent to June 30, 1996, the Board of Directors of the Trust declared a
dividend from undistributed earnings

(Right Column)

of $0.03333 per share payable July 31, 1996, to shareholders of record on July
15, 1996.

Note 7.
Quarterly Data (Unaudited)

- - ------------------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized Net increase (decrease)
gain (loss) in net assets Dividends Period
Net Investment on resulting from and and
Quarterly Total Income investments operations Distributions Share price net asset
period Income Amount Per share Amount Per share Amount Per share Amount Per share High Low value
- - ------- ------ ---------------- ----------------- ------------------ ------------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
July 1,
1994 to
September
30,
1994 ... $24,768,303 $24,587,197 $0.17 $(14,674,730) $(0.10) $ 9,912,467 $0.07 $23,964,278 $0.17 $8-1/4 $7-3/8 $8.23

October 1,
1994 to
December
31,
1994 ... 23,422,397 19,730,413 0.14 (21,121,487) (0.14) (1,391,074) 0.00 23,964,272 0.17 7-7/8 7 8.05

January 1,
1995 to
March 31,
1995 ... 21,633,042 19,861,828 0.14 50,559,812 0.35 70,421,640 0.49 20,415,369 0.14 7- 5/8 7-1/4 8.40

April 1,
1995 to
June 30,
1995 ... 23,732,271 21,879,601 0.16 44,206,107 0.31 66,085,708 0.47 20,415,375 0.15 8-1/4 7-1/2 8.72

July 1,
1995 to
September
30,
1995 ... 21,981,739 19,972,420 0.14 (808,514) (0.00) 19,163,906 0.14 15,976,191 0.12 7-3/4 7-1/4 8.74

October 1,
1995 to
December
31,
1995 ... 26,163,094 24,186,764 0.17 34,412,851 0.24 58,599,615 0.41 15,976,093 0.11 7-3/4 7-1/2 9.04

Jaunary 1,
1996 to
March 31,
1996 ... 20,316,717 18,241,965 0.13 (42,252,690) (0.30) (24,010,725) (0.17) 15,976,105 0.11 7-3/4 7-3/8 8.76

April 1,
1996 to
June 30,
1996 ... 21,601,167 19,641,777 0.14 (15,077,390) (0.11) 4,564,387 0.03 15,976,111 0.11 7-5/8 7-1/8 8.68
- - ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

17
<PAGE>

- - --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
REPORT OF INDEPENDENT AUDITORS
- - --------------------------------------------------------------------------------

The Shareholders and Board of Directors of
The BlackRock 2001 Term Trust Inc.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The BlackRock 2001 Term Trust Inc. as of June
30, 1996 and the related statements of operations and of cash flows for the year
then ended and of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the three years in the period
then ended and the period August 28, 1992 (commencement of investment
operations) to June 30, 1993. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our 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 financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at June
30, 1996 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The BlackRock 2001
Term Trust Inc. at June 30, 1996 and the results of its operations, its cash
flows, the changes in its net assets and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

New York, New York
August 23, 1996

<PAGE>

- - --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
TAX INFORMATION
- - --------------------------------------------------------------------------------

We wish to advise you as to the federal tax status of dividends and
distributions paid by the Trust during its fiscal year ended June 30, 1996

During the fiscal year ended June 30, 1996, the Trust paid aggregate dividends
of $0.4500 per share from net investment income. For federal income tax
purposees, the aggregate of any dividends and short-term capital gains
distributions you received are reportable in your 1996 federal income tax return
as ordinary income. Further, we wish to advise you that your income dividends do
not qualify for the dividends received deduction.

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

- - --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- - --------------------------------------------------------------------------------

Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"), shareholders
may elect to have all distributions of dividends and capital gains automatically
reinvested by State Street Bank and Trust Company (the "Plan Agent") in Trust
shares pursuant to the Plan. Shareholders who do not participate in the Plan
will receive all distributions in cash paid by check in United States dollars
mailed directly to the shareholders of record (or if the shares are held in
street or other nominee name, then to the nominee) by the custodian, as dividend
disbursing agent.

