BLACKROCK 2001 TERM TRUST INC, N-30D, 1998-08-31

BLACKROCK 2001 TERM TRUST INC
N-30D, 1998-08-31

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

July 31, 1998

Dear Shareholder:

Domestic bonds provided investors with modest total returns during the
past twelve months, as interest rates generally fell. Supporting the bond market
was favorable inflation news and the belief that the Federal Reserve is unlikely
to raise short-term interest rates in the immediate future.

U.S. economic growth has slowed of late after a robust first quarter of
1998. We expect the fallout from the Asian fiscal crisis to quash any
significant rebound in U.S. growth for the remainder of the year. While we
expect that interest rates will be fairly stable in the near-term, our
longer-term outlook for the bond market remains optimistic, based on the
fundamentally favorable backdrop of low inflation, a currently high level of
real yields, and declining Treasury borrowing.

As you may know, the five investment management firms that comprised the
PNC Asset Management Group have consolidated under BlackRock, resulting in
BlackRock Inc., a $119 billion money management firm. We look forward to using
our global investment management expertise to present exciting investment
opportunities to closed-end fund shareholders in the future.

This report contains comments from your Trust's managers regarding the
markets and portfolio in addition to the Trust's consolidated financial
statements and a detailed portfolio of investments. We thank you for your
continued investment in the Trust.

Sincerely,

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

<PAGE>

July 31, 1998

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, 1998. We would like
to take this opportunity to review the Trust's stock price and net asset value
(NAV) performance, summarize market developments and discuss recent portfolio
management activity.

The Trust is a diversified, actively managed closed-end bond fund whose
shares are traded on the New York Stock Exchange under the symbol "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. Although there can be no guarantee, BlackRock is confident that the
Trust can achieve its investment objectives. The Trust seeks these objectives by
investing in investment grade fixed income securities, including corporate debt
securities, mortgage-backed securities backed by U.S. Government agencies (such
as Fannie Mae, Freddie Mac or Ginnie Mae), asset-backed securities and
commercial mortgage-backed securities. All of the Trust's assets must be rated
at least "BBB" by Standard & Poor's or "Baa" by Moody's at time of purchase or
be issued or guaranteed by the U.S. government or its agencies.

The table below summarizes the performance of the Trust's stock price and
NAV (the market value of its assets per share) over the year:

<TABLE>
<CAPTION>
--------------------------------------------------------------
6/30/98 6/30/97 CHANGE HIGH LOW
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $8.8125 $8.1250 8.46% $8.8125 $8.1250
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $9.51 $9.10 4.51% $9.52 $9.10
- -----------------------------------------------------------------------------------------------
5-YEAR U.S. TREASURY NOTE 5.47% 6.38% (0.91%) 6.38% 5.21%
- -----------------------------------------------------------------------------------------------
</TABLE>

THE FIXED INCOME MARKETS

After extremely strong growth in 1997 and into the first quarter of 1998,
the U.S. economy slowed during the past three months. Despite the strong
economic growth of the past year, inflation stayed surprisingly subdued. One
explanation for the absence of inflation in the U.S. economy stems from the
aftermath of the Asian financial crisis. U.S. exports to Asia have slowed, while
the strength of the dollar caused cheap Asian imports to flood the U.S. market
and exert downward price pressure on domestic goods.

Yields of U.S. Treasury securities trended downward during the period. For
example, the yield of the 10-Year Treasury posted a net decline of 105 basis
points (1.05%), falling from 6.50% on June 30, 1997 to 5.45% on June 30, 1998.
The past year witnessed strong Treasury performance, which has been due to
moderating economic growth, low inflation and a "flight to quality" from
investors seeking a safe haven in U.S. Treasury securities. Continued
expectations that the Asian crisis will slow economic growth and that the Fed
will adopt an easing bias provided additional support to the bond market. With
Treasury supply waning due to surplus in the federal budget and increased
foreign demand for Treasuries due to their U.S. government backing and
relatively attractive yields, we anticipate a positive environment for
Treasuries for the balance of 1998.

<PAGE>

In light of declining interest rates and faster prepayment speeds during
the period, mortgages underperformed the broader investment grade bond market.
As measured by the LEHMAN BROTHERS MORTGAGE INDEX, mortgages posted an 8.92%
total return versus 10.54% for the LEHMAN BROTHERS AGGREGATE INDEX. Mortgage
rates fell below the critical 7% threshold for the first time since January
1994, causing concerns that increased refinancing activity would negatively
impact the performance of mortgage securities. Accordingly, lower coupon
securities generally outperformed more prepayment-sensitive higher-coupon
issues. After a strong beginning to 1997, the corporate bond market succumbed to
the financial turmoil in Asia during the fourth quarter, which caused a decline
in perceived corporate bond credit quality ratings and initiated a period of
corporate bond underperformance versus Treasuries. Lower U.S. interest rates
brought a flood of new corporate supply in 1998, further contributing to the
modest performance of corporates.

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, 1997 asset
composition.

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THE BLACKROCK 2001 TERM TRUST INC.
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COMPOSITION JUNE 30, 1998 JUNE 30, 1997
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Corporate Bonds 19% 16%
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Taxable Zero Coupon Bonds 17% 14%
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U.S. Treasury Securities 16% 27%
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Asset-Backed Securities 9% 5%
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Mortgage Pass-Throughs 8% 13%
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Agency Multiple Class Mortgage Pass-Throughs 8% 8%
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Money Market Instruments 7% 2%
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Principal Only Mortgage-Backed Securities 6% 4%
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Commercial Mortgage-Backed Securities 5% 4%
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Interest Only Mortgage-Backed Securities 2% 4%
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Municipal Bonds 2% 1%
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Adjustable Rate Mortgages 1% 2%
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RATING % OF CORPORATES
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CREDIT RATING JUNE 30, 1998 JUNE 30, 1997
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AAA or equivalent 2% 1%
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AA or equivalent 14% 9%
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A or equivalent 62% 55%
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BBB or equivalent 22% 30%
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N/R 0% 5%
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<PAGE>

In accordance with the Trust's primary investment objective of returning
the initial offer price upon maturity, the Trust's portfolio management activity
focused on adding securities which offered both attractive yield spreads over
Treasury securities and a maturity date matching the Trust's termination date of
June 30, 2001. Additionally, the Trust has been active in reducing positions in
bonds which have maturity dates or potential cash flows after the Trust's
termination date. During the reporting period, the most significant additions
have been in asset-backed securities (ABS) and corporate bond and structured
mortgage securities sectors (such as commercial mortgage-backed securities, or
"CMBS"). To finance these purchases, the Trust primarily sold mortgage
pass-through securities, as their maturities may extend past the Trust's
termination date in a rising interest rate environment.

We look forward to managing the Trust to benefit from the opportunities
available in the fixed income markets and to meet its investment objectives. 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,

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

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THE BLACKROCK 2001 TERM TRUST INC.
- --------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BLK
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Initial Offering Date: July 23, 1992
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Closing Stock Price as of June 30, 1998: $8.8125
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Net Asset Value as of June 30, 1998: $9.51
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Yield on Closing Stock Price as of June 30, 1998 ($8.8125)1: 4.54%
- --------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.0333
- --------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.40
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- ----------------
1 Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 Distribution is not constant and is subject to change.

