<PAGE> 1
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NATIONS GOVERNMENT INCOME
TERM TRUST 2004, INC.
S E M I
A N N U A L
R E P O R T
FOR THE PERIOD ENDED JUNE 30, 2000
NATIONS
GOVERNMENT
INCOME TERM
TRUST 2004
-------------------------------------------------------------------------------
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<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
NOT MAY LOSE VALUE
FDIC
INSURED NO BANK GUARANTEE
</TABLE>
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY BANK OF AMERICA , N.A. ("BANK OF AMERICA"), OR ANY OF
ITS AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN THE COMPANY INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
AFFILIATES OF BANK OF AMERICA PROVIDE INVESTMENT ADVISORY AND OTHER SERVICES TO
THE COMPANY, FOR WHICH THEY ARE COMPENSATED.
<PAGE> 3
NATIONS GOVERNMENT INCOME TERM TRUST 2004, INC.
DEAR SHAREHOLDER:
We welcome this opportunity to provide you with the semi-annual report for
Nations Government Income Term Trust 2004, Inc. (the "Company") for the
six-month period ending June 30, 2000, and to share our outlook for the near
term.
INVESTMENT OBJECTIVES
The Company is a closed-end investment company, and its shares are traded on the
New York Stock Exchange under the symbol "NGF." The Company's investment
objectives are to provide a high level of current income and to return $10 per
share (the initial public offering price per share) to shareholders on or about
February 28, 2004.
PORTFOLIO PERFORMANCE*
For the six-month period ending June 30, 2000, the Company distributed net
investment income of $0.285 per share. The June dividend was $0.0457 per share.
This dividend rate equates to an annualized yield of 5.48%, based on the initial
offering price of $10.00 per share, and a current annualized yield of 6.31%,
based upon the closing market price of $8.6875 per share on June 30, 2000. In
April, the dividend was adjusted downward to more closely align the amount paid
to shareholders with the net amount being earned by the Company on its portfolio
securities.
The net asset value of the Company's shares on June 30, 2000 was $9.58 per
share. The Company's total return for the six-month period was 3.58%, based on
net asset value at the end of the period.
MARKET ENVIRONMENT
The first half of the new year was marked by increased concern about the risks
of inflation and recession. Domestic growth was strong, resulting in fears of
inflation, and the Federal Reserve Board (the "Fed") continued to raise interest
rates in an effort to slow the growth rate to a more sustainable level. As a
result, uncertainty pervaded the financial markets, and yields on mortgages and
corporate bonds widened versus Treasuries. This widening was exacerbated by the
Treasury's announcement of a debt repurchase program in the first quarter. Under
the initial plan, longer maturity Treasury debt would be retired as the surplus
budget reduced the need for government financing. This impacted the yield curve
which inverted (shorter maturity securities yielded more than longer maturity
securities), and sent long-term Treasury bond yields lower, further widening
spreads. On a duration-adjusted basis, the mortgage sector turned in the best
performance among major fixed income spread sectors over the reporting period.
Interest rates dropped across all maturities longer than two years as the
Treasury buy back began. The yield on the 30-year Treasury fell to 5.90%, while
the yield on the 2-year note rose to 6.36%. Yields on spread sector securities,
such as mortgages and corporates, were not able to keep pace with the decline in
Treasury yields, and spreads widened in excess of 40 basis points. Late in the
second quarter, the market began embracing the notion that the Fed could
engineer another "soft landing" as economic data showed the economy was slowing.
As it became more apparent that the economy could downshift to a more
sustainable pace, the corporate bond and mortgage securities markets improved
and spreads contracted with the improvement in investor confidence.
MARKET OUTLOOK
The bond market has begun to embrace the notion of another "soft landing." As
this recognition unfolds, we expect to see spread sectors continue the
improvement begun in June 2000. Once again, the Fed has gained credibility by
being out in front sufficiently to head off excesses that could lead to a
sustained pickup in inflation and eventual recession. We expect continued
moderation of growth for the remainder of this year and into 2001, settling in
at the 3-3.5% GDP
---------------
*THE PAST PERFORMANCE QUOTED IS NOT AN INDICATION OF FUTURE RESULTS.