The Plan Agent serves as agent for the shareholders in administering the Plan.
After the Trust declares a dividend or determines to make a capital gain
distribution, the Plan Agent will, as agent for the participants, receive the
cash payment and use it to buy Trust shares in the open market on the New York
Stock Exchange or elsewhere, for the participants' accounts. The Trust will not
issue shares under the Plan below net asset value.

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 fee for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income taxes that
may be payable on such dividends or distributions.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all shareholders of the Trust at least 90 days before the record
date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent upon at least 90 days' written notice to all
shareholders of the Trust. All correspondence concerning the Plan should be
directed to the Plan Agent at (800) 699-1BFM. The addresses are on the front of
this report.

19
<PAGE>

- - --------------------------------------------------------------------------------
THE BLACKROCK 2001 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.

The Annual Meeting of Trust Shareholders was held May 8, 1996 to vote on the
following matters:

(1) To elect three Directors to serve as follows:
Director Class Term Expiring
-------- ---- ---- --------
Andrew F. Brimmer ....................... III 3 years 1999
Kent Dixon .............................. III 3 years 1999
Laurence D. Fink ........................ III 3 years 1999

Directors whose term of office continues beyond this meeting are Richard
E. Cavanagh, Frank J. Fabozzi, James Grosfeld, James Clayburn LaForce,
Jr. and Ralph L. Schlosstein.

(2) To ratify the selection of Deloitte & Touche LLP as independent
public accountants of the Trust for the fiscal year ending June30, 1997.
(3) To modify the investment restriction prohibiting investing for the
purpose of exercising control over the management of a company.

Shareholders elected the three Directors, ratified the selection of
Deloitte & Touche LLP and approved the modification of the investment
restriction prohibiting investing for the purpose of exercising control
over the management of a company. The results of the voting was as
follows:

Votes for Votes Against Abstentions
--------- ------------- -----------
Andrew F. Brimmer 89,576,028 - 2,495,101
Kent Dixon 89,631,537 - 2,439,592
Laurence D. Fink 89,624,368 - 2,446,761
Ratification of Deloitte
& Touche LLP 89,076,903 837,489 2,156,737
Investment restriction 63,119,954 2,387,721 3,547,850

<PAGE>

- - --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
INVESTMENT SUMMARY
- - --------------------------------------------------------------------------------

The Trust's Investment Objective

The Trust's investment objective is to manage a portfolio of investment grade
fixed income securities that will return $10 per share (the initial public
offering price per share) to investors on or about June 30, 2001 while providing
high monthly income.

Who Manages the Trust?

BlackRock Financial Management, Inc. ("BlackRock" or the "Adviser") is the
investment adviser for the Trust. BlackRock is a registered investment adviser
specializing in fixed income securities. Currently, BlackRock manages over $41
billion of assets across the government, mortgage, corporate and municipal
sectors. These assets are managed on behalf of institutional and individual
investors in 21 closed-end funds, on either the New York Stock Exchange or the
American Stock Exchange, several open-end funds and separate accounts for more
than 80 clients in the U.S. and overseas. BlackRock is a subsidiary of PNC Asset
Management Group, Inc. which is a division of PNC Bank, one of the nation's
largest banking organizations.

What Can the Trust Invest In?

The Trust may invest in all fixed income securities rated investment grade or
higher ("AAA", "AA", "A" or "BBB"). Examples of securities in which the Trust
may invest include U.S. government and government agency securities, zero coupon
securities, mortgage-backed securities, corporate debt securities, asset-backed
securities, U.S. dollar-denominated foreign debt securities and municipal
securities. Under current market conditions, BlackRock expects that the primary
investments of the Trust will be U.S. government securities, securities backed
by government agencies (such as mortgage-backed securities) and corporate debt
securities.

