BLACKROCK 2001 TERM TRUST INC, N-30D, 2000-08-30

BLACKROCK 2001 TERM TRUST INC
N-30D, 2000-08-30

Previous: CARBIDE GRAPHITE GROUP INC /DE/, 5, 2000-08-30

Next: DREYFUS INVESTMENT GRADE BOND FUND INC, 40-17F2, 2000-08-30

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED ANNUAL REPORT TO SHAREHOLDERS
REPORT OF INVESTMENT ADVISOR
--------------------------------------------------------------------------------
July 31, 2000

Dear Shareholder:

In the first half of the year, fears of an open-ended tightening policy by
the Federal Reserve peaked in May, which resulted in a subsequent relief in the
market as the U.S. economy seemed to decelerate significantly. During the
period, the Federal Reserve tightened short-term rates by 1.00% in an attempt to
engineer a "soft landing" for the U.S. economy. In the first six months of the
new millennium we have witnessed unprecedented volatility in both the Treasury
yield curve and the spread sectors. The Treasury curve inverted sharply in the
first quarter, but as weak economic data emerged in the second quarter, market
participants embraced an economic "soft landing" scenario causing the yield
curve to steepen. The downward revision in growth expectations allowed spread
sectors to rally in the month of June, but year-to-date their performance still
trails Treasuries.

While fears of a hawkish Federal Reserve and consequent risks of a
"hard-landing" may not materialize immediately, the risks are skewed in that
direction. A longer period of subdued financial market performance is necessary
to enable the labor markets to build up slack, which is an important
pre-condition for the Fed to achieve its goal. Given the likelihood of a
re-emergence of risk aversion in the capital markets as well as a continual
increase in the "scarcity premium" of Treasury securities, we are less inclined
to be aggressive with respect to spread assets. We are also focusing on the use
of high quality spread assets to increase the income or "carry" so that a total
return advantage over Treasuries is achieved despite further spread widening.

This report contains a summary of market conditions during the year and a
review of portfolio strategy by your Trust's managers in addition to the Trust's
audited financial statements and a detailed list of the portfolio's holdings.
Continued thanks for your confidence in BlackRock. We appreciate the opportunity
to help you achieve your long-term investment goals.

Sincerely,

/s/ LAURENCE D. FINK /s/ RALPH L. SCHLOSSTEIN
-------------------- -------------------------
Laurence D. Fink Ralph L. Schlosstein
Chairman President

<PAGE>

July 31, 2000

Dear Shareholder:

We are pleased to present the consolidated audited annual report for The
BlackRock 2001 Term Trust Inc. ("the Trust") for the fiscal year ended June 30,
2000. 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". The
Trust's primary investment objective is to return $10 per share (its initial
offering price) to shareholders on or about June 30, 2001. Although there can be
no guarantee, BlackRock believes that the Trust can achieve its investment
objective. The Trust seeks the objective 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, commercial paper, discount notes and
other debt securities and commercial mortgage-backed securities. All of the
Trust's assets must be rated "BBB" by Standard & Poor's or "Baa" by Moody's at
time of purchase or be issued or guaranteed by the U.S. government or its
agencies.

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

-----------------------------------------------------
6/30/00 6/30/99 CHANGE HIGH LOW
--------------------------------------------------------------------------------
STOCK PRICE $9.125 $9.00 1.39% $9.125 $8.8125
--------------------------------------------------------------------------------
NET ASSET VALUE (NAV) $9.35 $9.39 (0.43)% $9.39 $9.21
--------------------------------------------------------------------------------
5-YEAR U.S. TREASURY NOTE 6.18% 5.65% 9.38% 6.81% 5.51%
--------------------------------------------------------------------------------

THE FIXED INCOME MARKETS
Over the past year, the economy has had a tremendous amount of strength
and momentum, labor markets were very tight, and the opinion was that the best
news on inflation was behind us. Despite this, the view was that the Federal
Reserve would maintain a gradual process of slowing the economy until a more
pronounced pick-up in inflation was evident. Starting on June 30, 1999 the
Federal Reserve began to raise the target for the Fed Funds rate with a 0.25%
rise to 5.00%. Although reported inflation remained tame throughout the second
half of 1999, the Federal Reserve opted to raise the Federal Funds rate by 0.25%
in November, February, and again in March. Despite the sell-off in the equity
market in April, in May concerns about an overheating economy due to an
increased shortage of labor and rising oil prices led the Federal Reserve to
raise rates another 0.50% to 6.5%.

At the beginning of the annual period stated in this report the economy
was strong, while inflation was under control and at historically low levels. As
a pick-up in the manufacturing sector towards the end of 1999 drove the economy,
the Consumer Price Index and Producer Price Index remained benign, despite
stronger labor markets and higher commodity prices. The economy entered 2000
with a tremendous amount of momentum, although inflation continued to be benign.
A strong equity market led to increased consumer spending, and labor markets
stayed strong until the end of the second quarter, when consumers began to
moderate spending, and the strength of the labor market slowed. The real
question is

2
<PAGE>

whether this slowdown is the start of something bigger (soft or hard landing) or
simply a natural pause from well above-trend growth. Goldman Sachs' financial
conditions index shows that conditions are as accommodative now as they were
last June, prior to the 175 basis points of Fed tightening. This suggests that
growth is likely to reaccelerate later in the year and bring the Fed back into
play.

Treasury yields increased significantly during 1999, continuing their
year-long slide in price. During the second half of 1999 the yield of the 5-year
Treasury increased by 69 basis points (0.69%) to end at 6.34%. Reversing the
trend in 1999, Treasury yields decreased in the first half of 2000. As of June
30th, the yield of the 5-Year Treasury posted a net decrease of 16 basis points
(0.16%) over the course of the calendar year. Bond prices, which move inversely
to their yields, have risen in expectation of a slowing economy due to higher
short-term interest rates. We anticipate a continued flattening of the yield
curve as a result of an active Federal Reserve and potential Treasury
repurchases of long maturity debt.

A combination of shrinking supply, and a decline in prepayment rates in
response to a reduction in refinancing activity, allowed mortgage securities to
outperform the broader investment grade market in 1999. Falling bond prices kept
mortgages rates near 8%, which significantly affected refinacing activity
reducing an important source of new mortgage origination. Mortgages posted
positive returns during the first half of 2000, but trailed the broader market,
which was led by the strong rally in the Treasury market. During the period, as
measured by the LEHMAN BROTHERS MORTGAGE INDEX, mortgages posted a 5.04% total
return versus 4.56% for the LEHMAN BROTHERS AGGREGATE INDEX. Strength in the
housing market has continued unabated, leading to more supply than expected, but
in comparison to other spread sectors, mortgages benefited from greater
liquidity and higher credit quality. On a relative valuation basis mortgages
appear cheap, although uncertainty was increased in the market by Treasury
Undersecretary Gensler's testimony concerning a bill seeking to end the
quasi-governmental status of FNMA and FHLMC. GNMAs performed well during the
first quarter as a Treasury substitute, since it is the only other asset class
backed by the full faith and credit of the U.S. Government, but much of this
fear has now dissipated and led to better performance in Fnma and FHLMC.

