<PAGE> 1
NATIONS BALANCED TARGET
MATURITY FUND, INC.
S E M I
A N N U A L
R E P O R T
For the Period Ended September 30, 1995
Nations
Balanced
Target
Maturity Fund
<PAGE> 2
<TABLE>
- ------------------------------------------------------------------------------------
| <S> | <C> |
| NOT | MAY LOSE VALUE |
| FDIC - | |
| INSURED | NO BANK GUARANTEE |
- ------------------------------------------------------------------------------------
</TABLE>
Nations Fund Distributor: Stephens Inc. Stephens Inc., which is not affiliated
with NationsBank, is not a bank and securities offered by it are not guaranteed
by any bank or insured by the FDIC.
Stephens Inc., member NYSE-SIPC.
Nations Fund Investment Adviser: NationsBank. NationsBank is the Investment
Adviser and Administrator to the Fund, for which it is compensated.
<PAGE> 3
NATIONS BALANCED TARGET MATURITY FUND, INC.
DEAR SHAREHOLDER:
We are pleased to provide you with this semiannual report for Nations
Balanced Target Maturity Fund, Inc. (the "Company") for the six-month period
ended September 30, 1995.
INVESTMENT OBJECTIVE
The Company, which trades on the New York Stock Exchange under the symbol
"NBM," is a closed-end diversified management investment company. For
shareholders of the Company who purchased shares during the initial public
offering and have reinvested all dividends, the objective remains to return at
least the principal investment on September 30, 2004. In addition, for all
shareholders, the Company seeks long-term growth with income as a secondary
consideration.
PORTFOLIO PERFORMANCE AND ASSET ALLOCATION
The Company continued to pursue its long-term objective over this six-month
period by continuing to invest a portion of its assets in Zero Coupon U.S.
Treasury Obligations and the balance of assets in equities.
For the six-month period ended September 30, 1995, the Company distributed
$0.21 of ordinary income per share to its shareholders. As of September 30,
1995, 51.6% of the Company's portfolio was invested in Zero Coupon U.S. Treasury
Obligations, and 45.0% was invested in common stocks, with the remaining 3.4% in
repurchase agreements. A breakdown of portfolio holdings by asset type follows.
PORTFOLIO BREAKDOWN AS OF SEPTEMBER 30, 1995
[PIE CHART]
INVESTMENT PHILOSOPHY
The equity portion of the Company is invested under the philosophy that
value may be represented in all sectors of the market and that by investing in
those companies that the Company's investment adviser believes represent the
best value in each sector, the Company can seek to deliver above-average
performance with below-average risk over a market cycle. Consequently, the
portfolio is broadly diversified across many economic sectors, although certain
sectors may be modestly over- or underweighted relative to the S&P 500 from time
to time.
The emphasis in stock selection will continue to be on "bottom up" analysis
of individual company fundamentals. When evaluating specific equity investment
alternatives, the key investment criteria include a low price-to-earnings ratio,
strong financial quality and a catalyst for improved price performance.
Catalysts for improved performance typically come in the way of improving
earnings estimates, changes in management, new product developments or corporate
restructurings.
MARKET ENVIRONMENT AND PORTFOLIO STRATEGY
Over the past six months, the Federal Reserve Board has been modestly
reducing interest rates based on slowing economic growth and relatively low
levels of inflation. This decline in interest rates proved favorable for both
the equity and fixed income portions of the portfolio and served to enhance
Company performance over the period.
1
<PAGE> 4
The Company reduced its exposure to the economically sensitive sectors of
the market over the past six months as valuations became less compelling. The
Company's cyclical stocks, including holdings in automobile manufacturers and
machinery companies, outperformed the S&P 500 earlier in the year as interest
rates declined. The combination of price appreciation and reduced expectations
for earnings due to slowing economic growth prompted the Company's investment
adviser to reduce the Company's holdings in these areas. The proceeds of these
sales were used to increase the Company's positions in the traditionally more
defensive sectors of the market, including energy and electric utilities. The
Company's investment adviser believes that these sectors presently offer
attractive valuations, above average dividend yields and the prospects for
improving long-term earnings growth.
The energy sector should benefit from internal restructuring steps such as
reduction of costs and consolidation of operations. The electric utility
industry is undergoing regulatory changes that should boost the long-term
earnings prospects of the more favorably positioned companies. The Company
remains overweighted in the defense sector based on attractive market valuations
and the prospects for further earnings gains from the redeployment of excess
cash flow.