What is the Adviser's Investment Strategy?

The Adviser will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($10 per share)
at maturity. The Trust will implement a conservative strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment in June of 2001. 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
33-1/3% 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 advisor. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the fund through the Trust's transfer agent, State Street
Bank & Trust Company. Investors who wish to hold shares in a brokerage account
should check with their financial advisor to determine whether their brokerage
firm offers dividend reinvestment services.

Leverage Considerations in a Term Trust

Under current market conditions, leverage increases the income earned by the
Trust. The Trust employs leverage primarily through the use of reverse
repurchase agreements and dollar rolls. Leverage permits the Trust to borrow
money at short-term rates and reinvest that money in longer-term assets which
typically offer higher interest rates. The difference between the cost of the
borrowed funds and the income earned on the proceeds that are invested in longer
term assets is the benefit to the Trust from leverage. In general, the portfolio
is typically leveraged at approximately 33-1/3% of total assets.

Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rising rate environment. BlackRock's portfolio managers continuously monitor and
regularly review the Trust's use of leverage and the Trust may reduce, or
unwind, the amount of leverage employed should BlackRock consider that reduction
to be in the best interests of the shareholders.

Special Considerations and Risk Factors Relevant to Term Trusts

The Trust is intended to be a long-term investment and is not a short-term
trading vehicle.

Return of Initial Investment. Although the objective of the Trust is to return
its initial offering price upon termination, there can be no assurance that this
objective will be achieved.

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

Leverage. The Trust utilizes leverage through reverse repurchase agreements and
dollar rolls, which involves special risks. The Trust's net asset value and
market value may be more volatile due to its use of leverage.

Market Price of Shares. The shares of closed-end investment companies such as
the Trust trade on the New York Stock Exchange and as such are subject to supply
and demand influences. As a result, shares may trade at a discount or a premium
to their net asset value.

Mortgage-Backed and Asset-Backed Securities. The cash flow and yield
characteristics of these securities differ from traditional debt securities. The
major differences typically include more frequent payments and the possibility
of prepayments which will change the yield to maturity of the security.

Corporate Debt Securities. The value of corporate debt securities generally
varies inversely with changes in prevailing market interest rates. The Trust may
be subject to certain reinvestment risks in environments of declining interest
rates.

Zero Coupon Securities. Such securities receive no cash flows prior to maturity,
therefore, interim price movements on these securities are generally more
sensitive to interest rate movements than securities that make periodic coupon
payments. These securities appreciate in value over time and can play an
important role in helping the Trust achieve its primary objective.

Illiquid Securities. The Trust may invest in securities that are illiquid,
although under current market conditions the Trust expects to do so to only a
limited extent. These securities involve special risks.

Non-U.S Securities. The Trust may invest less than 10% of its total 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 2001 TERM TRUST INC.
ANNUAL REPORT TO SHAREHOLDERS
GLOSSARY
- - --------------------------------------------------------------------------------

Adjustable Rate Mortgage-
Backed Securities (ARMs): Mortgage instruments with interest rates that
adjust at periodic intervals at a fixed amount
over the market levels of interest rates as
reflected in specified indexes. ARMS are backed
by mortgage loans secured by real property.

Asset-Backed Securities: Securities backed by various types of receivables
such as automobile and credit card receivables.

Closed-End Fund: Investment vehicle which initially offers a fixed
number of shares and trades on a stock exchange.
The fund invests in a portfolio of securities
in accordance with its stated investment
objectives and policies.

Collateralized
Mortgage Obligations (CMOs): Mortgage-backed securities which separate mortgage
pools into short-, medium-, and long-term
securities with different priorities for receipt
of principal and interest. Each class is paid a
fixed or floating rate of interest at regular
intervals. Also known as multiple-class mortgage
pass-throughs.