Despite a very buoyant economic environment, credit parameters did not
improve much in 1999 in the investment corporate bond universe, raising concerns
about vulnerability to a down turn. So far in 2000, investment grade corporate
securities have encountered difficulty as fixed income investors sought the
credit quality and liquidity of treasuries. During the period, corporates as
measured BY MERRILL LYNCH U.S. CORPORATE MASTER INDEX returned 2.60%, under
performing the LEHMAN BROTHERS AGGREGATE INDEX'S 4.56%. Fundamentally the
corporate market appears healthy, with companies reporting strong earnings for
the fourth quarter 1999 and in the first half of the calendar year. The
negatives in the corporate market are from stock market volatility, poor
liquidity, increased leverage and deteriorating credit quality, which has
increased uncertainty in the market. With the uncertainty of future fed action
in the market, lower current yields could cloud the supply picture and lead to
an acceleration in issuance.

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 objective. The
following chart compares the Trust's current and June 30, 1999 asset
composition.

<PAGE>

THE BLACKROCK 2001 TERM TRUST INC.
--------------------------------------------------------------------------------
COMPOSITION JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
Corporate Bonds 29% 19%
--------------------------------------------------------------------------------
U.S. Government Securities 15% 24%
--------------------------------------------------------------------------------
Commercial Paper & Discount Notes 15% 5%
--------------------------------------------------------------------------------
Asset-Backed Securities 9% 7%
--------------------------------------------------------------------------------
Mortgage Pass-Throughs 8% 14%
--------------------------------------------------------------------------------
Stripped Money Market Instruments 8% 6%
--------------------------------------------------------------------------------
Zero Coupon Bonds 5% 11%
--------------------------------------------------------------------------------
Agency Multiple Class Mortgage Pass-Throughs 4% 3%
--------------------------------------------------------------------------------
Taxable Municipal Bonds 2% 2%
--------------------------------------------------------------------------------
Principal-Only Mortgage-Backed Securities 2% 3%
--------------------------------------------------------------------------------
Adjustable &Inverse Floating Rate Mortgages 1% 1%
--------------------------------------------------------------------------------
Interest-Only Mortgage-Backed Securities 1% 3%
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 1% 2%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
RATING % OF CORPORATES
--------------------------------------------------------------------------------
CREDIT RATING JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
AAA or equivalent 1% 1%
--------------------------------------------------------------------------------
AA or equivalent 14% 20%
--------------------------------------------------------------------------------
A or equivalent 31% 39%
--------------------------------------------------------------------------------
BBB or equivalent 51% 37%
--------------------------------------------------------------------------------
BB or equivalent 2% --
--------------------------------------------------------------------------------
N/R 1% 3%
--------------------------------------------------------------------------------

In accordance with the Trust's primary investment objective of returning
the initial offer price upon maturity, the Trust's portfolio management activity
focused on adding securities which offer attractive yield spreads over Treasury
securities and an emphasis on 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 year, the most significant additions to the portfolio have been
in the corporate bond sector asset-backed securities, commercial paper and
discount notes. To finance these purchases, the Trust sold zero coupon bonds,
U.S. Treasuries, interest-only and principal-only securities and mortgage
pass-through, as their maturity dates may extend past the Trust's termination
date in a rising interest rate environment. The Trust sold these securities to
reduce positions that extend past the end of the Trust and to increase current
cash flows to the Trust.

4
<PAGE>

We look forward to managing the Trust to benefit from the opportunities
available in the fixed income markets and to meet its investment objective. We
thank you for your investment in the BlackRock 2001 Term Trust Inc. Please feel
free to contact our marketing center at (800) 227-7BFM (7236) if you have
specific questions which were not addressed in this report.

Sincerely,

/s/ ROBERT S. KAPITO /s/ MICHAEL P. LUSTIG
-------------------- ---------------------
Robert S. Kapito Michael P. Lustig
Vice Chairman and Portfolio Manager Managing Director and Portfolio Manager
BlackRock Advisors, Inc. BlackRock Advisors, Inc.

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BTM
--------------------------------------------------------------------------------
Initial Offering Date: July 23, 1992
--------------------------------------------------------------------------------
Closing Stock Price as of 6/30/00: $9.125
--------------------------------------------------------------------------------
Net Asset Value as of 6/30/00: $9.35
--------------------------------------------------------------------------------
Yield on Closing Stock Price as of 6/30/00 ($9.125)1: 0.55%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share2: $0.004167
--------------------------------------------------------------------------------
Current Annualized Distribution per Share2: $0.05
--------------------------------------------------------------------------------

----------
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.

5
<PAGE>

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED PORTFOLIO OF INVESTMENTS
JUNE 30, 2000
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------