1
<PAGE> 4
(gross domestic product) zone, with yields being range bound for the rest of
this year. We believe the environment is a good one for spread sectors, and we
look for improvement in mortgage and agency performance ahead.
We thank you for your continued support.
Sincerely,
/s/ Robert H. Gordon
Robert H. Gordon
President
June 30, 2000
P.S. On June 22, 2000, the Company's Board of Directors reduced the dividend
rate to $0.039 per share to further align the amounts paid to shareholders
with the net amount of income earned by the Company on its portfolio
securities. This rate took effect starting with the July dividend.
2
<PAGE> 5
Nations Government Income Term Trust 2004, Inc.
STATEMENT OF NET ASSETS JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES -- 47.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 13.1%
GOLD:
$ 1,792 5.500% 06/01/03..................... $ 1,720
4,357 6.000% 08/01/03..................... 4,195
423 8.000% 11/01/03..................... 424
REMIC:
295 Series 1489 VB, CMO, SUP, Inverse
Floater,
4.945%** 10/15/07................... 275
2,942 Series 1544 SA, CMO, TAC, Inverse
Floater,
4.713%** 07/15/08................... 2,855
1,042 Series 1550 SD, CMO, TAC, Inverse
Floater,
3.964%** 07/15/08................... 946
213 Series 1644 NB, PAC, Inverse Floater,
3.725%** 12/15/23................... 191
5,115 Series 1693 SC, CMO, TAC, Inverse
Floater,
3.725%** 03/15/09................... 4,316
--------
14,922
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 34.5%
REMIC:
348 Certificate 92-150 SU, CMO, PAC,
Inverse Floater,
5.235%** 05/25/21................... 345
20,000 Certificate 92-193 HD, CMO, PAC,
7.000% 11/25/07..................... 19,761
1,645 Certificate 93-12 ED, CMO, AD,
7.500% 02/25/06..................... 1,633
Certificate 93-179 SG, TAC, Inverse
564 Floater,
2.966%** 10/25/23...................
536
494 Certificate 93-202 VB, PAC, Inverse
Floater,
3.424%** 11/25/23................... 427
547 Certificate 93-214 SP, CMO, PAC,
Inverse Floater,
2.555%** 12/25/08................... 533
985 Certificate 93-231 SA, CMO, SCH,
Inverse Floater,
2.531%** 12/25/08................... 873
3,624 Certificate 93-247 SK, CMO, AD,
Inverse Floater,
6.278%** 02/25/23................... 3,449
9,166 Certificate 94-82 B, CMO, TAC,
8.000% 03/25/17..................... 9,178
2,693 Certificate G93-32 H, CMO, AD,
6.750% 09/25/03..................... 2,660
--------
39,395
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $56,142)...................... 54,317
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 13.4%
ILLINOIS -- 2.8%
$ 3,845 University of Illinois, Revenue Bonds,
Auxiliary Facilities, Series 1991,
(AMBAC Insured),
5.050%*** 04/01/04.................. $ 3,183
--------
KENTUCKY -- 1.5%
2,000 Kentucky State Turnpike Authority,
Economic Development Revenue,
Capital Appreciation, Series 1992,
(FGIC Insured),
5.080%*** 01/01/04.................. 1,679
--------
TEXAS -- 8.0%
3,340 Conroe, Texas, Independent School
District, GO, Capital Appreciation,
Series 1993, (PSFG Insured),
5.500%*** 02/01/04.................. 2,788
2,080 Lower Colorado River Authority, Texas,
Revenue Bonds, Capital Appreciation,
Series 1991B, (AMBAC Insured),
5.450%*** 01/01/04.................. 1,746
2,500 San Antonio, Texas, Electric & Gas
Revenue, Capital Appreciation,
Series 1989A, (AMBAC Insured),
5.033%*** 02/01/04.................. 2,087
3,165 Texas State, GO, Capital Appreciation,
Series 1992, (FGIC Insured),
5.160%*** 04/01/04.................. 2,624
--------
9,245
--------
WASHINGTON -- 1.1%
1,500 Washington State, Public Power Supply
System Revenue, Series 1990,
(MBIA-IBC Insured),
5.300%*** 07/01/04.................. 1,225
--------
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $15,230).................... 15,332
--------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 20.9%
FEDERAL HOME LOAN BANK (FHLB) -- 3.3%
4,000 5.100% 02/05/04..................... 3,755
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 11.1%
13,400 5.625% 02/20/04..................... 12,712
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 6.5%
6,800 5.940% 01/27/03..................... 6,586
781 7.000% 08/01/03..................... 773
--------
7,359
--------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(Cost $24,864)...................... 23,826
--------
U.S. TREASURY OBLIGATIONS -- 8.0%
(Cost $8,929)
U.S. TREASURY NOTES -- 8.0%
9,220 5.875% 02/15/04..................... 9,098
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
Nations Government Income Term Trust 2004, Inc.
