BLACKROCK 2001 TERM TRUST INC, N-30D, 1999-08-26

BLACKROCK 2001 TERM TRUST INC
N-30D, 1999-08-26

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

July 31, 1999

Dear Shareholder:

Since the Trust's last report, interest rates rose sharply as U.S economic
growth remained strong, labor markets tightened and international markets began
to recover. In light of these factors, the Federal Reserve's Federal Open Market
Committee increased short-term interest rates by 25 basis points in June, citing
a concern that inflation might start to accelerate.

In tandem with the Fed's recent rate tightening, BlackRock has taken a
defensive interest rate stance. With the Treasury curve currently pricing in the
possibility of another Fed tightening by year-end, we believe that interest
rates will trade in a relatively narrow range until the economy shows signs of
slowing.

This report contains comments from your Trust's managers regarding the
markets and portfolio in addition to the Trust's annual financial statements and
a detailed portfolio listing. 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

1
<PAGE>

July 31, 1999

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, 1999. 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 "BTM"
(previously "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 "BBB" by Standard & Poor's or "Baa" by Moody's at
time of purchase or are 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>
------------------------------------------------------------------------
6/30/99 6/30/98 CHANGE HIGH LOW
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK PRICE $9.00 $8.8125 2.13% $9.25 $8.75
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $9.39 $9.51 (1.26%) $9.71 $9.35
- -------------------------------------------------------------------------------------------------------------------
5-YEAR U.S. TREASURY NOTE 5.65% 5.47% 3.29% 5.91% 4.46%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

THE FIXED INCOME MARKETS

U.S. economic growth generally showed strength during the past twelve
months, spurred by investor confidence and three Federal Reserve interest rate
cuts in the third quarter of 1998 in response to the global fiscal crisis. In
spite of strong domestic economic growth, inflationary forces continue to remain
contained; still, the Federal Reserve chose to raise its target for the federal
funds rate from 4.75% to 5.00% at its June 1999 meeting. The Fed cited an easing
of financial strain, tight labor markets and a firming of foreign economies in
the release accompanying the move. Although the committee hinted at a neutral
bias going forward, an additional 25-50 basis points of tightening by year-end
is possible, as the combination of a strong domestic economy and an improving
situation in Europe and Japan may allow for tighter monetary policy.

Although Treasury yields at the end of the period are at similar levels to
a year ago, the past twelve months have witnessed two divergent stories in the
Treasury market, as interest rates rallied in the second half of 1998 before
dramatically reversing in 1999. The impetus for the interest rate decline was
the instability in global markets, particularly Asia and Russia, which caused a
flight-to-quality to U.S. Treasury securities. This rally in the Treasury market
pushed the yield of the 30-year

2
<PAGE>

security to historically low yields and under the 5.00% barrier to a low of
4.72% in October. Since that point, rates have risen over 100 basis points, with
the yield of the 30-year Treasury ending the reporting period at 5.83% after
eclipsing 6.00% on June 9.

For the period, spread products such as mortgages and asset-backed
securities modestly outperformed Treasuries, although they significantly
outperformed year-to-date in 1999 as interest rates have risen. For example,
mortgages as measured by the LEHMAN MORTGAGE INDEX posted a 4.01% total return
for the one year period ended June 30, 1999 versus a 2.95% total return for the
LEHMAN TREASURY INDEX. However, so far in 1999 the LEHMAN MORTGAGE INDEX has
returned 0.53% compared to -2.50% for the LEHMAN TREASURY INDEX.

Despite the recent weakness in Treasury prices, investment grade corporate
securities underperformed Treasuries for the reported period. For the annual
period, corporates as measured by MERRILL LYNCH U.S. CORPORATE MASTER INDEX
returned 1.82%, significantly underperforming the LEHMAN BROTHERS AGGREGATE
INDEX'S 3.15%. Corporate profitability continues to be the driving factor of
corporate bond performance and profit growth remains under pressure from
overseas markets and a strong labor market. Deteriorating fundamentals (four
times as many downgrades as upgrades in the first quarter according to S&P)
combined with weakening profit growth and increased issuance will continue to
pressure the corporate market. Investor appetite for credit and liquidity risk
remains suppressed after last years volatility. We anticipate new supply to
start to taper off early in the fourth quarter and relieve some of the pressure
that investment grade corporates have been experiencing.

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 charts compare the Trust's current and June 30, 1998 asset composition
and credit rating.

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THE BLACKROCK 2001 TERM TRUST INC.
- --------------------------------------------------------------------------------
COMPOSITION JUNE 30, 1999 JUNE 30, 1998
- --------------------------------------------------------------------------------
U.S. Treasury Securities 25% 16%
- --------------------------------------------------------------------------------
Corporate Bonds 20% 19%
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs 15% 8%
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Zero Coupon Bonds 12% 17%
- --------------------------------------------------------------------------------
Asset-Backed Securities 7% 9%
- --------------------------------------------------------------------------------
Money Market Instruments 6% 7%
- --------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities 4% 2%
- --------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 3% 6%
- --------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 3% 5%
- --------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 2% 8%
- --------------------------------------------------------------------------------
Municipal Bonds 2% 2%
- --------------------------------------------------------------------------------
Adjustable Rate Mortgages 1% 1%
- --------------------------------------------------------------------------------

3
<PAGE>

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RATING % OF CORPORATES
- --------------------------------------------------------------------------------
CREDIT RATING JUNE 30, 1999 JUNE 30, 1998
- --------------------------------------------------------------------------------
AAA or equivalent 1% 2%
- --------------------------------------------------------------------------------
AA or equivalent 20% 14%
- --------------------------------------------------------------------------------
A or equivalent 39% 62%
- --------------------------------------------------------------------------------
BBB or equivalent 37% 22%
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N/R 3% --
- --------------------------------------------------------------------------------

In accordance with the Trust's primary investment objective of returning
the initial offering price upon maturity, the Trust's portfolio management
activity focused on adding bonds with maturity dates approximating 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 the Treasury and corporate bond sector. To
finance these purchases, the Trust sold asset-backed securities, mortgage-backed
securities and principal-only securities, as their maturity dates may extend
past the Trust's termination date in a rising interest rate environment. The
Trust sold these securities to increase liquidity in the Trust. The Trust will
take advantage of this increased liquidity to participate in the new issue
market for corporates and asset-backed securities, which are offering attractive
yields relative to existing bonds.