LONG-TERM INVESTMENTS--93.5%
MORTGAGE PASS-THROUGHS--8.8%
Federal Home Loan Mortgage Corp.,
$ 1,549@ 6.50%, 9/01/25 - 4/01/29 ............... $ 1,463,863
332 7.50%, 10/01/13 ........................ 327,677
7,704 8.144%, 12/01/01,
7 Year Multifamily ................... 7,735,362
4,107 8.50%, 2/01/08 ......................... 4,147,044
326 Federal Housing Administration,
Ponds at Punaluu,
7.625%, 4/01/37 ........................ 325,825
Federal National Mortgage
Association,
10,312@ 6.50%, 6/01/23 - 4/01/29 ............... 9,792,004
50,000 6.52%, 3/16/01 ......................... 49,859,500
8,058@ 7.00%, 10/01/22 - 11/01/28 ............. 7,793,906
4,065 7.50%, 9/01/07 - 7/01/23 ............... 4,000,105
9,959 7.695%, 5/01/01,
7 Year Multifamily ................... 9,934,353
10,952 7.79%, 2/01/01,
7 Year Multifamily ................... 10,952,826
3,675 8.00%, 3/01/01,
7 Year Multifamily ................... 3,678,564
3,032 8.50%, 11/01/03 - 9/01/10,
15 Year Multifamily .................. 3,084,395
4,088 Government National Mortgage
Association,
8.00%, 1/15/23 - 6/15/24 ............... 4,131,831
-----------
117,227,255
-----------
AGENCY MULTIPLE CLASS MORTGAGE
PASS-THROUGHS--3.6%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
17,491 Ser. 1507, Class 1507-EB,
1/15/18 .............................. 17,354,387
93 Ser. 1563, Class 1563-S,
10/15/07 ............................. 85,378
88 Ser. 1663, Class 1663-A,
7/15/23 .............................. 85,397
244 Ser. 1686, Class 1686-PK,
4/15/23 .............................. 241,748
2,046 Ser. 1944, Class 1944-HA,
1/15/25 .............................. 2,070,030
3,052 Ser. 1990, Class 1990-B,
9/15/24 .............................. 3,127,768
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,214 Trust 269, Class 269-1,
8/01/22 .............................. 1,243,397
3,863 Trust 1990-144, Class 144-W,
12/25/20 ............................. 4,087,340
2,050 Trust 1993-71, Class 71-PG,
7/25/07 .............................. 2,028,003
1,601@ Trust 1993-M2, Class M2-H,
11/25/03 ............................. 1,580,631
4,764 Trust 1994-22, Class 22-A,
3/25/22 .............................. 4,705,433
4,094 Trust 1994-81, Class 81-PE,
6/25/18 .............................. 4,079,665
5,611 Trust 1996-T6, Class T6-C,
2/26/01 .............................. 5,557,430
1,386 Trust 1996-T6, Class T6-D,
2/26/01 .............................. 1,376,547
138 Government National Mortgage
Association, REMIC
Pass-Through Certificates,
Trust 1996-26, Class 26-A,
1/16/20 .............................. 137,828
----------
47,760,982
----------
NON-AGENCY MULTIPLE CLASS
MORTGAGE PASS-THROUGHS--0.1%
AAA 170 Collateralized Mortgage Securities Corp.,
Ser. F, Class F4-A, 11/01/15 ........... 174,588
Aaa 1,000 Structured Asset Mortgage
Investments Inc.,
Ser. 1998-12, Class 12-A1,
2/25/29 .............................. 986,250
----------
1,160,838
----------
ADJUSTABLE & INVERSE FLOATING
RATE MORTGAGES--1.4%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
1,367 Ser. 1454, Class 1454-FB,
4/15/20 .............................. 1,387,029
23 Ser. 1512, Class 1512-LA,
5/15/08 .............................. 21,140
356 Ser. 1563, Class 1563-SB,
8/15/08 .............................. 348,589
603 Ser. 1592, Class 1592-NE,
12/15/22 ............................. 550,061

See Notes to Consolidated Financial Statements.

6
<PAGE>

--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------
ADJUSTABLE & INVERSE FLOATING
RATE MORTGAGES (CONTINUED)
$ 876 Ser. 1606, Class 1606-SB,
11/15/08 .............................. $ 839,073
1,481 Ser. 1617, Class 1617-EB,
9/15/23 ............................... 1,448,239
1,827 Ser. 1671, Class 1671-KB,
2/15/24 ............................... 1,761,346
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
2,247 Trust 1992-155, Class 155-SA,
10/25/05 .............................. 2,248,781
166 Trust 1993-99, Class 99-SB,
7/25/23 ............................... 165,061
230 Trust 1993-117, Class 117-S,
7/25/08 ............................... 220,529
1,391 Trust 1993-165, Class 165-SL,
10/25/21 .............................. 1,361,783
1,719 Trust 1993-178, Class 178-SC,
9/25/23 ............................... 1,799,487
1,859 Trust 1993-196, Class 196-SM,
10/25/08 .............................. 1,585,512
1,111 Trust 1993-214, Class 214-SO,
12/25/08 .............................. 1,076,374
1,060 Trust 1993-225 Class 225-FF,
9/25/22 ............................... 1,061,555
1,500 Trust 1993-G17, Class G17-SH,
4/25/23 ............................... 625,320
396 Trust 1994-42, Class 42-SM,
1/25/24 ............................... 387,695
1,408 Trust 1998-38, Class 38-S,
1/18/12 ............................... 1,399,671
----------
18,287,245
----------
INTEREST ONLY MORTGAGE-BACKED
SECURITIES--1.3%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
3,404 Ser. G3, Class G3-S,
4/25/19 ............................... 53,443
675 Ser. G29, Class G29-IA,
6/25/20 ............................... 38,705
3,689 Ser. G32, Class G32-PT,
2/25/19 ............................... 134,857
922 Ser. G32, Class G32-TT,
2/25/19 ............................... 33,714
27 Ser. 113, Class 113-N,
5/15/21 ............................... 802,844
9 Ser. 1185, Class 1185-C,
12/15/06 .............................. 117,240
13 Ser. 1283, Class 1283-X,
6/15/22 ............................... 365,540
10 Ser. 1388, Class 1388-G,
5/15/06 ............................... 93,134
4 Ser. 1404, Class 1404-E,
1/15/06 ............................... 25,335
4,617 Ser. 1422, Class 1422-IB,
11/15/07 .............................. 481,145
3,343 Ser. 1605, Class 1605-S,
8/15/06 ............................... 9,729
6,268 Ser. 1621, Class 1621-SJ,
10/15/20 .............................. 96,589
3,847 Ser. 1640, Class 1640-SD,
12/15/00 .............................. 7,964
5,416 Ser. 1849, Class 1849-EL,
12/15/08 .............................. 423,226
25,718 Ser. 1954, Class 1954-MD,
3/15/16 ............................... 1,842,672
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
4 Trust 1991-29, Class 29-J,
4/25/21 ............................... 123,705
10 Trust 1991-80, Class 80-Q,
7/25/21 ............................... 297,561
11 Trust 1991-G46, Class G46-K,
12/25/09 .............................. 266,751
889 Trust 1993-68, Class 68-PJ,
11/25/06 .............................. 41,758
7,008 Trust 1993-82, Class 82-SA,
5/25/23 ............................... 157,956
1,890 Trust 1993-141, Class 141-PW,
6/25/18 ............................... 67,653
29,790 Trust 1993-202, Class 202-SL,
11/25/23 .............................. 733,432
8,336 Trust 1993-240, Class 240-PS,
9/25/12 ............................... 74,774
18,999 Trust 1993-G31, Class G31-PS,
8/25/18 ............................... 211,080
7,300 Trust 1996-24, Class 24-SB,
10/25/08 .............................. 1,147,852
9,471 Trust 1996-40, Class 40-SG,
3/25/09 ............................... 1,293,213
1,321 Trust 1996-54, Class 54-SM,
9/25/23 ............................... 281,106
40,907 Trust 1997-35, Class 35-SB,
3/25/09 ............................... 464,080
23,700 Trust 1997-50, Class 50-HK,
8/25/27 ............................... 6,705,941
24,764 Trust 1998-3, Class 3-SC,
2/18/28 ............................... 263,114
----------
16,656,113
----------

<PAGE>

PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES--2.3%
Federal Home Loan Mortgage Corp.,
Multiclass Mortgage
Participation Certificates,
337 Ser. 1338, Class 1338-Q
8/15/07 ............................... 286,246
4,333 Ser. 1662, Class 1662-PO,
1/15/09 ............................... 3,478,575

See Notes to Consolidated Financial Statements.