<PAGE>

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THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED PORTFOLIO OF INVESTMENTS
JUNE 30, 1998

================================================================================
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 106.8%
MORTGAGE PASS-THROUGHS -- 8.8%
Federal Home Loan Mortgage Corp.,
$ 1,881++ 6.50%, 09/01/25 - 01/01/99 ...... $ 1,875,038
547 7.50%, 07/01/13 - 11/01/23 ...... 560,837
7,994 8.144%, 12/01/01,
7 Year Multifamily ............ 8,098,787
9,487 8.50%, 06/01/11 - 09/01/24 ...... 9,929,390
9,983 8.60%, 05/01/02,
7 Year Multifamily ............ 10,388,316
5,940 Federal Housing Administration,
Massachusetts St. Housing
Finance Agency, Series A,
6.85%, 10/01/20 ................. 5,925,684
Federal National Mortgage
Association,
30,000 6.50%, 03/25/27 ................. 6,825,000
21,721++ 7.00%, 10/01/22 - 06/01/26 ...... 22,026,361
6,825 7.50%, 09/01/07 - 07/01/23 ...... 7,033,307
10,364 7.695%, 05/01/01,
7 Year Multifamily ............ 10,496,057
11,218 7.79%, 02/01/01,
7 Year Multifamily ............ 11,367,083
3,761 8.00%, 03/01/01,
7 Year Multifamily ............ 3,818,964
3,684 8.49%, 04/01/01,
7 Year Multifamily ............ 3,750,459
6,197 8.50%, 06/01/06 - 09/01/09,
15 Year ....................... 6,477,773
2,423 8.69%, 04/01/01,
7 Year Multifamily ............ 2,551,501
7,281 Government National
Mortgage Association, 8.00%,
01/15/23 - 06/15/24 ............. 7,544,754
------------
118,669,311
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MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 10.3%
AAA 346 Collateralized Mortgage
Securities Corp.,
Series F, Class F-4A,
11/01/15 ........................ 349,819
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
2,006 Series G-29, Class G-29-IA,
06/25/20 (I) .................. 207,364
14,389 Series G-30, Class G-30-J,
02/25/23 (I) .................. 2,142,646
12,576 Series G-32, Class G-32-PT,
02/25/19 (I) .................. 1,228,546
3,045 Series G-32, Class G-32-TT,
02/25/19 (I) .................. 283,996
34,304 Series 1261, Class 1261-H,
08/15/19 ...................... 34,593,875
614 Series 1563, Class 1563-SB,
08/15/08 (ARM) ................ 621,838
1,758 Series 1606, Class 1606-SB,
11/15/08 (ARM) ................ 1,730,046
5,295 Series 1671, Class 1671-KD,
02/15/24 (ARM) ................ 5,202,456
46,732 Series 1954, Class 1954-MD,
03/15/16 (I) .................. 5,421,393
5,471 Series 1970, Class 1970-PN,
06/15/15 (I) .................. 574,461
Federal National Mortgage
Association, REMIC
Pass-Through Certificates,
6,533 6.125%, Series 1993-ML,
Class M2-H, 11/25/03,
Multifamily ................... 6,512,740
2,558 Trust 269, Class 269-1,
08/01/22 ...................... 2,704,498
6,954 Trust 1990-144, Class 144-W,
12/25/20 ...................... 7,548,216
15,000 Trust 1992-43, Class 43-E,
04/25/22 ...................... 15,530,850
8,315 Trust 1992-122, Class 122-PJ,
06/25/19 ...................... 8,369,571
529 Trust 1992-184, Class 184-SA,
06/25/22 (ARM) ................ 533,100
1,500 Trust 1993-G17, Class 17-SH,
04/25/23 (ARM) ................ 1,044,735
4,107 Trust 1993-68, Class 68-PJ,
11/25/06 (I) .................. 327,044
2,050 Trust 1993-71, Class 71-PG,
07/25/07 ...................... 2,058,877
652 Trust 1993-99, Class 99-SB,
07/25/23 (ARM) ................ 648,151
822 Trust 1993-117, Class 117-S,
07/25/08 (ARM) ................ 791,387
7,605 Trust 1993-141, Class 141-PW,
06/25/18 (I) .................. 651,283
4,722 Trust 1993-196, Class 196-SM,
10/25/08 (ARM) ................ 4,213,621
4,706 Trust 1993-214, Class 214-SO,
12/25/08 (ARM) ................ 4,442,291
1,486 Trust 1994-42, Class 42-SM,
01/25/24 (ARM) ................ 1,446,731
7,700 Trust 1994-54, Class 54-B,
11/25/23 (P) .................. 7,063,441
11,066 Trust 1996-T6, Class T6-C,
02/26/01 ...................... 11,062,701

See Notes to Consolidated Financial Statements.

MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- (CONT'D)
$ 2,735 Trust 1996-T6, Class T6-D,
02/26/01 ...................... $ 2,758,201
23,700 Trust 1997-50, Class 50-HK,
08/25/27 ...................... 8,428,313
6,465 Government National Mortgage
Association, REMIC,
Trust 1994-1, Class 1-PL,
06/16/24 (I) .................. 1,125,415
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139,17,606
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COMMERCIAL MORTGAGE BACKED
SECURITIES -- 5.0%
BBB 10,000 CBA Mortgage Corp.,
Series 1993-C1, Class D,
7.76%, 12/25/03 ................. 10,020,914
AA+ 3,444 Central Life Assurance Co.,
Series 1994-1, Class A2,
8.90%, 11/01/20 ................. 3,558,873
AAA 126,145 Credit Suisse First Boston Mortgage,
Series 1997, Class C-1,
06/20/29, (I/O) ................. 13,946,336
AAA 5,200 PaineWebber Mortgage Acceptance
Corp., Series 1995-M1, Class A,
01/15/07 ........................ 5,282,827
Resolution Trust Corp.,
AA- 3,963 Series 1992-C6, Class B,
6.70%, 07/25/24 ............... 3,943,225
AA 8,050 Series 1994-C1, Class C,
8.00%, 06/25/26 ............... 8,160,688
A 5,521 Series 1994-C2, Class D,
8.00%, 04/25/25 ............... 5,588,110
AA 4,684 Salomon Brothers, Mortgage
Acceptance Corp., Series
1997-TZH, Class A1,
7.15%, 03/25/25 ............... 4,889,207
AAA 12,800 Structured Asset Securities
Corp., Series 1996-CFL,
Class B, 6.30%, 02/25/28 ........ 12,778,166
-----------
68,168,346
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CORPORATE BONDS -- 20.5%
BANKING AND FINANCE -- 9.5%
A3 1,300@ Amsouth Bancorporation,
6.75%, 11/01/25 ................. 1,336,066
A- 5,000 Aristar Inc.,
7.25%, 06/15/01 ................. 5,153,350
Associates Corp.,
AA- 5,000 6.68%, 07/25/00 .................. 5,068,700
AA- 5,000 7.46%, 03/28/00 .................. 5,127,000
A- 15,000 Donaldson, Lufkin & Jenrette,
5.625%, 02/15/16 ................. 14,830,050
A+ 6,750 Goldman Sachs Group LP,
6.20%, 12/15/00 .................. 6,785,437
A3 5,000 Great Western Financial Corp.,
6.375%, 07/01/00 ................. 5,037,900
A1 5,700 Meridian Bancorp Inc.,
6.625%, 06/15/00 ................. 5,768,362
Merrill Lynch & Co. Inc.,
AA- 7,200 6.00%, 01/15/01 .................. 7,203,888
AA- 5,800 6.00%, 03/01/01 .................. 5,806,902
A+ 3,800 Morgan Stanley Inc.,
5.75%, 02/15/01 .................. 3,778,720
Aa3 10,000 NationsBank Corp.,
7.00%, 09/15/01 .................. 10,278,700
A 12,500 Salomon Inc.,
6.625%, 11/30/00 ................. 12,658,875
Salomon Smith Barney
Holdings Inc.,
A 13,000 5.875%, 02/01/01 ................. 12,937,600
A 3,600 7.00%, 05/15/00 .................. 3,661,704
A 1,925 Security Pacific Corp.,
11.00%, 03/01/01 .................. 2,157,176
A- 15,000 Transamerica Finance Corp.,
6.75%, 06/01/00 ................... 15,208,350
A2 5,000 Union Planters National Bank,
6.76%, 10/30/01 ................... 5,100,892
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127,899,672
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INDUSTRIAL -- 4.3%
BBB 7,500 Erac Usa Finance Co.,
7.00%, 06/15/00 ................... 7,610,137
A 10,000 Ford Motor Credit Co.,
6.18%, 12/27/01 ................... 10,058,200
A 20,600 General Motors Acceptance Corp.,
6.125%, 09/18/98 .................. 20,617,620
BBB- 6,000 RJR Nabisco Brands Inc.,
8.00%, 07/15/01 ................... 6,040,260
Sears Roebuck & Co.,
A- 4,250 6.50%, 06/15/00 ................... 4,293,095
A- 5,000 7.29%, 04/24/00 ................... 5,100,716
BBB 3,500 Tenneco Credit Corp.,
8.075%, 10/01/02 .................. 3,728,025
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57,448,053
------------
UTILITIES -- 1.0%
BBB 9,000 Pacificorp Holdings Inc.,
6.75%, 04/01/01 ................... 9,010,530
BBB+ 5,000 Potomac Capital Corp.,
6.90%, 08/09/00 ................... 5,049,350
------------
14,059,880
------------

YANKEE -- 5.7%
African Development Bank,
Aa1 5,000 7.75%, 12/15/01 ................... 5,254,816
Aaa 3,350 8.625%, 05/01/01 .................. 3,569,431
BBB- 3,000 Colombia (Republic of),
8.00%, 06/14/01 ................... 3,000,000
BBB- 15,000 Empresa Electric Guacolda,
7.60%, 04/30/01 ................... 14,893,484
A 4,000 Household Finance Corp.,
7.45%, 04/01/00 ................... 4,093,040

See Notes to Consolidated Financial Statements.

<PAGE>

ASSET-BACKED SECURITIES -- 9.2%
BBB+ 5,290 Amresco Securitized Interest,
Series 1996-1, Class A,
8.10%, 04/26/26 ................. 5,210,206
AAA 23,715 Brazos Student Finance Corp.,
Series 1998-A, Class A,
06/01/06 ........................ 23,707,968
Baa2 10,000 Broad Index Secured Trust,
6.58%, 03/26/01 ................. 10,019,239
AAA 18,205 Chase Manhattan Grantor Trust,
Series 1996-B, Class A,
6.61%, 09/15/02 ................. 18,341,462
AAA 35,000@ Citibank Credit Card Trust,
Series 1996-1, Class A,
5.79%, 02/07/03 ................. 30,045,050
AAA 2,222 NationsBank Auto Grantor Trust,
Series 1995-A, Class A,
5.85%, 06/15/02 ................. 2,223,049
AAA 5,750 Standard Credit Card Master Trust,
Series 1995-3, Class A,
7.85%, 02/07/02 ................. 5,915,313
Structured Mortgage Asset,
Residential Trust,
A 10,563 Series 1997-2, 8.24%,
03/15/06 ........................ 10,650,958
A 11,268 Series 1997-3, 8.724%,
04/15/06 ........................ 11,452,408
A 6,378 Series 1997-4, Class A, 7.85%,
09/15/01 ........................ 6,423,555
------------

123,989,208
------------

STRIPPED MORTGAGE-BACKED
SECURITIES -- 8.8%
AAA 6,404 Bear Stearns Secured Investments,
12/01/18 (P/O) .................... 6,228,234
Aaa 4,265 CMO Mortgage Investors Trust,
Trust 7, Class P,
09/22/21 (I/O) .................... 1,071,756
Collateralized Mortgage
Securities Corp.,
AAA 1,267 Series 1990-5, Class 5-L,
09/20/20 (I/O) .................. 32,849
AAA 3,320 Series 1991-9, Class M,
11/20/21 (I/O) .................. 501,642
Federal Home Loan
Mortgage Corp.,
17,650 Series G-3, Class G-3-S,
04/25/19 (I/O) .................. 749,964
4,482 Series 113, Class 113-M,
05/15/21 (I/O) .................. 1,093,122
13,205 Series 181, Class 181-F,
08/15/21 (I/O) .................. 1,764,025
1,127 Series 1125, Class 1125-F,
08/15/21 (I/O) .................. 303,780
26 Series 1185, Class 1185-C,
12/15/06 (I/O) .................. 440,247
28 Series 1283, Class 1283-X,
06/15/22 (I/O) .................. 777,417
691 Series 1338, Class 1338-Q,
08/15/07 (P/O) .................. 594,054
4,700 Series 1360, Class 1360-PT,
12/15/17 (I/O) .................. 696,319
4,700 Series 1378, Class 1378-DA,
01/15/18 (I/O) .................. 938,567
2,941 Series 1388, Class 1388-G,
05/15/06 (I/O) .................. 447,010
3,646 Series 1404, Class 1404-E,
01/15/06 (I/O) .................. 408,813
6,485 Series 1422, Class 1422-IB,
11/15/07 (I/O) .................. 1,063,032
14,852 Series 1506, Class 1506-SA,
01/15/05 (I/O) .................. 207,784
21,919 Series 1605, Class 1605-S,
08/15/06 (I/O) .................. 481,352
15,456 Series 1621, Class 1621-SJ,
10/15/20 (I/O) .................. 661,377
24,316 Series 1640, Class 1640-SD,
12/15/00 (I/O) .................. 492,151
6,506 Series 1662, Class 1662-PO,
01/15/09 (P/O) .................. 5,134,307
1,536 Series 1664, Class 1664-C,
11/15/23 (P/O) .................. 1,468,339
3,271 Series 1721, Class 1721-OC,
05/15/24 (P/O) .................. 1,896,673
52,664 Series 1790, Class 1790-D,
11/15/23 (I/O) .................. 1,123,853
5,416 Series 1849, Class 1849-EL,
12/15/08 (I/O) .................. 876,645
6,610 Series 1870, Class 1870-PA,
08/15/01 (P/O) .................. 5,899,461
3,706 Series 1900, Class 1900-SD,
01/15/23 (I/O) .................. 704,048
17,059 Series 1950, Class 1950-SA,
10/15/22 (I/O) .................. 319,865
Federal National Mortgage
Association,
2,861 Trust 3, Class 1, 02/01/17 (P/O) . 2,348,989
2,370 Trust 5, Class 1, 09/01/07 (P/O) .. 1,967,716
14,119 Trust 25, Class 2,
02/01/13 (I/O) .................. 1,353,585
1,196 Trust 60, Class 1,
01/01/19 (P/O) .................. 970,255
1,400 Trust 1990-76, Class 76-N,
07/25/20 (I/O) .................. 36,216

See Notes to Consolidated Financial Statements.