Discount: When a fund's net asset value is greater than its
stock price the fund is said to be trading at a
discount.

Dividend: This is income generated by securities in a
portfolio and distributed to shareholders after
the 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
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 uaranteed by the U.S.
government, or one of its agencies or
instrumentalities, such as GNMA (Government
National Mortgage Association), FNMA (Federal
National Mortgage Association) and FHLMC (Federal
Home Loan Mortgage Corporation).

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

Market Price: Price per share of a security trading in the
secondary market. For a closed-end fund, this is
the price at which one share of the fund trades on
the stock exchange. If you were to buy or sell
shares, you would pay or receive the market price.

Mortgage Dollar Rolls: A mortgage dollar roll is a transaction in which
the Trust sells mortgage-backed securities for
delivery in the current month and simultaneously
contracts to repurchase substantially similar
(although not the same) securities on a specified
future date. During the "roll" period, the Trust
does not receive principal and interest payments
on the securities, but is compensated for giving
up these payments by the difference in the current
sales price (for which the security is sold) and
lower price that the Trust pays for the similar
security at the end date as well as the interest
earned on the cash proceeds of the initial sale.

Mortgage Pass-Throughs: Mortgage-backed securities issued by Fannie Mae,
Freddie Mac or Ginnie Mae.

Multiple-Class Pass-Throughs: Collateralized Mortgage Obligations.

Net Asset Value (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust,
plus income accrued on its investments, minus any
liabilities including accrued expenses, divided by
the total number of outstanding shares. It is the
underlying value of a single share on a given day.
Net asset value for the Trust is calculated weekly
and published in Barron's on Saturday and The New
York Times or The Wall Street Journal each Monday.

Principal-Only
Securities (P/O): Mortgage securities that receive only the
principal cash flows from an underlying pool of
mortgage loans or underlying pass-through
securities. Also known as Strip.

Project Loans: Mortgages for multi-family, low- to middle-income
housing.

Premium: When a fund's stock price is greater than its net
asset value, the fund is said to be trading at a
premium.

REMIC: A real estate mortgage investment conduit is a
multiple-class security backed by mortgage-backed
securities or whole mortgage loans and formed as
a trust, corporation, partnership, or segregated
pool of assets that elects to be treated as a
REMIC for federal tax purposes. Generally, Fannie
Mae REMICs are formed as trusts and are backed by
mortgage-backed securities.

Residuals: Securities issued in connection with
collateralized mortgage obligations that
generally represent the excess cash flow from the
mortgage assets underlying the CMO after payment
of principal and interest on the other CMO
securities and related administrative expenses.

Reverse Repurchase
Agreements: In a reverse repurchase agreement, the Trust 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
Securities: Arrangements in which a pool of assets is
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 Financial Management, Inc.
Summary of Closed-End Funds
- - --------------------------------------------------------------------------------

Taxable Trusts
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Perpetual Trusts Stock Symbol Maturity
------------ --------
<S> <C> <C>
The BlackRock Income Trust Inc. ................................... BKT N/A
The BlackRock North American Government Income Trust Inc. ......... BNA N/A

Term Trusts
The BlackRock 1998 Term Trust Inc. ................................ BBT 12/98
The BlackRock 1999 Term Trust Inc. ................................ BNN 12/99
The BlackRock Target Term Trust Inc. .............................. BTT 12/00
The BlackRock 2001 Term Trust Inc. ................................ BLK 06/01
The BlackRock Strategic Term Trust Inc. ........................... BGT 12/02
The BlackRock Investment Quality Term Trust Inc. .................. BQT 12/04
The BlackRock Advantage Term Trust Inc. ........................... BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. ......... BCT 12/09
</TABLE>

<TABLE>
Tax-Exempt Trusts
- - --------------------------------------------------------------------------------
<CAPTION>
Perpetual Trusts Stock Symbol Maturity
------------ --------
<S> <C> <C>
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. .. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust .......... RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. .. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. .... RNY N/A