<PAGE>

PRINCIPAL ONLY MORTGAGE-BACKED
SECURITIES (CONTINUED)
$ 2,165 Ser. 1721, Class 1721-OC,
5/15/24 ............................... $1,236,511
2,974 Ser. 1870, Class 1870-PA,
8/15/01 ............................... 2,851,322
Federal National Mortgage Association,
REMIC Pass-Through Certificates,
1,393 Trust 3, Class 1, 2/01/17 ............... 1,093,545
1,429 Trust 5, Class 1, 9/01/07 ............... 1,182,472
42 Trust 1991-G44, Class G44-H,
11/25/21 .............................. 41,724
355 Trust 1991-167, Class 167-B,
10/25/17 .............................. 245,522
321 Trust 1993-151, Class 151-E,
5/25/23 ............................... 266,958
6,709 Trust 1993-257, Class 257-A,
6/25/23 ............................... 6,467,025
6,873 Trust 1994-8, Class 8-G,
11/25/23 .............................. 6,230,483
4,703 Trust 1994-53, Class 53-EA,
11/25/23 .............................. 4,060,308
2,432 Trust 1994-54, Class 54-B,
11/25/23 .............................. 2,360,785
----------
29,801,476
----------

COMMERCIAL MORTGAGE-BACKED
SECURITIES--0.8%
AAA 5,200 PaineWebber Mortgage
Acceptance Corp. IV,
Ser. 1995-M1, Class A,
6.70%, 1/15/07 ** ....................... 5,092,724
Resolution Trust Corp.,
AA 3,168 Ser. 1994-C1, Class C,
8.00%, 6/25/26 .......................... 3,164,441
A 2,885 Ser. 1994-C2, Class D,
8.00%, 4/25/25 .......................... 2,856,608
----------
11,113,773
----------
ASSET-BACKED SECURITIES--10.2%
BBB+ 1,758 Amresco Securitized Interest,
Ser. 1996-1, Class A,
8.10%, 4/26/26 ** ....................... 1,265,495
Broad Index Secured Trust Offering,
Baa2 10,000 6.58%, 3/26/01 9,881,866
Baa2 10,000 8.42%, 9/09/01** ........................ 9,965,625
AAA 6,000@ Chase Credit Card Master Trust,
Ser. 1997-2, Class A,
6.30%, 4/15/03 .......................... 5,994,360
AAA 3,182 Chase Manhattan Grantor Trust,
Ser. 1996-B, Class A,
6.61%, 9/15/02 .......................... 3,173,552
AAA 35,000@ Citibank Credit Card Trust,
Ser. 1996-1, Class A,
Zero Coupon, 2/07/03 .................... 33,512,500
NR 5,874+ Global Rated Eligible Asset Trust,
Ser. 1998-A, Class A-1,
7.33%, 3/15/06 **/*** ................... 1,762,130
AAA 35,000 Honda Auto Lease Trust,
Ser. 1999-A, Class A-3,
6.10%, 1/15/02 .......................... 34,721,094
AAA 7,000 IMC Home Equity Loan Trust,
Ser. 1998-3, Class A-9,
5.35%, 6/20/01 .......................... 430,938
AAA 25,000 MBNA Master Credit Card Trust II,
Ser. 1996-D, Class A,
6.80%, 9/15/03 .......................... 25,023,250
A 5,587 Newcourt Equipment Trust,
Ser. 1998-1, Class B,
5.97%, 4/20/05 .......................... 5,524,449
Structured Mortgage Asset
Residential Trust, @@/***
NR 9,989+ Ser. 1997-2, 8.24%, 3/15/06 ............. 2,197,641
NR 11,016+ Ser. 1997-3, 8.57%, 4/15/06 ............. 2,423,565
-----------
135,876,465
-----------
U.S GOVERNMENT SECURITIES--16.5%
U.S. Treasury Bonds,
31,754 3.625%, 4/15/28 (TIPS) .................. 30,265,468
15,000@ 6.125%, 11/15/27 ........................ 14,967,150
U.S. Treasury Notes,
50,000@ 4.50%, 9/30/00 .......................... 49,789,000
25,000@ 5.50%, 7/31/01 .......................... 24,746,000
100,000@ 5.75%, 6/30/01 .......................... 99,266,000
-----------
219,033,618
-----------

ZERO COUPON BONDS--5.7%
6,785 Coupon Treasury Receipt,
2/15/01 ................................. 6,546,877
Government Trust Certificates,
35,925 Ser. 1-D, 11/15/00 ...................... 35,117,765
34,630 Ser. 2-F, 11/15/00 ...................... 33,851,864
-----------
75,516,506
-----------

TAXABLE MUNICIPAL BONDS--2.3%
AAA 1,000 Kern County California
Pension Obligation,
6.27%, 8/15/01 .......................... 991,210
AAA 2,035 Long Beach California
Pension Obligation,
6.45%, 9/01/01 .......................... 2,020,369
AAA 6,000 Los Angeles County California
Pension Obligation,
Ser. D, 6.38%, 6/30/01 .................. 5,959,560

<PAGE>

NR 4,970 Massachusetts Housing Fin. Agency,
Ser. 1991-B, 6.85%, 10/01/20 ............ 4,637,805
New York City G.O., Ser. I,
A- 5,000 6.40%, 3/15/01 .......................... 4,975,100
A- 2,155 7.24%, 4/15/01 .......................... 2,154,181
A- 2,845 7.24%, 4/15/01, ETM ..................... 2,847,219

See Notes to Consolidated Financial Statements.

8
<PAGE>
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------

TAXABLE MUNICIPAL BONDS (CONTINUED)
A- $ 1,000 New York State Environmental
Facility Auth.,
Ser. A, 6.62%, 3/15/01 ................. $ 994,280
A 3,345 New York State Housing Fin. Agency,
Ser. B, 7.14%, 9/15/02 ................. 3,318,374
A 2,000 New York State Urban
Dev. Corp.,
Ser. B, 6.90%, 4/01/01 ................. 1,991,740
AAA 1,000 St. Josephs Health
Systems California,
Ser. A, 7.02%, 7/01/01 ................. 998,110
----------
30,887,948
----------