<PAGE>

================================================================================
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
STRIPPED MORTGAGE-BACKED
SECURITIES -- (CONT'D)
$ 1,900 Trust 1990-106, Class 106-K,
09/25/20 (I/O) .................. $ 435,146
532 Trust 1991-G44, Class G44-H,
11/25/21 (P/O) .................. 488,547
1,964 Trust 1991-G46, Class G46-K,
12/25/09 (I/O) .................. 466,678
839 Trust 1991-29, Class 29-J,
04/25/21 (I/O) .................. 273,260
2,400 Trust 1991-80, Class 80-Q,
07/25/21 (I/O) .................. 726,870
924 Trust 1991-167, Class 167-B,
10/25/17 (P/O) .................. 736,127
1,365 Trust 1991-167, Class 167-E,
10/25/17 (P/O) .................. 651,105
3,000 Trust G1992-5, Class 5-E,
01/25/22 (I/O) .................. 898,857
11,523 Trust 1992-G45, Class G45-2,
08/25/22 (I/O) .................. 2,886,515
66 Trust 1992-18, Class 18-JA,
11/25/05 (I/O) .................. 596,094
40,807 Trust G1993-31, Class 31-PS,
08/25/18 (I/O) .................. 1,522,926
3,726 Trust 1993-48, Class 48-B,
04/25/08 (P/O) .................. 3,126,508
60,353 Trust 1993-82, Class 82-SA,
05/25/23 (I/O) .................. 1,810,594
1,004 Trust 1993-128, Class 128-B,
07/25/23 (P/O) .................. 981,461
475 Trust 1993-150, Class 150-B,
09/25/20 (P/O) .................. 471,484
1,134 Trust 1993-151, Class 151-E,
05/25/23 (P/O) .................. 1,071,091
14,744 Trust 1993-152, Class 152-D,
08/25/23 (P/O) .................. 14,292,060
52,276 Trust 1993-202, Class 202-SL,
11/25/23 (I/O) .................. 2,624,275
1,162 Trust 1993-222, Class 222-B,
07/25/22 (P/O) .................. 1,072,387
22,852 Trust 1993-240, Class 240-PS,
09/25/12 (I/O) .................. 649,695
20,874 Trust 1993-257, Class 257-A,
06/25/23 (P/O) .................. 19,052,723
11,812 Trust 1994-8, Class 8-G,
11/25/23 (P/O) .................. 9,364,771
4,703 Trust 1994-53, Class 53-EA,
11/25/23 (P/O) .................. 3,676,926
7,300 Trust 1996-24, Class 24-SB,
10/25/08 (I/O) .................. 1,505,625
9,471 Trust 1996-40, Class 40-SG,
03/25/09 (I/O) .................. 1,823,094
75,603 Trust 1997-35, Class 35-SB,
03/25/09 (I/O) .................. 2,256,291
47,180 Trust 1997-37, Class 37-SX,
08/18/18 (I/O) .................. 855,140
AAA 6,148 Merrill Lynch Trust,
Series 43, Class F,
08/27/15 (I/O) ................ 879,093
------------
118,248,790
------------
U.S. GOVERNMENT SECURITIES -- 16.6%
U.S. Treasury Bonds,
125,000+ 6.125%, 11/15/27 .................. 133,945,000
71,329 3.625%, 04/15/28, (CPI) ........... 70,459,934
U.S. Treasury Notes,
3,050 5.375%, 01/31/00 .................. 3,042,863
4,180 5.750%, 09/30/99 .................. 4,191,119
12,500 6.125%, 08/15/07 .................. 13,005,875
------------
224,644,791
------------
TAXABLE ZERO COUPON BONDS -- 18.2%
U.S. Treasury Receipt,
187,000+ 05/15/01 ......................... 159,991,590
96,000 08/15/00 ......................... 85,531,200
------------
245,522,790
------------

TAXABLE MUNICIPAL BONDS -- 2.0%
AAA 1,000 Kern County California Pension
Obligation,
6.27%, 08/15/01 .................... 1,009,440
AAA 2,035 Long Beach California Pension
Obligation,
6.45%, 09/01/01 .................... 2,064,813
AAA 6,000 Los Angeles County
California Pension Obligation,
Series D, 6.38%, 06/30/01 .......... 6,072,720
New York City, G.O., Series 1,
BBB+ 5,000 6.40%, 03/15/01 .................... 5,044,750
BBB+ 5,000 7.24%, 04/15/01 .................... 5,151,800
BBB 1,000 New York State Environmental
Facility Auth., Series A,
6.62%, 03/15/01 .................... 1,013,100
BBB 3,345 New York State Housing
Finance Agency, Series B,
7.14%, 09/15/02 .................... 3,469,869
BBB 2,000 New York State Urban Development
Corp., Series B,
6.90%, 04/01/01 .................... 2,040,500
A 1,000 St. Joseph's Health System
California, Series A,
7.02%, 07/01/01 .................... 1,027,220
------------
26,894,212
------------

See Notes to Consolidated Financial Statements.

8
<PAGE>

Total long-term Investments
(cost $1,429,193,215) .............. 1,443,038,467
---------------
SHORT-TERM INVESTMENTS--0.8%
DISCOUNT NOTE --0.3%
4,830 Federal Home Loan
Mortgage Corp.,
07/01/98 (cost $4,830,000) .......... 4,830,000
--------------

NOTIONAL
AMOUNT
(000)
--------
CALL OPTIONS PURCHASED -- 0.5%
Interest Rate Swap,
80,000 6.20% over 3 Month LIBOR,
expires 08/13/99 ................... 2,292,800
103,000 5.85% over 3 Month LIBOR,
expires 08/07/00 ................... 2,147,550
235,000 5.82% over 3 Month LIBOR,
expires 01/11/99 ................... 1,076,535
235,000 5.92% over 3 Month LIBOR,
expires 08/21/98 ................... 1,022,250
--------------
6,539,135
--------------

PUT OPTIONSPURCHASED -- 0.0%
200,000 Interest Rate Swap, 6.90% over
3 Month LIBOR, expires 10/30/98 ..... 124,000
--------------
Total short-term Investments
(cost $14,296,175) .................. 11,493,135
--------------
Total investments before
call options written -- 107.6%
(cost $1,443,489,390) ............... 1,454,531,602
--------------

===============================================================================
NOTION
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
CALL OPTIONS WRITTEN -- (0.2%)
Interest Rate Swap,
$(450,000) 3 month LIBOR over 5.25%
expires 12/01/98 .................... $ (380,250)
(152,750) 3 month LIBOR over 5.80%
expires 01/11/99 .................... (1,439,822)
(152,750) 3 month LIBOR over 5.90%
expires 09/21/98 .................... (1,088,649)
--------------
Total call options written
(premium received $4,101,257) ....... (2,908,721)
--------------
Total investments net of
call options written--107.4% ........ 1,451,622,881
Liabilities in excess of other
assets--(7.4%) ...................... (100,462,876)
--------------
NET ASSETS -- 100% .................... $1,351,160,005
==============

- -------------
* Using the higher of Standard & Poor's or Moody's rating.
+ Partial principal amount pledged as collateral for reverse repurchase
agreements. See Note 4.
++ Includes mortgage dollar roll of $12,903,516. See Note 4.
@ Partial principal amount pledged as collateral for futures transactions.