STATEMENT OF NET ASSETS (CONTINUED) JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS -- 9.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 2.1%
$ 1,459 Discount note 07/05/00................ $ 1,458
1,000 Discount note 09/08/00................ 988
--------
2,446
--------
U.S. TREASURY BILLS -- 7.0%
8,025 Discount note 09/28/00................ 7,914
--------
TOTAL SHORT TERM INVESTMENTS
(Cost $10,358)...................... 10,360
--------
TOTAL INVESTMENTS
(Cost $115,523*)............... 99.0% 112,933
--------
OTHER ASSETS AND LIABILITIES
(NET)........................ 1.0%
Cash.................................. $ 223
Receivable for investment securities
sold................................ 7,758
Interest receivable................... 1,154
Payable for Fund shares redeemed...... (46)
Administration fee payable............ (5)
Payable for investment securities
purchased........................... (7,911)
Accrued expenses and other
liabilities......................... (86)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... 1,087
--------
NET ASSETS..................... 100.0% $114,020
========
NET ASSETS CONSIST OF:
Undistributed net investment income... $ 3,121
Accumulated net realized loss on
investments sold.................... (818)
Net unrealized depreciation of
investments......................... (2,590)
Paid-in capital....................... 114,307
--------
NET ASSETS............................ $114,020
========
Net asset value per share
($114,019,827/ 11,898,206 shares of
common stock outstanding)........... $9.58
========
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $2,590 on
investment securities was comprised of gross appreciation of $455 and gross
depreciation of $3,045 for Federal income tax purposes. At June 30, 2000, the
aggregate cost of securities for Federal income tax purposes was $115,523.
** Variable rate note. The interest rate shown reflects the rate in effect at
June 30, 2000.
*** Zero Coupon Security. The rate shown is the effective yield at date of
purchase.
ABBREVIATIONS:
<TABLE>
<S> <C>
AD Accretion Directed
AMBAC American Municipal Bond Assurance Corporation
CMO Collateralized Mortgage Obligation
FGIC Financial Guaranty Insurance Company
MBIA-IBC Municipal Bond Insurance Association -- Insured
Bond Certificate
PAC Planned Amortization Class
PSFG Permanent School Fund Guaranteed
REMIC Real Estate Mortgage Investment Conduit
SCH Scheduled Pay Bond
SUP Support Bond
TAC Targeted Amortization Class
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
Nations Government Income Term Trust 2004, Inc.