CORPORATE BONDS--32.1%
FINANCE & BANKING--18.7%
A3 1,300@ Amsouth Bancorp.,
6.75%, 11/01/25 ......................... 1,224,938
A- 5,000 Aristar, Inc.,
7.25%, 6/15/01 .......................... 4,962,200
AA- 5,000 Associates Corp.,
6.68%, 7/25/00 .......................... 5,000,400
AT&T Corp.,
A+ 10,000 5.74%, 6/30/01 .......................... 9,820,200
A+ 11,600 6.25%, 5/15/01 .......................... 11,465,440
Baa2 9,000 Capital One Bank,
6.26%, 5/07/01 .......................... 8,856,180
Case Credit Corp.,
BBB 2,150 5.85%, 2/20/01 .......................... 2,131,747
BBB 10,400 5.91%, 2/19/01 .......................... 10,315,760
BBB 11,200 6.24%, 11/06/00 ......................... 11,166,288
Comdisco Inc.,
BBB+ 5,000 5.75%, 2/15/01 .......................... 4,940,100
BBB+ 21,000 6.10%, 6/05/01 .......................... 20,718,600
BBB+ 10,000 6.68%, 6/29/01 .......................... 9,920,000
A- 15,000 Donaldson, Lufkin & Jenrette,
5.625%, 2/15/16 ......................... 14,807,550
BBB- 10,000 Franchise Finance Corp.,
7.00%, 11/30/00 ......................... 9,965,700
A+ 6,750 Goldman Sachs Group,
6.20%, 12/15/00 ** ...................... 6,723,810
A3 5,000 Great Western Financial Corp.,
6.375%, 7/01/00 ......................... 4,999,900
Lehman Brothers Holdings, Inc.,
A 8,000 6.75%, 9/24/01 .......................... 7,912,382
A 10,000 7.25%, 4/15/03 .......................... 9,822,662
AA- 10,715 Merrill Lynch & Co., Inc.,
5.75%, 11/04/02 ......................... 10,373,350
AA- 3,800 Morgan Stanley Dean Witter
Discover, Inc.,
5.75%, 2/15/01 .......................... 3,767,662
Aa2 10,000 Nations Bank Corp.,
7.00%, 9/15/01 .......................... 9,962,200
BBB+ 10,000 PaineWebber Group Inc.,
5.81%, 6/08/01 .......................... 9,813,719
A3 10,000 Popular Inc.,
6.20%, 4/30/01 .......................... 9,873,100
A+ 5,000 Prudential Funding Corp.,
6.00%, 5/11/01 ** ....................... 4,948,900
BBB+ 6,590 Ryder Systems Inc.,
9.25%, 5/15/01 .......................... 6,638,395
Salomon Smith Barney Holdings Inc.,
Aa3 13,000 5.875%, 2/01/01 ......................... 12,900,030
Aa3 12,500 6.625%, 11/30/00 ........................ 12,479,125
Aa3 1,925 Security Pacific Corp.,
11.00%, 3/01/01 ......................... 1,969,083
BB 5,500 Trinet Corporate Realty Trust,
7.30%, 5/15/01 .......................... 5,374,655
A2 5,000 Union Planters National Bank,
6.76%, 10/30/01 4,961,250
-----------
247,815,326
-----------
INDUSTRIALS--6.4%
BBB 10,000 Amerco Inc.,
7.49%, 9/18/01 .......................... 10,063,400
A+ 10,000 Ford Motor Credit Co.,
6.18%, 12/27/01 ......................... 9,854,500
BBB+ 14,505 ICI Wilmington Inc.,
8.75%, 5/01/01 .......................... 14,568,387
BBB 16,000 Phillips Petroleum Co.,
9.00%, 6/01/01 .......................... 16,222,880
Baa1 15,000 TRW Inc.,
6.45%, 6/15/01 .......................... 14,814,876
A+ 11,380 TTX Co.,
5.75%, 3/23/01 ** ....................... 11,266,200
A- 1,500 Tyco International Group,
6.125%, 6/15/01 ......................... 1,479,001
BBB+ 2,800 Westinghouse Electric Corp.,
8.875%, 6/01/01 ......................... 2,837,212
BBB 4,550 WMX Technologies Inc.,
7.125%, 6/15/01 ......................... 4,475,107
----------
85,581,563
----------

UTILITIES--1.7%
AA- 5,000 Duke Energy Corp.,
5.875%, 6/01/01 ......................... 4,941,550
BBB- 4,000 El Paso Electric Co.,
7.75%, 5/01/01 .......................... 3,993,560
BBB 9,000 Pacificorp Holdings Inc.,
6.75%, 4/01/01 ** ....................... 8,955,900
BBB+ 5,000 Potomac Capital Investment Corp.,
6.90%, 8/09/00 ** ....................... 5,000,000
----------
22,891,010
----------

YANKEE--5.3%
Aaa 3,350 African Development Bank,
8.625%, 5/01/01 ......................... 3,392,578
NR 4,619 Banamex Remittance Master Trust,
Ser. 1996, 7.57%, 1/01/01 ** ............ 4,601,868
BBB- 15,000 Empresa Electric Guacolda SA,
7.60%, 4/30/01 ** ....................... 14,752,500
A+ 18,000 Province of Quebec,
9.125%, 8/22/01 ......................... 18,299,044

See Notes to Consolidated Financial Statements.

9
<PAGE>
--------------------------------------------------------------------------------
PRINCIPAL
RATING* AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
--------------------------------------------------------------------------------

YANKEE (CONTINUED)
BBB $ 15,000 Republic of Argentina,
Zero Coupon, 4/15/01 ............... $ 13,912,500
BB+ 3,000 Republic of Colombia,
8.00%, 6/14/01 ..................... 2,910,000
BBB- 12,000 Transpatadora de Gas,
10.25%, 4/25/01 .................... 12,060,000
-------------
69,928,490
-------------

Total corporate bonds ................ 426,216,389
-------------

STRIPPED MONEY MARKET
INSTRUMENTS--8.4%
65,000 Aim Prime Money Market Portfolio,
1/02/01 ............................ 62,969,205
50,000 Goldman Sachs Money
Market Portfolio,
1/02/01 ............................ 48,433,200
-------------
111,402,405
-------------

NOTIONAL
AMOUNT
(000)
-------
CALL OPTIONS PURCHASED--0.0%
200,000 Interest Rate Swap,
5.60% over 3 month LIBOR,
expires 8/7/00 ..................... 20
-------------
Total long-term investments
(cost $1,239,011,789) .............. 1,240,941,033
-------------

PRINCIPAL
AMOUNT
(000)
-------
SHORT-TERM INVESTMENTS--16.4%
COMMERCIAL PAPER--5.9%
A-1+ 50,000 Bayerische Landesbank,
6.85%, 5/15/01 ..................... 50,005,698
P-2 15,000 Edison Mission Energy, **
6.92%, 2/15/01 ..................... 14,339,717
P-2 15,000 Williams Holdings of Delaware Inc.,
7.05%, 3/09/01 ..................... 14,262,687
-------------
78,608,102
-------------