- --------------------------------------------------------------------------------
KEY TO ABBREVIATIONS
ARM -- Adjustable Rate Mortgage.
CMO -- Collateralized Mortgage Obligation.
CPI -- Consumer Price Index.
G.O. -- General Obligation Bond.
I -- Denotes a CMO with Interest Only characteristics.
I/O -- Interest Only.
LIBOR -- London InterBank Offer Rate.
P -- Denotes a CMO with Principal Only characteristics.
P/O -- Principal Only.
REMIC -- Real Estate Mortgage Investment Conduit.
- --------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES JUNE 30, 1998
- --------------------------------------------------------------------------------

ASSETS
Investments, at value
(cost $1,443,489,390) (Note 1) ................ $1,454,531,602
Cash ............................................ 212,650
Deposits with brokers as collateral
for investments sold short (Note 1) ........... 1,365,000
Interest receivable ............................. 12,470,883
Receivable for investments sold ................. 2,183,469
Other assets .................................... 81,829
--------------
1,470,845,433
--------------
LIABILITIES
Reverse repurchase agreements (Note 4) .......... 88,476,375
Payable for investments purchased ............... 22,403,584
Interest rate caps, at value
(unamortized premium $1,035,412) (Note 1) ..... 3,146,660
Call options written, at value
(premium received $4,101,257) (Note 1) ........ 2,908,721
Unrealized depreciation on interest rate swaps
(Notes 1 & 3) ................................. 890,783
Investment advisory fee payable (Note 2) ........ 444,714
Due to broker-variation margin .................. 436,774
Dividends payable ............................... 327,539
Administration fee payable (Note 2) ............. 111,178
Other accrued expenses .......................... 539,100
--------------
119,685,428
--------------
$1,351,160,005
==============
NET ASSETS
Net assets were comprised of:
Common stock, at par (Note 5) ................. 1,420,106
Paid-in capital in excess of par .............. 1,335,382,179
--------------
1,336,802,285
Undistributed net investment income ........... 79,544,712
Accumulated net realized loss ................. (73,471,037)
Net unrealized appreciation ................... 8,284,045
--------------
Net assets, June 30, 1998 ..................... $1,351,160,005
==============
Net asset value per share:
($1,351,160,005 / 142,010,583 shares of
common stock issued and outstanding) .......... $9.51
=====

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest (net of premium amortization
of $7,173,632 and interest expense
of $29,259,290) ............................. $ 89,053,105
------------
Expenses
Investment advisory ........................... 5,323,741
Administration ................................ 1,330,934
Custodian ..................................... 299,000
Reports to shareholders ....................... 119,000
Audit ......................................... 113,000
Transfer agent ................................ 106,000
Directors ..................................... 100,000
Legal ......................................... 93,000
Miscellaneous ................................. 410,289
------------
Total operating expenses .................... 7,894,964
------------
Net investment income before excise tax ....... 81,158,141
Excise tax .................................... 1,988,694
------------
Net investment income ......................... 79,169,447
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments ................................... 25,179,448
Short sales ................................... (11,415,763)
Options ....................................... (4,804,103)
Swaps ......................................... (2,932,011)
Futures ....................................... (17,305,178)
------------
(11,277,607)
------------
Net change in unrealized appreciation
(depreciation) on:
Investments ................................... 50,977,356
Options written ............................... 1,192,536
Options ....................................... 877,297
Interest Rate Caps ............................ (3,845,957)
Swaps ......................................... (1,004,090)
Futures ....................................... (1,066,400)
------------
47,130,742
------------
Net gain on investments ......................... 35,853,135
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $115,022,582
============

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Interest received, net of interest purchased ..... $ 124,994,467
Operating expenses and excise taxes paid ......... (9,854,639)
Interest expense paid ............................ (30,168,256)
Purchases of long-term portfolio investments ..... (5,773,835,151)
Proceeds from disposition of long-term
portfolio investments .......................... 6,252,830,051
Other ............................................ 10,598
---------------
Net cash flows provided by operating
activities ..................................... 563,977,070
---------------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements ........ (507,307,000)
Cash dividends paid .............................. (56,846,800)
---------------
Net cash flows used for financing
activities ..................................... (564,153,800)
---------------
Net decrease in cash ............................... (176,730)
Cash at beginning of year .......................... 389,380
---------------
Cash at end of year ................................ $ 212,650
===============

RECONCILIATION OF NET INCREASE IN NET ASSETS
TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

Net increase in net assets resulting from
operations ......................................... $ 115,022,582
--------------
Decrease in investments ............................ 489,713,765
Net realized loss .................................. 11,277,607
Increase in unrealized appreciation ................ (47,130,742)
Decrease in interest rate caps ..................... 4,881,369
Decrease in unrealized appreciation on
interest rate swaps .............................. 1,004,090
Decrease in interest receivable .................... 6,682,072
Increase in receivable for investments sold ........ (367,432)
Decrease in broker-variation margin ................ 1,236,859
Increase in deposits with brokers .................. (1,365,000)
Decrease in other assets ........................... 10,598
Decrease in payable for investments purchased ...... (19,017,472)
Increase in written options ........................ 2,908,721
Decrease in interest payable ....................... (908,966)
Increase in accrued expenses and other
liabilities ...................................... 29,019
--------------
Total adjustments ................................ 448,954,488
--------------
Net cash flows provided by operating
activities ....................................... $ 563,977,070
==============

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN NET ASSETS
FOR THE YEARS ENDED
- --------------------------------------------------------------------------------

JUNE 30, JUNE 30,
1998 1997
-------- --------

INCREASE (DECREASE) IN
NET ASSETS

Operations:

Net investment income .......... $ 79,169,447 $ 88,871,701

Net realized loss .............. (11,277,607) (2,464,524)

Net change in unrealized
appreciation ................. 47,130,742 30,422,403
------------- --------------
Net increase
in net assets resulting
from operations .............. 115,022,582 116,829,580

Dividends from net
investment income .............. (56,747,022) (56,747,067)
------------- --------------
Total increase ................... 58,275,560 60,082,513

NET ASSETS

Beginning of year ................ 1,292,884,445 1,232,801,932
------------- --------------

End of year ...................... $1,351,160,005 $1,292,884,445
============== ==============