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 (unaudited)
<TABLE>
<S> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $ 3,607
--------------
EXPENSES:
Investment advisory fee..................................... 283
Administration fee.......................................... 142
Transfer agent fees......................................... 25
Legal and audit fees........................................ 29
Custodian fees.............................................. 4
Directors' fees and expenses................................ 4
Other....................................................... 13
--------------
Total expenses.......................................... 500
Fees waived by investment advisor and administrator......... (396)
Fees reduced by credits allowed by the custodian............ (4)
--------------
Net expenses............................................ 100
--------------
NET INVESTMENT INCOME....................................... 3,507
--------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... 80
Net change in unrealized appreciation/(depreciation) of
investments............................................... 4
--------------
Net realized and unrealized gain/(loss) on investments...... 84
--------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 3,591
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
Nations Government Income Term Trust 2004, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
6/30/00 YEAR ENDED
(UNAUDITED) 12/31/99
------------------------------
<S> <C> <C>
(IN THOUSANDS)
Net investment income....................................... $ 3,507 $ 7,637
Net realized gain/(loss) on investments..................... 80 726
Net change in unrealized appreciation/(depreciation) of
investments............................................... 4 (6,778)
-------------- --------------
Net increase/(decrease) in net assets resulting from
operations................................................ 3,591 1,585
Distributions to shareholders from net investment income.... (3,425) (7,274)
Net increase/(decrease) in net assets from Fund share
transactions.............................................. (1,578) (3,258)
-------------- --------------
Net increase/(decrease) in net assets....................... (1,412) (8,947)
NET ASSETS:
Beginning of period......................................... 115,432 124,379
-------------- --------------
End of period............................................... $ 114,020 $ 115,432
============== ==============
Undistributed net investment income/(distributions in excess
of net investment income) at end of period................ $ 3,121 $ 3,040
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Government Income Term Trust 2004, Inc.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/00+ ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/99+ 12/31/98+ 12/31/97+ 12/31/96+ 12/31/95
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 9.56 $ 10.00 $ 9.73 $ 9.27 $ 8.86 $ 7.62
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... 0.30 0.62 0.65 0.74 0.72 0.66
Net realized and unrealized
gain/(loss) on investments........ (0.01) (0.49) 0.19 0.29 (0.33) 1.23
-------- -------- -------- -------- -------- --------
Net increase/(decrease) in net
assets resulting from investment
operations........................ 0.29 0.13 0.84 1.03 0.39 1.89
Distributions:
Dividends from net investment
income............................ (0.29) (0.59) (0.59) (0.61) (0.65) (0.64)
Distributions in excess of net
investment income................. -- -- -- -- -- (0.01)
-------- -------- -------- -------- -------- --------
Total distributions................. (0.29) (0.59) (0.59) (0.61) (0.65) (0.65)
-------- -------- -------- -------- -------- --------
Increase from repurchase of common
shares............................ 0.02 0.02 0.02 0.04 0.04 --
Increase due to capital
contribution...................... -- -- -- -- 0.63 --
-------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 9.58 $ 9.56 $ 10.00 $ 9.73 $ 9.27 $ 8.86
======== ======== ======== ======== ======== ========
Market value, end of period......... $ 8.687 $ 8.875 $ 9.438 $ 8.813 $ 8.000 $ 8.000
======== ======== ======== ======== ======== ========
Total return++...................... 1.05% 0.24% 14.27% 18.24% 8.27% 26.29%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $114,020 $115,432 $124,379 $124,403 $125,573 $124,388
Ratio of operating expenses to
average net assets................ 0.18%* 0.21% 0.26% 0.27% 0.29% 0.56%
Ratio of operating expenses to
average net assets without fees
reduced by credits allowed by the
custodian......................... 0.19%* 0.22% 0.28% 0.28% 0.30% 0.57%
Ratio of net investment income to
average net assets................ 6.19%* 6.36% 6.56% 7.86% 8.01% 7.97%
Portfolio turnover rate............. 83% 26% 39% 11% 4% 88%
Ratio of operating expenses to
average net assets without
waivers, expenses reimbursed
and/or fees reduced by credits
allowed by the custodian.......... 0.89%* 0.92% 1.00% 0.99% 1.01% 1.09%
</TABLE>
---------------
* Annualized.
+ Per share net investment income has been calculated using the monthly average
shares method.