DISCOUNT NOTES--10.5%
Federal Home Loan Bank,
50,000 6.40%, 7/14/00 ..................... 49,884,444
42,355 6.57%, 7/03/00 ..................... 42,339,541
46,505 Student Loan Marketing Association,
6.57%, 7/03/00 ..................... 46,488,026
-------------
138,712,011
-------------
Total short-term investments
(amortized cost $217,320,113) ...... 217,320,113
-------------
Total investments, before
investments sold short--109.9%
(cost $1,456,331,902) .............. 1,458,261,146
-------------
INVESTMENTS SOLD
SHORT--(15.5%)
(32,500) U.S. Treasury Bonds,
6.125%, 8/15/29 .................... (32,825,000)
(173,500) U.S. Treasury Notes,
6.00% 8/15/09 ...................... (172,117,205)
-------------
(proceeds received $197,660,469) ..... (204,942,205)
-------------

Total investments, net of
investments sold short--94.4%
(cost $1,258,671,433) .............. 1,253,318,941

Other assets in excess of
liabilities--5.6% .................. 74,093,692
-------------

NET ASSETS--100% ..................... $1,327,412,633
==============

------------
* Using the higher of Standard & Poor's, Moody's or Fitch's rating.
** Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
*** Illiquid securities representing 0.48% of net assets.
@ Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
@@ Securities are restricted as to public resale. The securities were
acquired in 1997 and have an aggregate current cost of $6,758,867.
+ Security is fair valued. (Note 1).

<PAGE>

KEY TO ABBREVIATIONS
--------------------------------------------------------------------------------
CMT-- Constant Maturity Treasury.
ETM-- Escrowed to Maturity.
G.O.-- General Obligation.
LIBOR-- London InterBank Offer Rate.
REMIC-- Real Estate Mortgage Investment Conduit.
TIPS-- Treasury Inflation Protection Security.
--------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF
ASSETS AND LIABILITIES
JUNE 30, 2000
--------------------------------------------------------------------------------

ASSETS
Investments at value
(cost $1,456,331,902) (Note 1) ...................... $1,458,261,146
Cash .................................................. 3,817,491
Deposits with brokers as collateral
for investments sold short (Note 1) ................. 209,740,000
Receivable for investments sold ....................... 65,811,529
Interest receivable ................................... 13,373,781
Unrealized appreciation on interest rate swaps
(Notes 1 & 3) ....................................... 3,500,170
Unrealized appreciation on credit default swaps
(Notes 1 & 3) ....................................... 8,059
Other assets .......................................... 60,734
--------------
1,754,572,910
--------------

LIABILITIES
Investments sold short, at value
(proceeds $197,660,469) (Note 1) .................... 204,942,205
Reverse repurchase agreements (Note 4) ................ 175,789,892
Payable for investments purchased ..................... 41,736,667
Interest rate caps, at value
(amortized premium $746,744) (Note 1) ............... 3,658,066
Investment advisory fee payable (Note 2) .............. 436,249
Administration fee payable (Note 2) ................... 109,062
Due to broker-variation margin ........................ 23,447
Accrued expenses and other liabilities ................ 464,689
--------------
427,160,277
--------------
NET ASSETS ............................................ $1,327,412,633
==============
Net assets were comprised of:
Common stock, at par (Note 5) ....................... $1,420,106
Paid-in capital in excess of par .................... 1,329,702,046
--------------
1,331,122,152
Undistributed net investment income ................. 96,988,672
Accumulated net realized loss ....................... (96,120,130)
Net unrealized depreciation ......................... (4,578,061)
--------------
Net assets, June 30, 2000 ........................... $1,327,412,633
==============
Net asset value per share:
($1,327,412,633 / 142,010,583 shares of
common stock issued and outstanding) ................ $9.35
=====

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 2000
--------------------------------------------------------------------------------

NET INVESTMENT INCOME
Income
Interest (net of premium amortization
of $7,606,966 and interest expense
of $30,708,835) ................................... $ 52,443,206
------------
Operating expenses
Investment advisory ................................. 5,306,891
Administration ...................................... 1,326,723
Legal ............................................... 340,000
Custodian ........................................... 303,000
Reports to shareholders ............................. 221,000
Independent accountants ............................. 128,500
Registration ........................................ 119,000
Transfer agent ...................................... 99,000
Directors ........................................... 75,500
Miscellaneous ....................................... 344,398
------------
Total operating expenses .......................... 8,264,012
------------
Net investment income before excise tax 44,179,194
Excise tax ......................................... 2,872,454
------------
Net investment income ............................... 41,306,740
------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investments ........................................ (18,497,839)
Caps ............................................... 923,902
Futures ............................................. (9,067,866)
Options written ..................................... 1,960,000
Short sales ......................................... (1,152,414)
Swaps ............................................... 6,281,583
------------
(19,552,634)
------------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................... 25,947,929
Caps ................................................ (1,981,177)
Futures ............................................. 1,925,484
Options written ..................................... (1,959,296)
Short sales ......................................... (6,331,239)
Swaps ............................................... 3,420,776
------------
21,022,477
------------
Net gain on investments ............................... 1,469,843
------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 42,776,583
============

See Notes to Consolidated Financial Statements.

11
<PAGE>

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------

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

Net increase in net assets resulting from
operations ....................................... $ 42,776,583
--------------
Decrease in investments ............................ 401,660,633
Net realized loss .................................. 19,552,634
Decrease in unrealized depreciation ................ (21,022,477)
Increase in unrealized appreciation on
credit default rate swaps ......................... (8,059)
Increase in unrealized appreciation on
interest rate swaps ............................... (3,412,717)
Decrease in interest receivable ..................... 2,182,438
Increase in receivable for investments sold ......... (64,819,603)
Increase in deposits with brokers for
investments sold short ............................ (142,677,500)
Decrease in other assets ............................ 613,874
Decrease in payable for investments purchased ....... (15,682,665)
Decrease in call options written .................... (704)
Increase in interest rate caps ...................... 2,855,419
Increase in payable for investments sold short ...... 138,457,645
Decrease in due to broker-variation margin .......... (1,196,724)
Decrease in dividends payable ....................... (250,206)
Increase in accrued expenses and other
liabilities ....................................... 86,877
--------------
Total adjustments ................................. 316,338,865
--------------
Net cash flows provided by operating
activities ........................................ $ 359,115,448
==============

INCREASE (DECREASE) IN CASH
Net cash flows provided by operating activities ..... $ 359,115,448
--------------
Cash flows used for financing activities:
Decrease in reverse repurchase agreements ......... (306,804,454)
Cash dividends paid ............................... (48,496,182)
--------------
Net cash flows used for financing activities ........ (355,300,636)
--------------
Net increase in cash ................................ 3,814,812
Cash at beginning of year ........................... 2,679
--------------
Cash at end of year ................................. $ 3,817,491
==============

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

JUNE 30, JUNE 30,
2000 1999
---------- ---------
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income ... $ 41,306,740 $ 75,700,234
Net realized loss ....... (19,552,634) (3,096,459)
Net change in unrealized
appreciation/depreciation 21,022,477 (33,884,583)
-------------- --------------
Net increase in net assets
resulting from operations 42,776,583 38,719,192
Dividends from net
investment income ....... (48,496,182) (56,746,965)
-------------- --------------
Total decrease ............ (5,719,599) (18,027,773)

NET ASSETS
Beginning of year ......... 1,333,132,232 1,351,160,005
-------------- --------------
End of year (including
undistributed net investment
income of $96,988,672 and
$98,497,981,
respectively) ........... $1,327,412,633 $1,333,132,232
============== ==============

See Notes to Consolidated Financial Statements.