We look forward to continuing to manage the Trust to benefit from the
opportunities available to investors in the fixed income markets as well as to
maintain the Trust's ability to meet its investment objectives. We thank you for
your investment 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. You can also reach us via
e-mail at [email protected]

Sincerely,

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

- ----------
1 Yield on Closing Stock Price is calculated by dividing the current annualized
distribution per share by the closing stock price per share.
2 Distribution 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, 1999
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--131.5%
MORTGAGE PASS-THROUGHS--19.2%
Federal Home Loan Mortgage Corp.,
$ 2,912 6.125%, 11/25/03, Multifamily ....... $ 2,848,736
22,741 6.50%, 9/1/25 - 7/1/29 .............. 21,952,052
395 7.50%, 7/1/13 - 10/1/13 ............. 398,985
7,855 8.144%, 12/1/01, 7 Year
Multifamily ........................ 7,845,280
5,479 8.50%, 2/1/08 ....................... 5,672,825
Federal National Mortgage
Association,
152,870+ 6.50%, 6/1/23 - 6/1/29 .............. 147,315,647
21,042++ 7.00%, 10/1/22 - 11/1/28 ............ 20,803,436
7,000 7.00%, (TBA) ........................ 6,949,687
5,044 7.50%, 9/1/07 - 7/1/23 .............. 5,073,803
10,170 7.695%, 5/1/01, 7 Year
Multifamily ........................ 10,252,957
11,090 7.79%, 2/1/01, 7 Year
Multifamily ........................ 11,186,584
3,720 8.00%, 3/1/01, 7 Year
Multifamily ........................ 3,759,899
4,036 8.50%, 11/1/03 - 9/1/10,
Multifamily ........................ 4,208,656
2,400 8.69%, 4/1/01, 7 Year
Multifamily ........................ 2,470,623
Government National
Mortgage Association,
4,961 8.00%, 1/15/23 - 6/15/24 ............ 5,102,538
--------------
255,841,708
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MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--4.4%
AAA 233 Collateralized Mortgage
Securities Corp.,
Ser. F, Class F-4-A, 11/1/15 ........ 241,908
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
3 Ser. 1360, Class 1360-PT,
12/15/17 (ARM) ..................... 305
46 Ser. 1512, Class 1512-LA,
5/15/08 (ARM) ...................... 44,587
314 Ser. 1563, Class 1563-S,
10/15/07 (ARM) ..................... 319,389
396 Ser. 1563, Class 1563-SB,
8/15/08 (ARM) ...................... 392,330
1,733 Ser. 1592, Class 1592-NE,
12/15/22 (ARM) ..................... 1,419,023
1,066 Ser. 1606, Class 1606-SB,
11/15/08 (ARM) ..................... 1,079,271
2,800 Ser. 1617, Class 1617-EB,
9/15/23 (ARM) ...................... 2,662,334
142 Ser. 1663, Class 1663-A,
7/15/23 ............................ 138,802
3,342 Ser. 1671, Class 1671-KB,
2/15/24 (ARM) ...................... 3,334,359
485 Ser. 1686, Class 1686-PK,
4/15/23 ............................ 478,915
4,855 Ser. 1990, Class 1990-B,
9/15/24 ............................ 4,934,722
2,986 Ser. 1944, Class 1944-HA,
1/15/25 ............................ 3,059,398
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,617 Trust 269, Class 269-1,
8/1/22 ............................. 1,713,062
5,561 Trust 1990-144, Class 144-W,
12/25/20 ........................... 5,842,355
11,850 Trust 1992-43, Class 43-E,
4/25/22 ............................ 1,956,829
1,500 Trust 1993-G17, Class G17-SH,
4/25/23 (ARM) ...................... 1,280,280
2,050 Trust 1993-71, Class 71-PG,
7/25/07 ............................ 2,048,873
324 Trust 1993-99, Class 99-SB,
7/25/23 (ARM) ...................... 326,900
266 Trust 1993-117, Class 117-S,
7/25/08 (ARM) ...................... 257,940
2,361 Trust 1993-178, Class 178-SC,
9/25/23 (ARM) ...................... 2,354,306
2,752 Trust 1993-196, Class 196-SM,
10/25/08 (ARM) ..................... 2,457,162
1,831 Trust 1993-214, Class 214-SO,
12/25/08 (ARM) ..................... 1,797,261
846 Trust 1994-42, Class 42-SM,
1/25/24 (ARM) ...................... 842,874
7,081 Trust 1996-T6, Class T6-C,
2/26/01 ............................ 7,087,502
1,902 Trust 1996-T6, Class T6-D,
2/26/01 ............................ 1,904,252
--------------
57,974,939
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INTEREST ONLY MORTGAGE-BACKED
SECURITIES--5.0%
AAA 22 Collateralized Mortgage Securities Corp.,
Ser. 1991-9, Class M,
11/20/21 ........................... 324,253
AAA 124,576 Credit Suisse First Boston
Mortgage Securities Corp.,
Ser. 1997-C1, Class AX,
6/20/29** ........................... 11,314,263
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
9,369 Ser. G-3, Class G-3-S,
4/25/19 ............................ 260,446

See Notes to Consolidated Financial Statements.