In closing, we believe that the Company remains on track as it seeks to
meet its objectives. We are pleased to have this opportunity to discuss the
economic conditions that have had an impact on the Company's performance and to
share our investment strategy and outlook for the near term. Thank you for
choosing Nations Balanced Target Maturity Fund, Inc. to pursue your investment
goals.
Sincerely,
[LOGO Mark H. Williamson]
Mark H. Williamson
President
September 30, 1995
2
<PAGE> 5
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------------------------------------
COMMON STOCKS -- 45.2%
AEROSPACE AND DEFENSE -- 1.9%
5,700 Lockheed Martin Corporation......................................... $ 382,613
3,400 Raytheon Company.................................................... 289,000
8,800 Rockwell International Corporation.................................. 415,800
----------
1,087,413
----------
AUTOMOBILE -- 0.3%
6,100 Ford Motor Company.................................................. 189,862
----------
AUTOMOTIVE ACCESSORIES -- 1.7%
3,800 Eaton Corporation................................................... 201,400
3,600 Echlin Inc. ........................................................ 128,700
7,200 Genuine Parts Company............................................... 288,900
8,600 Goodyear Tire & Rubber Company...................................... 338,625
----------
957,625
----------
BEVERAGES -- 1.4%
6,900 Anheuser-Busch Companies, Inc. ..................................... 430,388
6,800 PepsiCo Inc. ....................................................... 346,800
----------
777,188
----------
BUSINESS EQUIPMENT -- 1.8%
9,100 AMP Inc. ........................................................... 350,350
4,700 International Business Machines Corporation......................... 443,562
5,800 Pitney Bowes Inc. .................................................. 243,600
----------
1,037,512
----------
CHEMICALS -- BASIC -- 1.2%
3,800 du Pont (E.I.) deNemours & Company.................................. 261,250
9,300 PPG Industries Inc. ................................................ 432,450
----------
693,700
----------
CHEMICALS -- SPECIALTY -- 0.7%
12,700 Lubrizol Corporation................................................ 414,338
----------
DIVERSIFIED HEALTHCARE -- 1.2%
6,400 Becton, Dickinson & Company......................................... 402,400
17,400 Tenet Healthcare Corporation........................................ 302,325
----------
704,725
----------
DIVERSIFIED HOLDING COMPANY -- 0.5%
17,100 Hanson plc, ADR..................................................... 277,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
DOMESTIC PETROLEUM -- 1.1%
8,200 Ashland Inc. ....................................................... $ 273,675
9,000 Murphy Oil Corporation.............................................. 360,000
----------
633,675
----------
DRUGS -- 2.6%
10,000 Abbott Laboratories................................................. 426,250
8,500 Bausch & Lomb Inc. ................................................. 351,688
5,900 Bristol-Myers Squibb Company........................................ 429,963
5,500 Schering-Plough Corporation......................................... 283,250
----------
1,491,151
----------
ELECTRICAL EQUIPMENT -- 1.5%
4,200 General Electric Company............................................ 267,750
9,000 General Signal Corporation.......................................... 263,250
5,900 Minnesota Mining & Manufacturing Company............................ 333,350
----------
864,350
----------
ELECTRONIC COMPONENTS -- 3.2%
5,200 Avnet, Inc. ........................................................ 268,450
16,700 EMC Corporation+ ................................................... 302,688
5,200 Harris Corporation.................................................. 285,350
4,200 Intel Corporation................................................... 252,525
3,600 Texas Instruments Inc. ............................................. 287,550
3,100 Xerox Corporation................................................... 416,562
----------
1,813,125
----------
ENERGY -- 0.6%
14,300 Dresser Industries Inc. ............................................ 341,413
----------
FINANCE -- 0.4%
10,400 Paine Webber Group Inc. ............................................ 205,400
----------
FOOD -- 0.6%
5,200 Hershey Foods Corporation........................................... 334,750
----------
FOREIGN PETROLEUM -- 1.5%
4,400 Exxon Corporation................................................... 317,900
4,300 Royal Dutch Petroleum Company, ADR.................................. 527,825
----------
845,725
----------
HEALTH AND BEAUTY -- 0.4%
8,200 Dial Corporation.................................................... 202,950
----------
HEALTHCARE PRODUCTS -- 0.6%
7,400 Rhone-Poulenc Rorer................................................. 336,700