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ........................ $ 9.10 $ 8.68 $ 8.72 $ 8.32 $ 9.62
------------ ----------- ----------- ---------- ----------
Net investment income (net of $0.21, $0.25, $0.22, $0.27
and $0.12 respectively, of interest expense) .......... 0.56 0.62 0.58 0.61 0.64
Net realized and unrealized gain (loss) ................. 0.25 0.20 (0.17) 0.42 (1.23)
----------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment operations ........ 0.81 0.82 0.41 1.03 (0.59)
----------- ---------- ---------- ---------- ----------
Dividends from net investment income ...................... (0.40) (0.40) (0.45) (0.63) (0.71)
----------- ---------- ---------- ----------- ----------
Net asset value, end of year* ............................. $ 9.51 $ 9.10 $ 8.68 $ 8.72 $ 8.32
=========== ========== ========== ========== ==========
Market value, end of year* ................................ $ 8.81 $ 8.13 $ 7.63 $ 7.50 $ 8.00
=========== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+ .................................. 13.59% 12.07% 7.83% 1.61% (7.73)%

RATIOS TO AVERAGE NET ASSETS:
Operating expenses # ...................................... 0.59% 0.63% 0.64% 0.63% 0.67%
Net investment income ..................................... 5.96% 7.04% 6.57% 7.28% 6.97%

SUPPLEMENTAL DATA:
Average net assets (in thousands) ......................... $ 1,327,28 $1,261,766 $1,248,679 $1,181,411 $1,295,131
Portfolio turnover ........................................ 307% 110% 216% 107% 91%
Net assets, end of year (in thousands) .................... $ 1,351,160 $1,292,884 $1,232,802 $1,238,389 $1,182,120
Reverse repurchase agreements outstanding,
end of year (in thousands) .............................. $ 88,476 $ 595,783 $ 352,757 $ 489,335 $ 395,559
Asset coverage++ .......................................... $ 16,271 $ 3,170 $ 4,495 $ 3,531 $ 3,988
</TABLE>

- ------------------
* Net asset value and market value are published in THE WALL STREET JOURNAL
each Monday.
# The ratios of operating expenses, including interest expense, to average
net assets were 2.80%, 3.47%, 3.17%, 3.89% and 1.98%, for the years
indicated above, respectively. The ratios of operating expenses, including
interest expense and excise taxes, to average net assets were 2.95%, 3.53%,
3.17%, 3.89% and 1.99% for the years indicated above, respectively.
+ Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of the years reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at prices obtained under the Trust's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions.
++ Per $1,000 of reverse repurchase agreement outstanding.

The information above represents the audited operating performance for a share
of common stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each of the years indicated. This
information has been determined based upon financial information provided in the
financial statements and market value data for the Trust's shares.

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION & The BlackRock 2001 Term Trust Inc. (the "Trust"), a
ACCOUNTING Maryland corporation, is a diversified, closed-end
POLICIES 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.

On October 17, 1997, the Trust transferred a substantial portion of its
total assets to a 100% owned regulated investment company subsidiary called BLK
Subsidiary, Inc. These consolidated financial statements include the operations
of both the Trust and its wholly-owned subsidiary after elimination of all
intercompany transactions and balances.

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 the applicable exchanges. In the absence of a last sale,
options are valued at the average of the quoted bid and asked prices as of the
close of business. A futures contract is valued at the last sale price as of the
close of the commodities exchange on which it trades 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 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase is 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.

In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.

OPTION SELLING/PURCHASING: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.

Options, when used by the Trust, help in maintaining a
targeted duration. Duration is a measure of the price sensitivity of a security
or a portfolio to relative changes in interest rates. For instance, a duration
of "one" means that a portfolio's or a security's price would be expected to
change by approximately one percent with a one percent change in interest rates,
while a duration of five would imply that the price would move approximately
five percent in relation to a one percent change in interest rates.

Option selling and purchasing is used by the Trust to effectively "hedge"
positions so that changes in interest rates do not change the duration of the
portfolio unexpectedly. In general, the Trust uses options to hedge a long or
short posi-

<PAGE>

tion 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.

SWAP OPTIONS: Swap options are similar to options on securities except
that instead of selling or purchasing the right to buy or sell a security, the
writer or purchaser of the swap option is granting or buying the right to enter
into a previously agreed upon interest rate swap agreement at any time before
the expiration of the option. Premiums received or paid from writing or
purchasing options are recorded as liabilities or assets and are subsequently
adjusted to the current market value of the option written or purchased.
Premiums received or paid from writing or purchasing options which 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
commission, is also treated as a realized gain or loss. If an option is
exercised, the premium paid or received is added to the proceeds from the sale
or cost of the purchase in determining whether the Trust has realized a gain or
loss on investment transactions.

The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the swap option
expires worthless and the premium paid for the swap option is considered the
loss. The main risk that is associated with the writing of a swap option is the
market risk of an unfavorable change in the value of the interest rate swap
underlying the written swap option. Swap options may be used by the Trust to
manage the duration of the Trust's portfolio reflecting the view of the Trust's
management in the direction of interest rates.

FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.

Financial futures contracts, when used by the Trust, help in maintaining a
targeted duration. Futures contracts can be sold to effectively shorten an
otherwise longer duration portfolio. In the same sense, futures contracts can be
purchased to lengthen a portfolio that is shorter than its duration target.
Thus, by buying or selling futures contracts, the Trust can effectively "hedge"
positions so that changes in interest rates do not change the duration of the
portfolio unexpectedly.

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

SHORT SALES: The Trust may make short sales of securities as a method of hedging
potential price declines in similar securities owned. When the Trust makes a
short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trust may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on

<PAGE>

such borrowed securities. A gain, limited to the price at which the Trust sold
the security short, or a loss, unlimited as to dollar amount, will be recognized
upon the termination of a short sale if the market price is greater or less than
the proceeds originally received.

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

INTEREST RATE SWAPS: In a simple interest rate swap, one investor pays a
floating rate of interest on a notional principal amount and receives a fixed
rate of interest on the same notional principal amount for a specified period of
time. Alternatively, an investor may pay a fixed rate and receive a floating
rate. Rate swaps were conceived as asset/liability management tools. In more
complex swaps, the notional principal amount may decline (or amortize) over
time.

During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by "marking-to-market" to reflect the
market value of the swap. When the swap is terminated, the Trust will record a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Trust's basis in the contract, if any.

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

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

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

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

Transaction fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate cap. The asset or liability is subsequently adjusted
to the current market value of the interest rate cap purchased or sold. Changes
in the value of the interest rate cap are recognized as unrealized gains and
losses.

INTEREST RATE FLOORS: Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate under a specified fixed or floating rate.

Interest rate floors are used by the Trust to both manage the duration of
the portfolio and its exposure to changes in short-term interest rates. 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.

Transaction fees paid or received by the Trust are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate floor. The asset or liability is subsequently adjusted
to the current market value of the interest rate floor purchased or sold.
Changes in the value of the interest rate floor are recognized as unrealized
gains and losses.

SECURITIES TRANSACTIONS AND NET INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust amortizes premium and accretes discount on
securities purchased using the interest method. Expenses are recorded on the
accrued basis which may require the use of certain estimates by management.