<PAGE>

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PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--(CONT'D)
$ 1,246 Ser. G-29, Class G-29-IA,
6/25/20 ............................ $ 102,579
10,373 Ser. G-30, Class G-30-J,
2/25/23 ............................ 1,453,133
7,817 Ser. G-32, Class G-32-PT,
2/25/19 ........................... 761,547
1,954 Ser. G-32, Class G-32-TT,
2/15/19 ............................ 125,827
37 Ser. 113, Class 113-N,
5/15/21 ............................ 1,100,583
7 Ser. 1125, Class 1125-F,
8/15/21 ............................ 182,932
15 Ser. 1185, Class 1185-C,
12/15/06 ............................ 197,530
17 Ser. 1283, Class 1283-X,
6/15/22 ............................ 464,551
27 Ser. 1378, Class 1378-DA,
1/15/18 ............................ 94,404
16 Ser. 1388, Class 1388-G,
5/15/06 ............................ 221,005
16 Ser. 1404, Class 1404-E,
1/15/06 ............................ 126,399
5,713 Ser. 1422, Class 1422-IB,
11/15/07 ........................... 734,284
3,861 Ser. 1506, Class 1506-SA,
1/15/05 ............................ 9,692
11,822 Ser. 1605, Class 1605-S,
8/15/06 ............................ 201,567
10,507 Ser. 1621, Class 1621-SJ,
10/15/20 ........................... 298,618
12,537 Ser. 1640, Class 1640-SD,
12/15/00 ........................... 97,789
5,416 Ser. 1849, Class 1849-EL,
12/15/08 ........................... 614,775
3,039 Ser. 1950, Class 1950-SA,
10/15/22 ........................... 4,346
35,948 Ser. 1954, Class 1954-MD,
3/15/16 ............................ 3,410,727
313 Ser. 1970, Class 1970-PN,
6/15/15 ............................ 2,225
30,859 Ser. 2056, Class 2056-IB,
4/15/21 ............................ 3,490,924
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
9 Trust 1990-76, Class 76-N,
7/25/20 ............................ 22,784
5 Trust 1991-29, Class 29-J,
4/25/21 ............................ 170,458
15 Trust 1991-80, Class 80-Q,
7/25/21 ............................ 426,656
14 Trust 1991-G46, Class G46-K,
12/25/09 ........................... 304,681
8,160 Trust 1992-G45, Class G45-2,
8/25/22 ............................ 1,347,662
21 Trust 1992-5, Class 5-E,
1/25/22 ............................ 583,618
13 Trust 1992-18, Class 18-JA,
11/25/05 ........................... 404,580
29,545 Trust 1993-G31, Class G31-PS,
8/25/18 ............................ 672,732
2,329 Trust 1993-68, Class 68-PJ,
11/25/06 ........................... 137,007
11,868 Trust 1993-82, Class 82-SA,
5/25/23 ............................ 418,107
4,657 Trust 1993-141, Class 141-PW,
6/25/18 ............................ 306,810
38,722 Trust 1993-202, Class 202-SL,
11/25/23 ........................... 1,630,196
15,281 Trust 1993-240, Class 240-PS,
9/25/12 ............................ 341,534
7,300 Trust 1996-24, Class 24-SB,
10/25/08 ........................... 1,605,927
9,471 Trust 1996-40, Class 40-SG,
3/25/09 ............................ 2,132,594
1,785 Trust 1996-54, Class 54-SM,
9/25/23 ............................ 349,251
54,254 Trust 1997-35, Class 35-SB,
3/25/09 ............................ 1,335,149
5,705 Trust 1997-37, Class 37-SX,
8/18/18 ............................ 20,848
23,700 Trust 1997-50, Class 50-HK,
8/25/27 ............................ 7,742,309
Government National Mortgage
Association,
5,031 Trust 1994-1, Class 1-PL,
6/16/24 ............................. 830,130
AAA 3,346 Merrill Lynch Trust,
Ser. 43, Class F, 8/27/15 ........... 217,510
Aaa 48,039 Merrill Lynch Mortgage Investments,
Ser. 1998-C2, Class C-2,
2/15/30 ............................. 3,627,779
AAA 67,350 Merrill Lynch Mortgage Investors Inc.,
Ser. 1997-C2, Class IO,
12/10/29 ............................ 4,604,850
Morgan Stanley Capital Inc.,
AAA 99,687 Ser. 1998-WF2, Class X
4/15/23 ............................. 4,302,854
AAA 113,661 Ser. 1998-HF1 Class X,
2/15/18 ............................. 6,813,427
--------------
65,943,852
--------------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--3.7%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
447 Ser. 1338, Class 1338-Q,
8/15/07 ............................ 389,298
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage Participation
Certificates,
5,232 Ser. 1662, Class 1662-PO,
1/15/09 ............................ 4,200,021

See Notes to Consolidated Financial Statements.

<PAGE>

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PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--(CONT'D)
$ 422 Ser. 1664, Class 1664-C,
11/15/23 ........................... $ 412,543
2,313 Ser. 1721, Class 1721-OC,
5/15/24 ............................ 1,325,370
3,895 Ser. 1870, Class 1870-PA,
8/15/01 ............................ 3,665,324
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,907 Trust 3, Class 1, 2/1/17 ............ 1,565,100
1,823 Trust 5, Class 1, 9/1/07 ............ 1,533,763
767 Trust 60, Class 1, 1/1/19 ........... 621,543
257 Trust 1991-G44, Class G44-H,
11/25/21 ........................... 246,150
420 Trust 1991-167, Class 167-B,
10/25/17 ........................... 331,267
2,322 Trust 1993-48, Class 48-B,
4/25/08 ............................ 1,973,358
465 Trust 1993-151, Class 151-E,
5/25/23 ............................ 431,475
13,272 Trust 1993-257, Class 257-A,
6/25/23 ............................ 12,514,264
8,332 Trust 1994-8, Class 8-G,
11/25/23 ........................... 7,450,412
4,703 Trust 1994-53, Class 53-EA,
11/25/23 ........................... 4,130,240
5,027 Trust 1994-54, Class 54-B,
11/25/23 ........................... 4,777,555
19,261 Trust 1998-3, Class 3-SC,
2/18/28 ............................ 261,826
3,220 Trust 1998-38, Class 38-S,
1/18/12 ............................ 3,333,189
--------------
49,162,698
--------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES--3.2%
BBB 4,150 CBA Mortgage Corp.,
Ser. 1993-C1, Class D,
6.67%, 12/25/03 ..................... 4,053,621
AA+ 2,256 Central Life Assurance Co.,
Ser. 1994-1, Class A2, 8.90%,
11/1/20 ............................. 2,285,066
AAA 5,200 PaineWebber Mortgage
Acceptance Corp.,
Ser. 1995-M1, Class A, 6.70%,
1/15/07** ........................... 5,215,561
Resolution Trust Corp.,
AA 8,050 Ser. 1994-C1, Class C, 8.00%,
6/25/26 ............................. 8,050,000
A 5,462 Ser. 1994-C2, Class D, 8.00%,
4/25/25 ............................. 5,432,749
AA 4,315 Salomon Brothers Mortgage
Securities Corp.,
Ser. 1997-TZH, Class A1, 7.15%,
3/25/25 ** .......................... 4,383,619
AAA 12,800 Structured Asset Securities Corp.,
Ser. 1996-CFL, Class B, 6.303%,
2/25/28 ............................. 12,883,944
--------------
42,304,560
--------------
ASSET-BACKED SECURITIES--9.6%
NR 2,208 Amresco Securitized Interest,
Ser. 1996-1, Class A, 8.10%,
4/26/26** ........................... 2,119,548
Aaa 22,286 Brazos Student Financial Corp.,
Ser. 1998-A, Class A1, 5.78%,
6/1/06 .............................. 22,233,908
Broad Index Secured Trust Offering,
NR 10,000 Ser. 1998-4, Class 9,
6.924%, 9/9/01 ...................... 9,957,000
Baa2 10,000 Ser. 1998-10, Class 10,
6.58%, 3/26/01** .................... 9,834,687
AAA 9,036 Chase Manhattan Grantor Trust,
Ser. 1996-B, Class A, 6.61%,
9/15/02 ............................. 9,075,792
AAA 35,000@ Citibank Credit Card,
Ser. 1996-1, Class A, zero coupon,
2/7/03 .............................. 31,806,250
NR 5,905 Global Rated Eligible Asset Trust,
Ser. 1998-1, Class A, 7.33%,
9/15/07**/*** ....................... 3,217,522
AAA 787 NationsBank Auto Grantor Trust,
Ser. 1995-A, Class A, 5.85%,
6/15/02 ............................. 787,640
A 10,000 Newcourt Equipment Trust,
Ser. 1998-1, Class B, 5.97%,
4/20/05 ............................. 9,946,559
AA 14,426 Pegasus Aviation Lease Securitization,
Ser. 1999-1A, Class A1, 6.30%,
3/25/29** ........................... 14,101,794
AAA 5,750 Standard Credit Card Master Trust,
Ser. 1995-3, Class A,
7.85%, 2/7/02 ....................... 5,852,556
Structured Mortgage Asset
Residential Trust,***
NR 9,989 Ser. 1997-2, Class E, 8.24%,
3/15/06** ........................... 4,779,870
NR 11,016 Ser. 1997-3, 8.57%,
4/15/06** ........................... 4,900,007
--------------
128,613,133
--------------
U.S GOVERNMENT AND AGENCY
SECURITIES--33.2%
25,000 Federal Home Loan Bank,
5.075%, 4/28/00 ..................... 24,906,250
25,000 Federal National Mortgage Association
5.00%, 5/4/00 ....................... 24,903,750
U.S. Treasury Bonds,
72,835++ 3.625%, 4/15/28, (TIPS) ............. 68,726,038
10,000 5.25%, 11/15/28-2/15/29 ............. 8,864,100
35,000 6.125%, 11/15/27 .................... 34,764,800
U.S. Treasury Notes,
100,000++ 4.25%, 11/15/02 ..................... 94,422,000
150,000++ 4.50%, 9/30/00 ...................... 148,359,000
3,050 5.375%, 1/31/00 ..................... 3,055,704
4,180 5.75%, 9/30/99 ...................... 4,188,484
30,000++ 6.50%, 10/15/06 ..................... 30,975,000
--------------
443,165,126
--------------