++ Total return represents aggregate total return for the period based on market
value at period end.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
Nations Government Income Term Trust 2004, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Nations Government Income Term Trust 2004, Inc. (the "Company") was incorporated
under the laws of the State of Maryland on November 3, 1993, and is registered
with the Securities and Exchange Commission as a diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended. The Company commenced operations on February 28, 1994.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of the significant accounting policies followed by the Company in the
preparation of its financial statements.
Securities valuation: The Company's securities are valued using prices provided
by a pricing service, which may be based on a matrix system which considers such
factors as security prices, yields and maturities. The value of mortgage-backed
securities can be significantly affected by changes in interest rates.
Restricted securities, securities for which market quotations are not readily
available and certain other assets may be valued under procedures adopted by the
Board of Directors. Certain securities may be valued by one or more principal
market makers. Short-term investments that mature in 60 days or less are valued
at amortized cost, which approximates current value.
Securities transactions and investment income: Securities transactions are
accounted for on trade date. Realized gains or losses are computed based on the
specific identification of securities sold. Interest income, adjusted for
accretion of discounts and amortization of premiums, is earned from settlement
date and is recorded on an accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. The Company instructs its custodian to establish a
segregated account in which it will maintain cash or U.S. government securities
or other high grade debt securities at least equal in value to its commitments
for such securities.
Inverse floating rate obligations: Inverse floating rate obligations ("inverse
floaters") are tranches of a REMIC or CMO with an interest rate that moves
inversely to a specified index. The interest rate, which is adjusted
periodically, is based on a formula incorporating a specific index times a
multiplier, plus or minus a spread over the index. The value and related
unrealized and realized gain or loss (due to changes in interest rates) on an
inverse floater can be much more volatile than other debt securities because of
the inverse floater's multiple to the index.
Dividends and distributions to shareholders: It is the policy of the Company to
declare and pay distributions from net investment income monthly to
shareholders. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
Federal income tax: The Company intends to continue to qualify as a regulated
investment company by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
taxable earnings to its shareholders. Therefore, no provision is made for
Federal income or excise taxes.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND OTHER
RELATED PARTY TRANSACTIONS
The Company has entered into an investment advisory agreement with Banc of
America Advisors, Inc. ("BAAI"), a wholly-owned subsidiary of Bank of America,
N.A. ("Bank of America"), which in turn is a wholly-owned banking subsidiary of
Bank of America Corporation, a bank holding company organized as a Delaware
corporation. Pursuant to the investment advisory agreement, the Company pays
BAAI a monthly fee equal to an annual rate of 0.50% of the Company's average
weekly net assets. For the six months ended June 30, 2000, BAAI voluntarily
waived all of its fees.
The Company and BAAI have entered into a sub-advisory agreement with Banc of
America Capital Management, Inc. ("BACAP") (formerly known as TradeStreet
Investment Associates, Inc.), a wholly-owned subsidiary of Bank of America,
pursuant to which BACAP is entitled to receive a sub-advisory fee from BAAI at
an annual rate of 0.15% of the Company's average weekly net assets. For the six
months ended June 30, 2000, BACAP voluntarily waived all of its fees.
8
<PAGE> 11
Nations Government Income Term Trust 2004, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
BAAI is also the Company's administrator. In its role as administrator, BAAI
supervises the Company's overall day-to-day operations and provides certain
administrative services. BAAI also maintains certain of the Company's books and
records and furnishes, at its own expense, such clerical assistance, bookkeeping
and other administrative services as the Company may reasonably require in the
conduct of its business. As compensation for both the administrative services
and the expenses assumed by BAAI, the Company pays BAAI a monthly fee equal to
an annual rate of 0.25% of the Company's average weekly net assets. For the six
months ended June 30, 2000, BAAI voluntarily waived administration fees of
$113,242.
The Bank of New York ("BNY") serves as sub-administrator of the Company pursuant
to an agreement with BAAI and provides certain administrative services in
support of the operations of the Company. The fees of BNY are paid out of the
fees paid to BAAI by the Company for administration services.