Term Trusts
The BlackRock Municipal Target Term Trust Inc. .................... BMN 12/06
The BlackRock Insured Municipal 2008 Term Trust Inc. .............. BRM 12/08
The BlackRock California Insured Municipal 2008 Term Trust Inc. ... BFC 12/08
The BlackRock Florida Insured Municipal 2008 Term Trust ........... BRF 12/08
The BlackRock New York Insured Municipal 2008 Term Trust Inc. ..... BLN 12/08
The BlackRock Insured Municipal Term Trust Inc. ................... BMT 12/10

If you would like further information, please call BlackRock at (800) 227-7BFM (7236)
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BlackRock Financial Management, Inc.
An Overview
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BlackRock Financial Management (BlackRock) is a registered investment
adviser which specializes in managing high quality fixed income securities, both
taxable and tax exempt. BlackRock currently manages approximately $41 billion of
assets across the government, mortgage, corporate and municipal sectors. These
assets are managed on behalf of institutional and individual investors in 21
closed-end funds traded either on the New York Stock Exchange or American Stock
Exchange, several open-end funds and over 80 institutional clients in the United
States and overseas. BlackRock's institutional investor base includes Chrysler
Corporation Master Retirement Trust, General Retirement System of the City of
Detroit, State Treasurer of Florida, Ford Motor Company Pension Plan, General
Electric Pension Trust and Unisys Corporation Master Trust.

BlackRock was formed in April 1988 by fixed income professionals who sought
to create an asset management firm specializing in managing fixed income
securities for individuals and institutional investors. The professionals at
BlackRock have extensive experience creating, analyzing and trading a variety of
fixed income instruments, including the most complex structured securities. In
fact, individuals at BlackRock are responsible for many of the major innovations
in the mortgage-backed and asset-backed securities market, including the
creation of the CMO, the floating rate CMO, the senior/subordinated pass-through
and the multi-class asset-backed security.

BlackRock is unique among asset management and advisory firms in the
significant emphasis it places on the development of proprietary analytical
capabilities. A quarter of the professionals at BlackRock work full-time in the
design, maintenance and use of such systems which are otherwise not generally
available to investors. BlackRock's proprietary analytical tools are used for
evaluating, investing in and designing investment strategies and portfolios of
fixed income securities, including mortgage securities, corporate debt
securities or tax-exempt securities and a variety of hedging instruments.

BlackRock has developed investment products which respond to investors'
needs and has been responsible for several major innovations in closed-end
funds. BlackRock introduced the first closed-end mortgage fund, the first
taxable and tax-exempt closed-end funds to offer a finite term, the first
closed-end fund to achieve a AAAf rating by Standard & Poor's, and the first
closed-end fund to invest primarily in North American Government securities.
BlackRock's closed-end funds currently have dividend reinvestment plans which
are designed to provide an ongoing source of demand for the stock in the
secondary market. BlackRock manages a ladder of alternative investment vehicles,
with each fund having specific investment objectives and policies.

In view of our continued desire to provide a high level of service to all
our shareholders, BlackRock maintains a toll-free number for your questions. The
number is (800) 227-7BFM (7236). We encourage you to call us with any questions
you may have about your BlackRock funds and thank you for the continued trust
you place in our abilities.

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(Left column)

BlackRock

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

Officers
Ralph L. Schlosstein, President
Scott Amero, Vice President
Keith T. Anderson, Vice President
Michael C. Huebsch, 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
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, NY 10019

Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434

Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
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 Trust shares.

The BlackRock 2001 Term Trust Inc.
c/o Mitchell Hutchins Asset Management Inc.
15th Floor
1285 Avenue of the Americas
New York, NY 10019
(800) 227-7BFM
092477-10-8

(Right column)

The BlackRock
2001 Term Trust Inc.
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Annual Report
June 30, 1996