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
ZERO COUPON BONDS--16.2%
Government Trust Certificates
$ 35,925 Ser. 1-D, 11/15/00 .................. $ 33,301,397
34,630 Ser. 2-F, 11/15/00 .................. 32,100,971
U.S. Treasury Receipt,
159,000++ 5/15/01 ............................. 143,562,690
7,600 8/15/00 ............................. 7,167,484
--------------
216,132,542
--------------
TAXABLE MUNICIPAL BONDS--2.4%
AAA 1,000 Kern County California Pension
Obligation,
6.27%, 8/15/01** .................... 1,005,000
AAA 2,035 Long Beach California Pension
Obligation,
6.45%, 9/1/01 ....................... 2,052,623
AAA 6,000 Los Angeles County California
Pension Obligation,
Ser. D, 6.38%, 6/30/01 .............. 6,040,860
NR 5,735 Massachusetts Housing Fin. Agency,
1991-B, 6.85%, 10/1/20 .............. 5,192,698
New York City G.O.,
A- 5,000 Ser. I, 6.40%, 3/15/01 .............. 5,012,100
A- 5,000 Ser. I, 7.24%, 4/15/01 .............. 5,082,100
BBB+ 1,000 New York State Environmental
Facility Auth.,
Ser. A, 6.62%, 3/15/01 .............. 1,003,510
BBB+ 3,345 New York State Housing
Finance Agency,
Ser. B, 7.14%, 3/15/02 .............. 3,406,314
BBB+ 2,000 New York State Urban
Developement Corp.,
Ser. B, 6.90%, 4/1/01 ............... 2,016,240
AA 1,000 St. Josephs Health Systems California,
Ser. A, 7.02%, 7/1/01 ............... 1,016,210
--------------
31,827,655
--------------
CORPORATE BONDS--26.6%
FINANCE & BANKING--15.9%
A3 1,300@ Amsouth Bancorp.,
6.75%, 11/1/25 ...................... 1,285,999
A- 5,000 Aristar Inc.,
7.25%, 6/15/01 ...................... 5,071,300
Associates Corp.,
AA- 5,000 6.68%, 7/25/00 5,036,450
AA- 5,000 7.46%, 3/28/00 ...................... 5,058,100
BBB+ 10,000 AT&T Corp,
5.74%, 6/30/01 ...................... 9,769,500
Baa2 9,000 Capital One Bank,
6.26%, 5/7/01 ....................... 8,933,760
A- 15,000 Donaldson, Lufkin & Jenrette,
5.63%, 2/15/16 ...................... 4,861,850
BBB- 10,000 Franchise Finance Corp.,
7.00%, 11/30/00 ..................... 9,955,200
A+ 6,750 Goldman Sachs Group LP,
6.20%, 12/15/00** ................... 6,737,310
A3 5,000 Great Western,
6.38%, 7/1/00 ....................... 5,015,450
A 4,000 Household Financial Corp.,
7.45%, 4/1/00 ....................... 4,030,520
Lehman Brothers Holdings Inc.,
A 8,000 6.75%, 9/24/01 ...................... 7,986,962
A 10,000 7.25%, 4/15/03 ...................... 10,035,752
A1 5,700 Meridian Bancorp Inc.,
6.63%, 6/15/00 ...................... 5,742,655
AA- 10,715 Merrill Lynch & Co., Inc.,
5.75%, 11/02/02 ..................... 10,496,317
Aa3 3,800 Morgan Stanley Inc.,
5.75%, 2/15/01 ...................... 3,777,846
Aa2 10,000 NationsBank Corp.,
7.00%, 9/15/01 ...................... 10,152,500
BBB+ 10,000 PaineWebber Group Inc.,
5.81%, 6/8/01 ....................... 9,831,250
A3 10,000 Popular Inc.,
6.20%, 4/30/01 ...................... 9,905,300
A+ 5,000 Prudential Funding Corp.,
6.00%, 5/11/01** .................... 4,963,450
BBB+ 6,590 Ryder Systems Inc.,
9.25%, 5/15/01 ...................... 6,891,209
Salomon, Smith Barney Holdings Inc.
Aa3 13,000 5.88%, 2/1/01 ....................... 12,930,190
Aa3 12,500 6.63%, 11/30/00 ..................... 12,586,625
Aa3 3,600 7.00%, 5/15/00 ...................... 3,636,216
Aa3 1,925 Security Pacific Corp.,
11.00%, 3/1/01 ...................... 2,068,855
A- 15,000 Transamerica Finance Corp.,
6.75%, 6/1/00 ....................... 15,099,150
Baa2 5,500 Trinet Corporate Realty Trust,
7.30%, 5/15/01 ...................... 5,453,195
A2 5,000 Union Planters National Bank,
6.76%, 10/30/01 ..................... 5,028,750
--------------
212,341,661
--------------
INDUSTRIALS--3.7%
BBB 10,000 Amerco Inc.,
7.49%, 9/18/01 ...................... 10,166,800
BBB+ 7,500 Erac USA Finance Co.,
7.00%, 6/15/00** .................... 7,548,612
A1 10,000 Ford Motor Credit Co.,
6.18%, 12/27/01 ..................... 9,980,400
A- 2,505 ICI Wilmington Inc.,
8.75%, 5/1/01 ....................... 2,591,798
A2 911 Kern River Funding Corp.,
6.42%, 3/31/01 ...................... 911,787
Sears Roebuck & Co.,
A2 4,250 6.50%, 6/15/00 ...................... 4,271,675
A2 5,000 7.29%, 4/24/00 ...................... 5,049,200
Baa1 3,500 Tenneco Credit Corp.,
8.08%, 10/1/02 ...................... 3,599,995
BBB+ 4,550 WMX Technologies Inc.,
7.13%, 6/15/01 ...................... 4,605,374
--------------
48,725,641
--------------