PFPC Inc. ("PFPC") serves as the transfer agent and dividend disbursing agent
for the Company.
BNY also serves as the custodian of the Company's assets. For the six months
ended June 30, 2000, expenses of the Company were reduced by $4,011 under
expense offset arrangements with BNY. The Company could have invested a portion
of the assets utilized in connection with the expense offset arrangements in an
income producing asset if they had not entered into such arrangements.
No officer, director or employee of Bank of America, BAAI or BACAP or any
affiliate thereof, receives any compensation from the Company for serving as a
Director or Officer of the Company.
3. SECURITIES TRANSACTIONS
For the six months ended June 30, 2000, the cost of purchases and proceeds from
sales of long-term U.S. government securities aggregated $92,800,625 and
$102,156,812, respectively.
4. COMMON STOCK
At June 30, 2000, 1,000,000,000 shares of common stock, $0.001 par value, were
authorized.
The Board of Directors of the Company has approved a stock repurchase plan that
gives the Company the flexibility to engage in repurchases of its outstanding
common stock. Accordingly, shareholders are notified that, from time to time,
the Company may purchase shares of its common stock in an open market when
management believes that such purchases are appropriate in light of market
conditions, including the presence of a market discount. For the six months
ended June 30, 2000 and the year ended December 31, 1999, the Company
repurchased shares of its common stock in the open market at an average discount
of approximately 7% for each period from its net asset value. All repurchased
shares have been retired by the Company.
9
<PAGE> 12
Nations Government Income Term Trust 2004, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Common stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
6/30/00 12/31/99
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------
<S> <C> <C> <C> <C>
Shares repurchased by the Company.................... (179,000) $(1,577,719) (358,300) $(3,257,790)
-------- ----------- -------- -----------
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of December 31, 1999, the Company had available for Federal income tax
purposes a capital loss carryforward of $1,036,843 expiring in the year 2003.
The Company utilized $228,144 of capital loss carryforward during that year.
10
<PAGE> 13
Nations Government Income Term Trust 2004, Inc.
DIVIDEND REINVESTMENT PLAN
The Company's Dividend Reinvestment Plan (the "Plan") offers an automatic way to
reinvest dividends and capital gains distributions in shares of the Company.
PARTICIPATION
Shareholders of record will receive their dividends in cash unless they have
otherwise instructed PFPC (the "Plan Agent"), acting as agent for each
participant in the Plan, in writing. Such a notice must be received by the Plan
Agent not less than 5 business days prior to the record date for a dividend or
distribution in order to be effective with respect to that dividend or
distribution. A notice which is not received by that time will be effective only
with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all distributions
by check mailed directly to the shareholder by PFPC, as dividend paying agent.
For Federal income tax purposes, dividends are treated as income or capital
gains, regardless of whether they are received in cash or reinvested in
additional shares.
Participants may terminate their participation in the Plan by written notice to
the Plan Agent. If the written notice is received at least 5 business days
before the record date of any distribution, it will be effective immediately. If
received after that date, it will be effective as soon as possible after the
reinvestment of the dividend or distribution.
PRICING OF DIVIDENDS AND DISTRIBUTIONS
Whenever the Company's Board of Directors declares a dividend or other
distribution payable in cash or, at the option of the Plan Agent, in shares of
capital stock issued by the Company, the Plan Agent will elect, on behalf of the
participants, to receive the dividend in authorized but unissued shares of
capital stock if the net asset value per share (as determined by the investment
advisor of the Company as of the close of business on the record date for the
dividend or distribution) is equal to or less than 95% of the closing market
price per share of the capital stock of the Company on the New York Stock
Exchange (the "Exchange") on such record date plus estimated brokerage
commissions. The number of such authorized but unissued shares to be credited to
a participant's account will be determined as of the close of business on the
record date for the dividend, by valuing such shares at the greater of the net
asset value per share or 95% of the market price per share. The Plan Agent will
credit each participant's account with the number of shares corresponding in
value, as determined under the foregoing formula, to the amount such participant
would have received in cash had such participant not elected to participate in
this Plan.