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 at least
annually. Dividends and distributions are recorded on the ex-dividend date.

<PAGE>

Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.

ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATION OF CAPITAL ACCOUNTS: The Trust accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2:Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect caused by
applying this statement was to decrease paid-in capital and increase
undistributed net investment income by $1,988,694 due to certain expenses not
being deductible for tax purposes. Net investment income, net realized gains and
net assets were not affected by this change.

NOTE 2. AGREEMENTS The Trust has an Investment Advisory Agreement with
BlackRock Financial Management, Inc. (the "Adviser"), a wholly-owned corporate
subsidiary of BlackRockAdvisors Inc., an indirect majority-owned subsidiary of
PNC Bank,N.A., 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. The
Administrator pays occupancy and certain clerical and accounting costs of the
Trust. The Trust bears all other costs and expenses.

NOTE 3. PORTFOLIO Purchases and sales of investment securities, other
SECURITIES than short-term investments and dollar rolls, for
the year ended June 30, 1998 aggregated $5,323,329,284 and $5,714,521,469,
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, 1998,
the Trust did not have any investments in illiquid securities.

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

The federal income tax basis of the Trust's investments at June 30, 1998 was
substantially the same as the basis for financial reporting and accordingly, net
unrealized appreciation for federal income tax purposes was $8,284,045 (gross
unrealized appreciation--$38,771,375; gross unrealized depreciation--
$30,487,330).

For federal income tax purposes, the Trust had a capital loss carryforward as
of June 30, 1998 of approximately $72,788,407 of which $582,344 will expire in
2001, $22,753,973 will expire in 2002, $947,956 will expire in 2003, $34,764,750
will expire in 2004, $2,461,777 will expire in 2005 and $11,277,607 will expire
in 2006. Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amounts.

<PAGE>

Details of open financial futures contracts at June 30, 1998 are as follows:

VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE JUNE 30, UNREALIZED
CONTRACTS TYPE DATE DATE 1998 DEPRECIATION
- -------- ----- ---------- ------- ---------- ------------
Short position:
106 5 Yr. T-Note Sept. $ (11,570,914) $ (11,626,875) $ (55,961)
1,500 30 Yr. T-Bond Sept. (184,497,914) (185,390,625) (892,711)
---------
$(948,672)
=========

The Trust has entered into three interest rate caps. Under the first
agreement, the Trust paid a transaction fee and will receive the excess, if any,
of a floating rate over a fixed rate. Under the second and third agreements, the
Trust received transaction fees and will pay the excess, if any, of a floating
rate over a fixed rate. Details of the caps at June 30, 1998 are as follows:

<TABLE>
<CAPTION>
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION UNAMORTIZED JUNE 30, UNREALIZED
(000) RATE RATE DATE COST 1998 DEPRECIATION
- ------- ----- ------- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Purchased:
$120,000 6.00% 3 month LIBOR 02/19/02 $2,044,567 $ 1,060,800 $ (983,767)

Sold:
(300,000) 3 Yr. CMT 3 month LIBOR 08/08/01 (1,959,301) (2,490,000) (530,699)
(200,000) 5 Yr. CMT 3 month LIBOR 08/12/01 (1,120,678) (1,717,460) (596,782)
---------- -----------
$(3,146,660) $(2,111,248)
=========== ===========
</TABLE>

Details of open interest rate swaps at june 30, 1998 are as follows:

NOTIONAL UNREALIZED
AMOUNT FIXED FLOATING TERMINATION APPRECIATION
(000) TYPE RATE RATE DATE (DEPRECIATION)
------- ----- ----- ------- ---------- -----------
Purchased:
$509,250 Interest Rate 6.37% 2 Yr. Forward 07/27/00 $4,669,823
280,000 Basis 10 Yr. CMT 3 month LIBOR 05/28/03 (610,400)
10,908 Interest Rate 7.23% 10 Yr. Forward 06/15/11 (756,939)

Sold:
(350,000) Interest Rate 6.42% 3 Yr. Forward 07/27/01 (5,105,100)
(10,908) Interest Rate 7.23% 10 Yr. Forward 06/15/11 911,833
----------
$ (890,783)
==========

NOTE 4. BORROWINGS REVERSE REPURCHASE AGREEMENTS: The Trust enters
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 establishes
and maintains a segregated account with the lender containing liquid high-grade
securities having a value not less than the repurchase price, including accrued
interest, of the reverse repurchase agreement.

The average daily balance of reverse repurchase agreements outstanding during
the year ended June 30, 1998, was approximately $495,864,519 at a weighted
average interest rate of approximately 5.15%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the year, was
$720,010,938 as of February 28, 1998, which was 20.95% of total assets.

DOLLAR ROLLS: The Trust enters 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 is 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, 1998, was approximately $15,005,103. For the year ended June 30, 1998
the maximum amount of dollar rolls outstanding at any month end was $15,447,656
as of the close of July 31, 1997, which was 0.75% 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, 1998, the Adviser owned 10,583 shares.

NOTE 6. DIVIDENDS Since June 30, 1998, the Board of Directors of the
Trust declared dividends from undistributed earnings of $0.0333 per share
payable July 31, 1998 to shareholders of record onJuly 15, 1998.

<PAGE>

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

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

We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated portfolio of investments, of The
BlackRock 2001 Term Trust Inc. as of June 30, 1998 and the related consolidated
statements of operations and of cash flows for the year then ended, the
statement of changes in net assets for the two years then ended, and financial
highlights for each of the five years then ended. These consolidated financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
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 securities owned at June 30,
1998, by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such consolidated financial statements and financial highlights
for the respective stated periods present fairly, in all material respects, the
financial position of The BlackRock 2001 Term Trust Inc. at June 30, 1998, and
the results of its operations, its cash flows, the changes in its net assets and
its financial highlights for the periods presented in conformity with generally
accepted accounting principles.

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

New York, New York
August 1, 1998

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------

Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
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
transfer agent as dividend disbursing agent.

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

Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Trust shares and a cash
payment for any fraction of a Trust share.

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

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 or BlackRock Financial Management,
Inc. at (800) 227-7BFM. The addresses are on the front of this report.

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

There have been no material changes in the Trust's investment objectives
or policies that have not been approved by the shareholders or to its charter or
by-laws or in the principal risk factors associated with investment in the
Trust. There have been no changes in the persons who are primarily responsible
for the day-to-day management of the Trust's portfolio.

The Annual Meeting of Trust Shareholders was held May 6, 1998 to vote on
the following matters:

(1)To elect three Directors as follows:

DIRECTOR CLASS TERM EXPIRING
------- ----- ----- -------
Frank J. Fabozzi .................... II 3 years 2001
Ralph L. Schlosstein ................ II 3 years 2001
Walter F. Mondale ................... II 3 years 2001

Directors whose term of office continues beyond this meeting are Andrew
F.Brimmer, Richard E. Cavanagh, Kent Dixon, Laurence D. Fink, James
Grosfeld, and James Clayburn La Force, Jr.