See Notes to Consolidated Financial Statements.

<PAGE>

CALL OPTIONS PURCHASED--0.0%
Interest Rate Swap,
200,000 5.60% over 3-month
LIBOR, expires 8/7/00 ................. 1,072,620
103,000 5.85% over 3-month LIBOR,
expires 8/7/00 ...................... 853,793
--------------
1,926,413
--------------

Total long-term investments
(cost $1,776,862,302) ................ 1,752,843,617
--------------
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENTS--7.9%
COMMERCIAL PAPER--0.8%
Williams Holdings of Delaware, Inc.,
10,000 5.15%, 7/6/99 ...................... 9,992,847
--------------

DISCOUNT NOTES--6.7%
51,820 Federal Home Loan Mortgage Corp.,
4.60%, 7/1/99 ....................... 51,820,000
38,000 Federal National Mortgage Association,
5.03%, 8/3/99 ....................... 37,824,788
--------------
89,644,788
--------------
REPURCHASE AGREEMENT--0.4%
5,971 State Street Bank & Trust,
4.60%, dated 6/30/99,
due 7/1/99 in the amount of
$5,971,447 (cost $5,970,684)
collateralized by $5,975,000
U.S. Treasury Note, 6.5% due
5/31/01 value including accrued
interest ............................ 5,970,684
--------------

Total short-term investments
(cost $105,608,319) ................. 105,608,319
--------------

Total investments before call option
written and investment sold short
(cost $1,882,470,621) ............... 1,858,451,936
--------------

NOTIONAL
AMOUNT
(000)
---------

CALL OPTION WRITTEN--0.0%
(320,000) Interest Rate Swap,
3 month LIBOR over 5.25%,
expires 8/10/99
(premium received $1,960,000) ....... (704)
--------------

PRINCIPAL
AMOUNT
(000)
---------

INVESTMENT SOLD SHORT--(5.0)%
(74,000) US Treasury Bonds,
5.25%, 2/15/29
(proceeds received
$65,534,063) ........................ (66,484,560)
--------------

Total investments, net of call
option written and investment
sold short--134.4%
(cost $1,814,976,558) ............... 1,791,966,672
Liabilities in excess of other
assets --(34.4)% .................... (458,834,440)
--------------
NET ASSETS--100% ...................... $1,333,132,232
==============

- ----------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Private placements restricted as to resale.
*** Illiquid securities representing 0.69% of portfolio assets.
+ (Partial) principal amount pledged as collateral for reverse
repurchase agreements.
++ Entire principal amount pledged as collateral for reverse
repurchase agreements.
@ Entire principal amount pledged as collateral for futures transactions.

- --------------------------------------------------------------------------------
KEY TO ABBREVIATIONS
ARM Adjustable Rate Mortgage.
G.O. General Obligation
LIBOR London InterBank Offer Rate.
REMIC Real Estate Mortgage Investment Conduit.
TBA To be allocated
TIPS Treasury Inflation Protected Security
- --------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

9
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES JUNE 30, 1999
- --------------------------------------------------------------------------------

ASSETS
Investments at value
(cost $1,882,470,621) (Note 1) ........................... $ 1,858,451,936
Cash ..................................................... 2,679
Deposits with brokers as collateral
for investments sold short (Note 1) .................... 67,062,500
Interest receivable ...................................... 15,556,219
Receivable for investments sold .......................... 991,926
Unrealized appreciation on interest rate swaps
(Notes 1 & 3) ............................................ 87,453
Other assets ............................................. 674,608
---------------
1,942,827,321
---------------

LIABILITIES
Reverse repurchase agreements (Note 4) ................... 482,594,346
Investments sold short, at value
(proceeds $65,534,063) (Note 1) .......................... 66,484,560
Payable for investments purchased ........................ 57,419,332
Due to broker-variation margin ........................... 1,220,171
Interest rate caps, at value
(amortized premium $127,498) (Note 1) .................... 802,647
Investment advisory fee payable (Note 2) ................. 439,345
Dividends payable ........................................ 250,206
Administration fee payable (Note 2) ...................... 109,836
Call option written, at value
(premium received $1,960,000) (Note 1) ................... 704
Other accrued expenses ................................... 373,942
---------------
609,695,089
---------------
$ 1,333,132,232
===============

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 .................... 98,497,981
Accumulated net realized loss .......................... (76,567,496)
Net unrealized depreciation ............................ (25,600,538)
---------------
Net assets, June 30, 1999 .............................. $ 1,333,132,232
===============

Net asset value per share:
($1,333,132,232 / 142,010,583 shares of
common stock issued and outstanding) ................... $9.39
=====