<PAGE>

--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

YEAR ENDED JUNE 30,
------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year .............. $ 9.39 $ 9.51 $ 9.10 $ 8.68 $ 8.72
---------- --------- ---------- ---------- ----------
Net investment income (net of interest
expense of $0.22, $0.14,
$0.21, $0.25 and $0.22, respectively) ....... 0.29 0.54 0.56 0.62 0.58
Net realized and unrealized gain (loss) ......... 0.01 (0.26) 0.25 0.20 (0.17)
---------- --------- ---------- ---------- ----------
Net increase from investment operations ......... 0.30 0.28 0.81 0.82 0.41
---------- --------- ---------- ---------- ----------
Dividends from net investment income ............ (0.34) (0.40) (0.40) (0.40) (0.45)
---------- --------- ---------- ---------- ----------
Net asset value, end of year* ................... $ 9.35 $ 9.39 $ 9.51 $ 9.10 $ 8.68
========== ========= ========== ========== ==========
Market value, end of year* ...................... $ 9.13 $ 9.00 $ 8.81 $ 8.13 $ 7.63
========== ========= ========= ========== ==========
TOTAL INVESTMENT RETURN+ ........................ 5.31% 6.72% 13.59% 12.07% 7.83%
RATIOS TO AVERAGE NET ASSETS:
Operating expenses .............................. 0.63% 0.60% 0.59% 0.63% 0.64%
Operating expenses and interest expense ......... 2.95% 2.06% 2.80% 3.47% 3.17%
Operating expenses, interest expense and
excise taxes ................................. 3.17% 2.26% 2.95% 3.53% 3.17%
Net investment income ........................... 3.13% 5.58% 5.96% 7.04% 6.57%
SUPPLEMENTAL DATA:
Average net assets (in thousands) ............... $1,319,473 $1,356,648 $1,327,288 $1,261,766 $1,248,679
Portfolio turnover 74% 133% 307% 110% 216%
Net assets, end of year (in thousands) .......... $1,327,413 $1,333,132 $1,351,160 $1,292,884 $1,232,802
Reverse repurchase agreements outstanding,
end of year (in thousands) .................... $ 175,790 $ 482,594 $ 88,476 $ 595,783 $ 352,757
Asset coverage++ ................................ $ 8,551 $ 3,762 $ 16,271 $ 3,170 $ 4,495
</TABLE>

----------
* Net asset value and market value are published in BARRON'S on Saturday and
THE WALL STREET JOURNAL on Monday.
+ 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 each year reported. Dividends 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.

13
<PAGE>

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

NOTE 1. ORGANIZATION & ACCOUNTING

The BlackRock 2001 Term Trust Inc. (the "Trust"), a POLICIES Maryland
corporation, is a diversified, closed-end management investment company. The
primary investment objective of the Trust is to manage a portfolio of investment
grade fixed income securities that will return $10 per share to investors on or
about June 30, 2001. 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, 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. Short-term securities are valued at amortized cost. 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. At June 30, 2000 the Trust held three positions
that were valued at fair value which is significantly lower than their purchase
cost. Interest income in the Consolidated Statement of Operations for the year
ended June 30, 2000 includes a write down in the amount of $17,192,121. This
write down represents a reclarification of unrealized depreciation, and
accordingly the net asset value of the Trust was not affected.

REPURCHASE AGREEMENT: In connection with transactions in repurchase agreements,
the Trusts 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 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 exer-

14
<PAGE>

cised), 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.

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.

Credit default swaps involve the receipt or payment of fixed amounts at a
specified rate times the notional amount in exchange for the payment or receipt
of an amount only upon a credit event of the underlying security. See note 3 for
a summary of open swap agreements as of June 30, 2000.

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 Trusts 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 Trusts
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 Trusts 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.

<PAGE>

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

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

The Trust did not engage in securities lending during the year ended June 30,
2000.

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 Trusts
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 Trusts
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.

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

SECURITIES TRANSACTIONS AND NET INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Trust amortizes premium and accretes discount on
securities purchased using the interest method.

FEDERAL INCOME TAXES: It is the Trusts intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute sufficient 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

16
<PAGE>

sources, if necessary. Net long-term capital gains, if any, in excess of loss
carryforwards may be 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.

RECLASSIFICATION OF CAPITAL ACCOUNTS: The Trust accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect caused by
applying this statement was to decrease paid-in capital and increase
undistributed net investment income by $5,680,133 due to certain expenses not
being deductible for tax purposes. Net investment income, net realized gains and
net assets were not affected by this change.

ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 Advisors, Inc.
(the "Advisor"), a wholly-owned subsidiary of BlackRock, Inc., which in turn is
an indirect majority-owned subsidiary of PNC Financial Services Group, Inc. The
Trust has 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 Advisor is computed weekly and
payable monthly at an annual rate of 0.40% of the Trusts 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 Trusts average weekly net
assets.

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

NOTE 3. PORTFOLIO

Purchases and sales of SECURITIES investment securities, other than short-term
investments and dollar rolls, for the year ended June 30, 2000 aggregated
$1,184,192,553 and $1,640,858,809, 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, 2000, the Trust held
7.0% of its net assets in restricted securities.

The Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by affiliates such
as 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 Trusts investments at June 30, 2000 was
substantially the same as the basis for financial reporting and accordingly, net
unrealized appreciation for federal income tax purposes was $1,929,244 (gross
unrealized appreciation--$29,001,124; gross unrealized depreciation--
$27,071,880).

For federal income tax purposes, the Trust had a capital loss carryforward as
of June 30, 2000 of approximately $62,204,475 of which $13,482,818 will expire
in 2002, $947,956 will expire in 2003, $34,764,750 will expire in 2004,
$2,461,777 will expire in 2005, and $10,547,574 will expire in 2006.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amounts.

In addition, BLK Sudsidiary, Inc. had a capital loss carryforward as of
September 30, 1999 of approximately $6,754,096 of which $3,440,382 will expire
in 2006 and $3,313,714 will expire in 2007. Accordingly, no capital gains
distribution is expected to be paid to shareholder until net gains have been
realized in excess of such amounts.