(2)To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending June 30, 1999.
Shareholders elected the three Directors and ratified the selection of
Deloitte & Touche LLP. The results of the voting was as follows:
<TABLE>
<CAPTION>

VOTES FOR VOTES AGAINST ABSTENTIONS
-------- ----------- ----------
<S> <C> <C> <C>
Frank J. Fabozzi ...................... 107,328,201 0 4,390,555
Ralph L. Schlosstein .................. 107,332,021 0 4,386,735
Walter F. Mondale ..................... 106,860,359 0 4,858,397
Ratification of Deloitte &Touche LLP .. 109,097,019 476,058 2,145,679
</TABLE>

<PAGE>

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

THE TRUST'S INVESTMENT OBJECTIVE
The BlackRock 2001 TermTrust Inc.'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") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $119
billion on behalf of taxable and tax-exempt clients worldwide. Strategies
include fixed income, equity and cash and may incorporate both domestic and
international securities. Domestic fixed income strategies utilize the
government, mortgage, corporate and municipal bond sectors. BlackRock manages
twenty-one closed-end funds that are traded on either the New York or American
stock exchanges, and a $23 billion family of open-end equity and bond funds.
Current institutional clients number 334, domiciled in the United States and
overseas.

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

WHAT IS THE ADVISER'S INVESTMENT STRATEGY?
The Adviser will seek to meet the Trust's investment objective by managing the
assets of the Trust so as to return the initial offering price ($10 per share)
at maturity. The Trust will implement a conservative strategy that will seek to
closely match the maturity of the assets of the portfolio with the future return
of the initial investment at the end of 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
331/3% of total assets) to enhance the income of the portfolio. In order to
maintain competitive yields as the Trust approaches maturity and depending on
market conditions, the Adviser will attempt to purchase securities with call
protection or maturities as close to the Trust's maturity date as possible.
Securities with call protection should provide the portfolio with some degree of
protection against reinvestment risk during times of lower prevailing interest
rates. Since the Trust's primary goal is to return the initial offering price at
maturity, any cash that the Trust receives prior to its maturity date (i.e. cash
from early and regularly scheduled payments of principal on mortgage-backed
securities) will be reinvested in securities with maturities which coincide with
the remaining term of the Trust. Since shorter-term securities typically yield
less than longer-term securities, this strategy will likely result in a decline
in the Trust's income over time. However, the Adviser will attempt to maintain a
yield which is competitive with a comparable maturity Treasury at the same point
on the yield curve (i.e. if the Trust has three years left until its maturity,
the Adviser will attempt to maintain a yield at a spread over a 3-year
Treasury). It is important to note that the Trust will be managed so as to
preserve the integrity of the return of the initial offering price.

<PAGE>

HOW ARE THE TRUST'S SHARES PURCHASED AND SOLD? DOES THE TRUST PAY DIVIDENDS
REGULARLY?

The Trust's shares are traded on the New York Stock Exchange which provides
investors with liquidity on a daily basis. Orders to buy or sell shares of the
Trust must be placed through a registered broker or financial advisor. The Trust
pays monthly dividends which are typically paid on the last business day of the
month. For shares held in the shareholder's name, dividends may be reinvested in
additional shares of the Trust through the Trust's transfer agent, 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 331/3% of total assets.

Leverage also increases the duration (or price volatility of the net assets) of
the Trust, which can improve the performance of the fund in a declining rate
environment, but can cause net assets to decline faster than the market in a
rapidly 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 interest of 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 (NYSE symbol: BLK) 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 on certain U.S. mortgage-backed securities which will change the
yield to maturity of the security.

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

ZERO COUPON SECURITIES. Such securities receive no cash flows prior to maturity,
therefore, interim price movement on the securities are generally more sensitive
to interest rate movements 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. Investing in these securities involves 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.
GLOSSARY
- --------------------------------------------------------------------------------

ADJUSTABLE RATE MORTGAGE-
BACKED SECURITIES (ARMS): Mortgage instruments with interest rates that
adjust at periodic intervals at a fixed amount
relative to the market levels of interest rates
as reflected in specified indexes. ARMs are
backed by mortgage loans secured by real
property.

ASSET-BACKED SECURITIES: Securities backed by various types of
receivables such as automobile and credit card
receivables.

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

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

DIVIDEND REINVESTMENT: Shareholders may elect to have all dividends
and distributions of capital gains
automatically reinvested into additional shares
of the Trust.

FHA: Federal Housing Administration, a government
agency that facilitates a secondary mortgage
market by providing an agency that guarantees
timely payment of interest and principal on
mortgages.

FHLMC: Federal Home Loan Mortgage Corporation, a
publicly owned, federally chartered corporation
that facilitates a secondary mortgage market by
purchasing mortgages from lenders such as
savings institutions and reselling them to
investors by means of mortgage-backed
securities. Obligations of FHLMC are not
guaranteed by the U.S. government, however;
they are backed by FHLMC's authority to borrow
from the U.S. government. Also known as Freddie
Mac.

FNMA: Federal National Mortgage Association, a
publicly owned, federally chartered corporation
that facilitates a secondary mortgage market by
purchasing mortgages from lenders such as
savings institutions and reselling them to
investors by means of mortgage-backed
securities. Obligations of FNMA are not
guaranteed by the U.S. government, however;
they are backed by FNMA's authority to borrow
from the U.S. government. Also known as Fannie
Mae.

GNMA: Government National Mortgage Association, a
U.S. government agency that facilitates a
secondary mortgage market by providing an
agency that guarantees timely payment of
interest and principal on mortgages. GNMA's
obligations are supported by the full faith and
credit of the U.S. Treasury. Also known as
Ginnie Mae.

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

<PAGE>

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.

INVERSE-FLOATINGRATE MORTGAGES: Mortgage instruments with coupons that adjust
at periodic intervals according to a formula
which sets inversely with a market level
interest rate index. MARKET PRICE: Price per
share of a security trading in the secondary
market. For a closed-end fund, this is the
price at which one share of the fund trades on
the stock exchange. If you were to buy or sell
shares, you would pay or receive the market
price.

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

MORTGAGE PASS-THROUGHS: Mortgage-backed securities issued by Fannie
Mae, Freddie Mac or Ginnie Mae.

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 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 In a reverse repurchase agreement, the Trust
REPURCHASE AGREEMENTS: sells securities and agrees to repurchase them
at a mutually agreed date and price. During
this time, the Trust continues to receive the
principal and interest payments from that
security. At the end of the term, the Trust
receives the same securities that were sold for
the same initial dollar amount plus interest on
the cash proceeds of the initial sale.

STRIPPED MORTGAGE BACKED Arrangements in which a pool of assets is
SECURITIES: separated into two classes that receive
different proportions of the interest and
principal distributions from underlying
mortgage-backed securities. IO's and PO's are
examples of strips.

<PAGE>

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

OFFICERS
Ralph L. Schlosstein, PRESIDENT
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
(800) 699-1BFM

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

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

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

THE BLACKROCK 2001 TERM TRUST INC.
c/o Mitchell Hutchins Asset Management Inc.
32nd Floor
1285 Avenue of the Americas
New York, NY 10019
(800) 227-7BFM

[RECYCLE LOGO]Printed on recycled paper 092477-10-8

THE BLACKROCK
2001 TERM TRUST INC.
====================
CONSOLIDATED
ANNUAL REPORT
JUNE 30, 1998

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