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest (net of discount amortization
of $484,472 and interest expense
of $19,796,788) ...................................... $ 86,628,391
------------
Operating expenses
Investment advisory .................................... 5,441,501
Administration ......................................... 1,360,375
Custodian .............................................. 310,000
Reports to shareholders ................................ 200,000
Audit .................................................. 115,500
Transfer agent ......................................... 109,500
Directors .............................................. 73,500
Legal .................................................. 33,000
Miscellaneous .......................................... 477,102
------------
Total operating expenses ............................. 8,120,478
------------
Net investment income
before excise tax ..................................... 78,507,913
Excise tax ........................................... 2,807,679
------------
Net investment income .................................. 75,700,234
------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3)
Net realized gain (loss) on:
Investments ............................................ 1,063,310
Short sales ............................................ (3,222,490)
Options ................................................ 3,764,175
Swaps .................................................. 191,185
Futures ................................................ (4,892,639)
------------
(3,096,459)
------------

Net change in unrealized appreciation
(depreciation) on:
Investments .............................................. (35,060,897)
Short sales ............................................ (950,497)
Options written ........................................ 766,760
Interest rate caps ..................................... 1,181,103
Swaps .................................................. 978,236
Futures ................................................ (799,288)
------------
(33,884,583)
------------
Net loss on investments .................................. (36,981,042)
------------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $ 38,719,192
============

See Notes to Consolidated Financial Statements.

10
<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------

RECONCILIATION OF NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH FLOWS
USED FOR OPERATING ACTIVITIES

Net increase in net assets resulting from
operations ................................................ $ 38,719,192
-------------
Increase in investments ................................... (440,901,376)
Net realized loss ......................................... 3,096,459
Decrease in unrealized appreciation ....................... 33,884,583
Increase in unrealized appreciation on
interest rate swaps ....................................... (978,236)
Increase in interest receivable ........................... (3,085,336)
Decrease in receivable for investments sold ............... 1,191,543
Increase in deposits with brokers ......................... (65,697,500)
Increase in other assets .................................. (592,779)
Increase in payable for investments purchased ............. 35,015,748
Decrease in written options ............................... (2,908,017)
Decrease in interest rate caps ............................ (2,344,013)
Increase in payable for investments sold short ............ 66,484,560
Increase in broker-variation margin ....................... 783,397
Decrease in dividends payable ............................. (77,333)
Decrease in accrued expenses and other
liabilities ............................................... (171,869)
-------------
Total adjustments ....................................... (376,300,169)
-------------

NET CASH FLOWS USED FOR OPERATING
ACTIVITIES ................................................ $(337,580,977)
=============

INCREASE (DECREASE) IN CASH
Net cash flows used for operating
activities ................................................ $(337,580,977)
-------------
Cash flows provided by financing activities:
Increase in reverse repurchase agreements ............... 394,117,971
Cash dividends paid ..................................... (56,746,965)
-------------
Net cash flows provided by financing
activities ................................................ 337,371,006
-------------
Net decrease in cash ...................................... (209,971)
Cash at beginning of year ................................. 212,650
-------------
Cash at end of year ....................................... $ 2,679
=============

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN NET ASSETS FOR THE YEARS ENDED
- --------------------------------------------------------------------------------
JUNE 30, JUNE 30,
1999 1998
---------- ---------

INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income .............. $ 75,700,234 $ 79,169,447
Net realized loss on
investments ...................... (3,096,459) (11,277,607)
Net change in unrealized
appreciation/(depreciation)
on investments ................... (33,884,583) 47,130,742
--------------- ---------------
Net increase
in net assets resulting
from operations ...................... 38,719,192 115,022,582
Dividends from net
investment income .................... (56,746,965) (56,747,022)
--------------- ---------------
Total increase (decrease) ........... (18,027,773) 58,275,560

NET ASSETS
Beginning of year .................... 1,351,160,005 1,292,884,445
--------------- ---------------
End of year .......................... $ 1,333,132,232 $ 1,351,160,005
=============== ===============

See Notes to Consolidated Financial Statements.

<PAGE>

- --------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

YEAR ENDED JUNE 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 9.51 $ 9.10 $ 8.68 $ 8.72 $ 8.32
-------- -------- -------- -------- --------
Net investment income (net of
interest expense of $0.14,
$0.21, $0.25, $0.22 and $0.27, respectively) .......... 0.54 0.56 0.62 0.58 0.61
Net realized and unrealized gain (loss) ................. (0.26) 0.25 0.20 (0.17) 0.42
-------- -------- -------- -------- --------
Net increase from investment operations ................... 0.28 0.81 0.82 0.41 1.03
-------- -------- -------- -------- --------
Dividends from net investment income ...................... (0.40) (0.40) (0.40) (0.45) (0.63)
-------- -------- -------- -------- --------
Net asset value, end of year* ............................. $ 9.39 $ 9.51 $ 9.10 $ 8.68 $ 8.72
======== ======== ======== ======== ========
Market value, end of year* ................................ $ 9.00 $ 8.81 $ 8.13 $ 7.63 $ 7.50
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ .................................. 6.72% 13.59% 12.07% 7.83% 1.61%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses # ...................................... 0.60% 0.59% 0.63% 0.64% 0.63%
Net investment income ..................................... 5.58% 5.96% 7.04% 6.57% 7.28%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ......................... $1,356,648 $1,327,288 $1,261,766 $1,248,679 $1,181,411
Portfolio turnover ........................................ 133% 307% 110% 216% 107%
Net assets, end of year (in thousands) .................... $1,333,132 $1,351,160 $1,292,884 $1,232,802 $1,238,389
Reverse repurchase agreements outstanding,
end of year (in thousands) ................................ $ 482,594 $ 88,476 $ 595,783 $ 352,757 $ 489,335
Asset coverage++ .......................................... $ 3,762 $ 16,271 $ 3,170 $ 4,495 $ 3,531

</TABLE>

- ----------
* Net asset value and market value are published in BARRON'S each Saturday,
THE NEW YORK TIMES and THE WALL STREET JOURNAL each Monday.
# Respectively, for the years indicated above, the ratios of operating
expenses, including interest expense, to average net assets were 2.06%,
2.80%, 3.47%, 3.17% and 3.89%. The ratios of operating expenses, including
interest expense and excise taxes, to average net assets were 2.26%, 2.95%,
3.53%, 3.17% and 3.89%.
+ 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.

12
<PAGE>

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

NOTE 1. ORGANIZATION & ACCOUNTING POLICIES

The BlackRock 2001 Term Trust Inc. (the "Trust"), a Maryland corporation, is a
diversified, closed-end management investment company. The investment objective
of the Trust is to manage a portfolio of investment grade fixed income
securities that will return $10 per share (the initial public offering price per
share) to investors on or about June 30, 2001 while providing high monthly
income. The ability of issuers of debt securities held by the Trust to meet
their obligations may be affected by economic developments in a specific
industry or region. No assurance can be given that the Trust's investment
objective will be achieved.