17
<PAGE>

Details of open financial futures contracts at June 30, 2000, are as follows:

VALUE AT VALUE AT
NUMBER OF EXPIRATION TRADE JUNE 30, UNREALIZED
CONTRACTS TYPE DATE DATE 2000 APPRECIATION
-------- ----- -------- ------- ------- ---------------
Long position:
30 Yr. Sept.
150 T-Bond 2000 $14,424,038 $14,601,562 $177,524
========
Details of open interest rate caps at June 30, 2000 are as follows:
<TABLE>
<CAPTION>
NOTIONAL FIXED/ VALUE AT
AMOUNT FLOATING FLOATING TERMINATION AMORTIZED JUNE 30, UNREALIZED
(000) RATE RATE DATE COST 2000 DEPRECIATION
-------- --------- --------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sold:
$(300,000) 3 Yr. CMT 3 month LIBOR 6/08/01 $(475,875) $(2,046,654) $(1,570,780)
(200,000) 3 Yr. CMT 3 month LIBOR 8/12/01 (270,870) (1,611,412) 1,340,542)
----------- -----------
$(3,658,066) $(2,911,322)
=========== ===========
</TABLE>

Details of the interest rate swap held at June 30, 2000 are as follows:

NOTIONAL
AMOUNT FIXED FLOATING TERMINATION UNREALIZED
(000) TYPE RATE RATE DATE APPRECIATION
---------- -------- ----------- ---------- ----------- -------------
Purchased: Floating 3-month
$100,000 Rate 7.4659% LIBOR 2/14/10 $3,500,170
==========

Details of the open credit default swap at June 30, 2000 are as follows:

NOTIONAL
AMOUNT NET UNREALIZED
(000) TERMS APPRECIATION
------- ----- -------------------
Sold:
$(15,000) An agreement with Salomon Brothers International $8,059
Limited dated July 16, 1999 (trade date) to
receive 1.68% per year times the notional
amount. The fund makes a payment only upon a
credit event with respect to News America
Holdings, the referenced security in the
contract, of the notional amount. The scheduled
termination date is June 15, 2001.

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 Trusts 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, 2000, was approximately $400,608,260 at a weighted
average interest rate of approximately 5.38%. The maximum amount of reverse
repurchase agreements outstanding at any month-end during the year, was
$613,051,938 as of August 31, 1999 which was 27.93% 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 Trust did not enter into dollar rolls during the year ended June 30,
2000.

NOTE 5. CAPITAL

There are 200 million shares of $.01 par value common stock authorized. Of the
142,010,583 common shares out-standing at June 30, 2000, the Advisor owned
10,583 shares.

NOTE 6. DIVIDENDS

On June 30, 2000, the Board of Directors of the Trust declared dividends from
undistributed earnings of $0.004167 per share payable July 31, 2000 to
shareholders of record on July 14, 2000.

18
<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, 2000 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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, 2000, 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 accounting
principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP
-------------------------
Deloitte & Touche LLP

New York, New York
August 7, 2000

<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, 2000.

During the fiscal year ended June 30, 2000, the Trust paid dividends of
$0.34 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 2000 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 2000 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 2001.

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

20
<PAGE>

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

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 18, 2000 to vote on
the following matters:

(1) To elect two Directors as follows:

DIRECTORS CLASS TERM EXPIRING
-------- ------ ----- --------
Richard E. Cavanagh ................ I 3 years 2003
James Clayburn La Force, Jr. ....... I 3 years 2003

Directors whose term of office continues beyond this meeting are Andrew
F. Brimmer, Kent Dixon, Frank J. Fabozzi, Laurence D. Fink, 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 two Directors and ratified the selection of
Deloitte & Touche LLP. The results of the voting was as follows:

VOTES FOR VOTES AGAINST ABSTENTIONS
-------- ------------ ----------
Richard E. Cavanagh ............ 92,549,942 -- 10,352,271
James Clayburn La Force, Jr. ... 92,439,477 -- 10,462,736
Ratification of Deloitte
& Touche LLP ................. 101,774,404 500,813 626,996

<PAGE>
--------------------------------------------------------------------------------
THE BLACKROCK 2001 TERM TRUST INC.
INVESTMENT SUMMARY
--------------------------------------------------------------------------------

THE TRUST'S INVESTMENT OBJECTIVE

The BlackRock 2001 TermTrust Inc.'s primary 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.

WHO MANAGES THE TRUST?

BlackRock Advisors, Inc. (the "Advisor") is an SEC-registered investment
advisor. As of June 30, 2000, the Advisor and its affiliates (together,
"BlackRock") managed $177 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-two closed-end funds that are traded on either the New
York or American stock exchanges, and a $28 billion family of open-end funds.
BlackRock manages over 629 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 advisor 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 ADVISOR'S INVESTMENT STRATEGY?

The advisor 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 advisor 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 on or about June 30, 2001. At the Trust's
termination, the Advisor 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 order to maintain competitive yields as the Trust approaches maturity and
depending on market conditions, the advisor 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. 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 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.

<PAGE>

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.

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. The Advisor'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 the Advisor consider
that reduction to be in the best interest of shareholders.

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 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 up to 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.

23
<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 and FHLMC.

24
<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.

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

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 FNMA, FHLMC,
GNMA or FHA.

NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities and other assets held by the Trust,
plus income accrued on its investments, minus any
liabilities including accrued expenses, divided
by the total number of outstanding shares. It is
the underlying value of a single share on a given
day. Net asset value for the Trust is calculated
weekly and published in BARRON'S on Saturday and
THE WALL STREET JOURNAL 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.

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, FNMA
REMICs are formed as trusts and are backed by
mortgage-backed securities.

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

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

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

<PAGE>
--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
SUMMARY OF CLOSED-END FUNDS
--------------------------------------------------------------------------------

TAXABLE TRUSTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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 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
The BlackRock Pennsylvania Strategic Municipal Trust BPS N/A
The BlackRock Strategic Municipal Trust BSD 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
do not hesitate to call BlackRock at (800)
227-7BFM (7236) or consult with your
financial advisor.

<PAGE>

--------------------------------------------------------------------------------
BLACKROCK ADVISORS, INC.
AN OVERVIEW
--------------------------------------------------------------------------------

BlackRock Advisors, Inc. (the "Advisor") is an SEC-registered investment
advisor. As of June 30, 2000, the Advisor and its affiliates (together,
"BlackRock") managed $177 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-two
closed-end funds that are traded on either the New York or American stock
exchanges, and a $28 billion family of open-end funds. BlackRock manages over
629 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 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 ADVISORS
BlackRock Advisors, Inc.
400 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM

ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
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 ACCOUNTANTS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434

LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10022

LEGAL COUNSEL - INDEPENDENT DIRECTORS
Debevoise & Plimpton
875 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.
51 West 52nd Street
New York, NY 10019
Call toll free (800) 227-7BFM

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

THE BLACKROCK
2001 TERM TRUST INC.
--------------------------------------------------------------------------------
CONSOLIDATED
ANNUAL REPORT
JUNE 30, 2000

[GRAPHIC]