If the net asset value per share is equal to or less than the closing market
price per share of the capital stock of the Company on the Exchange on such
record date plus estimated brokerage commissions but exceeds 95% of such closing
market price plus estimated brokerage commissions, the Plan Agent may elect, on
behalf of all participants, (i) to take the dividend in cash and as soon as
practicable thereafter, consistent with obtaining the best price and execution,
proceed to purchase in one or more transactions the shares of capital stock in
the open market, at the then current price as hereinafter provided, and will
credit each participant's account with the number of shares corresponding in
value, as determined by the price actually paid on the open market for such
shares including brokerage expenses, to the amount such participant would have
received in cash had such participant not elected to participate in this Plan or
(ii) to receive the dividend in authorized but unissued shares of capital stock,
in which case the Plan Agent will credit each participant's account with the
number of shares corresponding in value (determined by valuing such shares at
the greater of the net asset value per share or 95% of the market price per
share, in each case as of the close of business on the record date for the
dividend or distribution) to the amount such participant would have received in
cash had such participant not elected to participate in this Plan.
If the net asset value per share is higher than the closing market price per
share of the capital stock on the Exchange including estimated brokerage
commissions on such record date, the Plan Agent will elect to take the dividend
in cash and as soon as practicable, consistent with obtaining the best price and
execution, the Plan Agent will proceed to purchase in one or more transactions
the shares of capital stock in the open market, at the then current price as
hereinafter provided. Each participant's account will be credited with the
number of shares corresponding in value, as determined by the price actually
paid on the open market for such shares including brokerage expenses, to the
amount such participant would have received in cash had such participant not
elected to participate in this Plan. Under such circumstances, in anticipation
of receipt of a dividend in cash, the Plan Agent may purchase shares in
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Nations Government Income Term Trust 2004, Inc.
DIVIDEND REINVESTMENT PLAN (CONTINUED)
the open market during the period between the record date and the payable date
for the dividend or distribution. The Plan has been amended to specifically
authorize such anticipatory purchases.
If the Plan Agent elects to purchase shares in the open market, and if before
the Plan Agent has completed its purchases the market price exceeds the net
asset value per share, the average per share purchase price paid by the Plan
Agent may exceed the net asset value of the Company's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Company. During certain market conditions, it may be
impracticable or impossible to complete a market purchase program at prices that
are below or not substantially in excess of net asset value, and, in such event,
the Company may, in its discretion, issue the required shares.
NO SERVICE FEE TO REINVEST
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Company. There will be no brokerage commissions with respect to
shares issued directly by the Company as a result of dividends or capital gains
distributions payable either in stock or cash. However, participants 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 any
dividends or capital gains distributions payable only in cash.
PLAN AGENT ADDRESS AND TELEPHONE NUMBER
You may obtain more detailed information by requesting a copy of the Plan from
the Plan Agent. All correspondence (including notifications) should be directed
to: Nations Government Income Term Trust 2004, Inc., Dividend Reinvestment Plan,
c/o PFPC Inc., P.O. Box 34602, Charlotte, NC 28234, 1.800.982.2271.
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Nations Government Income Term Trust 2004, Inc.
ANNUAL MEETING OF STOCKHOLDERS
ANNUAL MEETING OF STOCKHOLDERS
On April 27, 2000, the Company held its Annual Meeting of Stockholders. A. Max
Walker was elected as a director of the Company by the following votes:
11,241,269 For, 117,333 Withheld. In the only other matter voted upon at the
Annual Meeting, the selection of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending December 31, 2000, was
ratified by the following votes: 11,301,649 For, 22,938 Against, 34,016
Withheld.
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PO Box 34602
Charlotte, NC 28254-4602
Toll Free 1.800.321.7854
2004SAR 06/00