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, interest rate swaps, caps, floors and non-exchange traded
options on the basis of current market quotations provided by dealers or pricing
services approved by the Trust's Board of Directors. In determining the value of
a particular security, pricing services may use certain information with respect
to transactions in such securities, quotations from dealers, market transactions
in comparable securities, various relationships observed in the market between
securities, and calculated yield measures based on valuation technology commonly
employed in the market for such securities. Exchange-traded options are valued
at their last sales price as of the close of options trading on the applicable
exchanges. In the absence of a last sale, options are valued at the average of
the quoted bid and asked prices as of the close of business. A futures contract
is valued at the last sale price as of the close of the commodities exchange on
which it trades unless the Trust's Board of Directors determines that such price
does not reflect its fair value, in which case it will be valued atits fair
value as determined by the Trust's Board of Directors. Any securities or other
assets for which such current market quotations are not readily available are
valued at fair value as determined in good faith under procedures established by
and under the general supervisionand 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.

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

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

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

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

13
<PAGE>

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.

INTEREST RATE SWAPS: In a simple interest rate swap, one investor pays a
floating rate of interest on a notional principal amount and receives a fixed
rate of interest on the same notional principal amount for a specified period of
time. Alternatively, an investor may pay a fixed rate and receive a floating
rate. Interest rate swaps were conceived as asset/liability management tools. In
more complex swaps, the notional principal amount may decline (or amortize) over
time.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by "marking-to-market" to reflect the
market value of the swap. When the swap is terminated, the Trust will record a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Trust's basis in the contract, if any.

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

SWAP OPTIONS: 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 in a manner similar to more generic options described above.

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 con-

14
<PAGE>

tracts and may realize a loss. The use of futures transactions involves the risk
of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets. The Trust is also at the risk
of not being able to enter into a closing transaction for the futures contract
because of an illiquid secondary market. In addition, since futures are used to
shorten or lengthen a portfolio's duration, there is a risk that the portfolio
may have temporarily performed better without the hedge or that the Trust may
lose the opportunity to realize appreciation in the market price of the
underlying positions.

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

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

Interest rate floors are used by the Trust to both manage the duration of
the portfolio and its exposure to changes in short-term interest rates. Selling
interest rate floors reduces the portfolio's duration, making it less sensitive
to changes in interest rates from a market value perspective. The Trust's
leverage provides extra income in a period of falling rates. Selling floors
reduces some of the advantage by partially monetizing it as an up front payment
which the Trust receives.

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

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

<PAGE>
sources, if necessary. Net long-term capital gains, if any, in excess of loss
carryforwards are distributed at least annually. Dividends and distributions are
recorded on the ex-dividend date.

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

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 SECURITIES

Purchases and sales of investment securities, other than short-term investments
and dollar rolls, for the year ended June 30, 1999 aggregated $2,585,651,195 and
$2,231,141,092, 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, 1999, the Trust held
0.69% of its portfolio assets in illiquid securities all of which were
restricted as to resale.

The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by PNC Mortgage
Securities Corp. (or Sears 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, 1999
was substantially the same as the basis for financial reporting and accordingly,
net unrealized depreciation for federal income tax purposes was $25,600,538
(gross unrealized appreciation--$39,623,438; gross unrealized depreciation--
$65,223,976).

Details of open financial futures contracts at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>

VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE JUNE 30, UNREALIZED
CONTRACTS TYPE DATE DATE 1999 DEPRECIATION
- --------- ---- ---------- ----- -------- ----------
Short position:
<S> <C> <C> <C> <C> <C>
(1,750) 30-Yr.T-Bond Sept. 1999 $(201,087,976) $(202,835,936) $(1,747,960)
===========
</TABLE>

Details of open interest rate caps at June 30, 1999 are as follows:
<TABLE>
<CAPTION>

NOTIONAL VALUE AT
AMOUNT FIXED/ FLOATING TERMINATION AMORTIZED JUNE 30, UNREALIZED
(000) FLOATING RATE RATE DATE COST 1999 DEPRECIATION
------ ------------- -------- ----------- --------- --------- ------------
Purchased:
<S> <C> <C> <C> <C> <C> <C>
$120,000 6.00% 3 month LIBOR 2/19/02 $2,042,455 $1,313,851 $(728,604)
Sold:
(300,000) 3 Yr. CMT 3 month LIBOR 6/08/01 (1,218,602) (1,353,288) (134,686)
(200,000) 3 Yr. CMT 3 month LIBOR 8/12/01 (696,355) (763,210) (66,855)
---------- ---------
$ (802,647) $(930,145)
========== =========
</TABLE>

Details of open interest rate swaps at June 30, 1999 are as follows:

<TABLE>
<CAPTION>
NOTIONAL FIXED/
AMOUNT FLOATING FLOATING TERMINATION UNREALIZED
(000) TYPE RATE RATE DATE APPRECIATION
------- ----- -------- ------- ----------- ------------
Purchased:
<S> <C> <C> <C> <C> <C>
$85,000 Floating Rate 3 Mo. T-Bill 3 month LIBOR 9/10/03 $ 3,553
+80.25bps
80,000 Floating Rate 3 Mo. T-Bill 3 month LIBOR 9/10/03 2,880
+81.75bps
50,000 Basis 3 Mo. T-Bill 3 month LIBOR 9/18/03 81,020
-------
$87,453
=======
</TABLE>

16
<PAGE>

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, 1999, was approximately $414,071,460 at a
weighted average interest rate of approximately 4.54%. The maximum amount of
reverse repurchase agreements outstanding at any month-end during the year, was
$583,263,179 as of February 28, 1999 which was 26.41% 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, 1999, was approximately $16,787,399 . For the year ended June 30,
1999 the maximum amount of dollar rolls outstanding at any month end was
$72,475,313 as of the close of February 28, 1999, which was 3.28% 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, 1999, the Adviser owned 10,583
shares.

NOTE 6. DIVIDENDS

Since June 30, 1999, the Board of Directors of the Trust declared dividends from
undistributed earnings of $0.0333 per share payable July 30, 1999 to
shareholders of record on July 15, 1999.

17
<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, 1999 and the related consolidated
statements of operations and of cash flows for the year then ended, the
statements 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,
1999, 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, 1999, and
the results of its operations, its cash flows, the changes in its net assets and
its financial highlights for the years presented in conformity with generally
accepted accounting principles.

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

New York, New York
August 6, 1999

<PAGE>

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

We wish to advise you as to the federal status of dividends and
distributions paid by the Trust during the fiscal year ended June 30, 1999.

During the fiscal year ended June 30, 1999, the Trust paid dividends of
$0.40 per share from net investment income. For federal income tax purposes, the
aggregate of any dividends and short-term capital gains distributions you
received are reportable in your 1999 federal income tax returns as ordinary
income. Further, we wish to advise you that your income dividends do not qualify
for the dividends received deduction.

For the purpose of preparing your 1999 annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form 1099
DIV which will be mailed to you in January 2000.

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

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

Pursuant to the Trust's Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to have all distributions of dividends and capital gains
reinvested by 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 any new 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.

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.

19
<PAGE>

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

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

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

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

ANNUAL MEETING OF TRUST SHAREHOLDERS. 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 19, 1999 to vote on
the following matters:

(1) To elect three Directors as follows:

DIRECTOR CLASS TERM
-------- ------ -----
Andrew F. Brimmer ........................ IIII 3 years
Kent Dixon ............................... IIII 3 years
Laurence D. Fink ......................... IIII 3 years

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

(2) To ratify the selection of Deloitte & Touche LLP as independent public
accountants of the Trust for the fiscal year ending June 30, 2000.

Shareholders elected the three Directors and ratified the selection of
Deloitte & Touche LLP. The results of the voting was as follows:

VOTES FOR VOTES AGAINST ABSTENTIONS
-------- ------------ -----------
Andrew F. Brimmer 90,308,756 -- 13,558,357
Kent Dixon 90,472,977 -- 13,394,136
Laurence D. Fink 90,410,302 -- 13,456,811
Ratification of
Deloitte & Touche LLP 102,843,064 417,307 606,742

<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 $141
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 $25 billion family of open-end funds. BlackRock manages
over 470 accounts, 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 Adviser 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.

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

<PAGE>

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.

INTEREST-ONLY SECURITIES (IO). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on such security's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Trust may fail to recoup fully its initial investment in these
securities even if the securities are rated AAA by S&P or Aaa by Moody's.

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: BTM) 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.

COMMERCIAL MORTGAGE BACKED SECURITIES (CMBS):
Mortgage-backed securities secured or backed by mortgage loans on commercial
properties.

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

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

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

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

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

FNMA:
Federal National Mortgage 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).

23
<PAGE>

INTEREST-ONLY SECURITIES:
Mortgage securities including CMBS that receive only the interest cash flows
from an underlying pool of mortgage loans or underlying pass-through securities.
Also known as STRIP.

INVERSE-FLOATING RATE 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, THE NEW
YORK TIMES and THE WALL STREET JOURNAL on Monday.

PRINCIPAL-ONLY SECURITIES:
Mortgage securities that receive only the principal cash flows from an
underlying pool of mortgage loans or underlying pass-through securities. Also
known as STRIP.

PROJECT LOANS:
Mortgages for multi-family, low- to middle-income housing.

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

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

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

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

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

<PAGE>

- --------------------------------------------------------------------------------
BLACKROCK FINANCIAL MANAGEMENT, INC.
SUMMARY OF CLOSED-END FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

TAXABLE TRUSTS
- --------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ --------
<S> <C> <C>
The BlackRock Income Trust Inc. BKT N/A
The BlackRock North American Government Income Trust Inc. BNA N/A
The BlackRock High Yield Trust BHY N/A

TERM TRUSTS
The BlackRock 1999 Term Trust Inc. BNN 12/99
The BlackRock Target Term Trust Inc. BTT 12/00
The BlackRock 2001 Term Trust Inc. BTM 06/01
The BlackRock Strategic Term Trust Inc. BGT 12/02
The BlackRock Investment Quality Term Trust Inc. BQT 12/04
The BlackRock Advantage Term Trust Inc. BAT 12/05
The BlackRock Broad Investment Grade 2009 Term Trust Inc. BCT 12/09

TAX-EXEMPT TRUSTS
- --------------------------------------------------------------------------------------------------
STOCK MATURITY
PERPETUAL TRUSTS SYMBOL DATE
------ --------
The BlackRock Investment Quality Municipal Trust Inc. BKN N/A
The BlackRock California Investment Quality Municipal Trust Inc. RAA N/A
The BlackRock Florida Investment Quality Municipal Trust RFA N/A
The BlackRock New Jersey Investment Quality Municipal Trust Inc. RNJ N/A
The BlackRock New York Investment Quality Municipal Trust Inc. RNY N/A

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

IF YOU WOULD LIKE FURTHER INFORMATION PLEASE CALL BLACKROCK AT
(800) 227-7BFM (7236) OR CONSULT WITH YOUR FINANCIAL ADVISOR.

25
<PAGE>

- --------------------------------------------------------------------------------
BLACKROCK FINANCIAL MANAGEMENT, INC.
AN OVERVIEW
- --------------------------------------------------------------------------------

BlackRock Financial Management, Inc. ("BlackRock") is an SEC-registered
investment adviser. BlackRock and its affiliates currently manage over $141
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. BlackRock manages twenty-one closed-end funds that are
traded on either the New York or American stock exchanges, and a $25 billion
family of open-end funds. BlackRock manages over 470 accounts, domiciled in the
United States and overseas.

BlackRock's fixed income product was introduced in 1988 by a team of
highly seasoned fixed income professionals. These professionals had extensive
experience creating, analyzing and trading a variety of fixed income
instruments, including the most complex structured securities. In fact, several
individuals at BlackRock were responsible for developing many of the major
innovations in the mortgage-backed and asset-backed securities markets,
including the creation of the first CMO, the floating rate CMO, the
senior/subordinated pass-through and the multi-class asset-backed security.

BlackRock is unique among asset management and advisory firms in the
emphasis it places on the development of proprietary analytical capabilities.
Over one quarter of the firm's professionals is dedicated to the design,
maintenance and use of these systems, which are not otherwise available to
investors. BlackRock's proprietary analytical tools are used for evaluating, and
designing fixed income investment strategies for client portfolios. Securities
purchased include mortgages, corporate bonds, municipal bonds and a variety of
hedging instruments.

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

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

IF YOU WOULD LIKE FURTHER INFORMATION
PLEASE DO NOT HESITATE TO CALL BLACKROCK AT (800) 227-7BFM

<PAGE>

BlackRock

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

OFFICERS
Ralph L. Schlosstein, PRESIDENT
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.
37th Floor
1285 Avenue of the Americas
New York, NY 10019
(800) 227-7BFM

092477-10-8

Printed on recycled paper

THE BlackRock
2001 TERM TRUST INC.
- --------------------------
CONSOLIDATED ANNUAL REPORT
JUNE 30, 1999