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
HOUSEHOLD PRODUCTS -- 1.1%
4,200 Clorox Company...................................................... $ 299,775
3,300 First Brands Corporation............................................ 148,500
13,100 Sunbeam-Oster Inc. ................................................. 194,863
----------
643,138
----------
INDUSTRIAL CONGLOMERATES -- 2.2%
3,600 ITT Corporation..................................................... 446,400
3,600 Premark International Inc. ......................................... 183,150
9,200 Trinity Industries Inc. ............................................ 285,200
4,300 TRW Inc. ........................................................... 319,812
----------
1,234,562
----------
INSURANCE -- 2.3%
4,400 American International Group, Inc. ................................. 374,000
1,700 General Re Corporation.............................................. 256,700
7,500 Lincoln National Corporation........................................ 353,438
3,500 Marsh & McLennan Companies Inc. .................................... 307,563
----------
1,291,701
----------
INTERNATIONAL OIL -- MULTINATIONAL -- 2.3%
5,300 Amoco Corporation................................................... 339,862
4,500 Chevron Corporation................................................. 218,813
3,900 Mobil Corporation................................................... 388,537
5,200 Texaco Inc. ........................................................ 336,050
----------
1,283,262
----------
LONG DISTANCE -- 1.5%
5,700 AT&T Corporation.................................................... 374,775
14,200 Sprint Corporation.................................................. 497,000
----------
871,775
----------
PAPER AND FOREST PRODUCTS -- 0.6%
5,900 Mead Corporation.................................................... 345,887
----------
PRODUCER GOODS -- MACHINERY -- 0.8%
10,500 Briggs & Stratton Corporation....................................... 422,625
----------
REGIONAL BANKS -- 1.7%
4,600 Chemical Banking Corporation........................................ 280,025
4,700 First Chicago Corporation........................................... 322,538
8,000 Mellon Bank Corporation............................................. 357,000
----------
959,563
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
RETAIL -- 1.6%
5,000 Federated Department Stores Inc.+ .................................. $ 141,875
8,600 May Department Stores Company....................................... 376,250
7,800 Penney (J.C.) Inc. ................................................. 387,075
-----------
905,200
-----------
RETAIL -- SPECIALTY -- 0.5%
9,000 Circuit City Stores Inc. ........................................... 284,625
-----------
TELECOMMUNICATIONS -- 1.3%
11,600 Communications Satellite Corporation, Series 1...................... 261,000
10,000 General Instrument Corporation+ .................................... 300,000
2,900 SBC Communications.................................................. 159,500
-----------
720,500
-----------
TELEPHONE -- 1.1%
3,200 BellSouth Corporation............................................... 234,000
10,000 GTE Corporation..................................................... 392,500
-----------
626,500
-----------
TEXTILES -- 1.1%
12,700 Unifi, Inc. ........................................................ 311,150
6,600 V.F. Corporation.................................................... 336,600
-----------
647,750
-----------
TRANSPORTATION -- SURFACE -- 0.5%
4,100 Burlington Northern Inc. ........................................... 297,250
-----------
UTILITIES -- 3.4%
11,900 Baltimore Gas & Electric Company.................................... 307,912
14,100 Brooklyn Union Gas Company.......................................... 347,213
12,600 CINergy Corporation................................................. 351,225
10,800 DPL Inc. ........................................................... 249,750
10,000 Equitable Resources Inc. ........................................... 295,000
14,100 PECO Energy Corporation............................................. 403,612
-----------
1,954,712
-----------
TOTAL COMMON STOCKS (Cost $22,560,350).............................. 25,698,527
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<C> <S> <C>
- ---------------------------------------------------------------------------------------------
U.S. TREASURY STRIPPED SECURITIES -- 51.8%
$15,256,800 TIGR, Interest Receipt, 7.460% due 08/15/2004**..................... $ 8,728,567
20,000,000 TIGR, Principal Receipt, 7.440% due 08/15/2004**.................... 11,442,200
16,120,000 U.S. Treasury Strip, 7.440% due 08/15/2004**........................ 9,286,892
-----------
TOTAL U.S. TREASURY STRIPPED SECURITIES (Cost $26,828,595).......... 29,457,659
===========
REPURCHASE AGREEMENT -- 3.5% (Cost $1,971,000)
1,971,000 Agreement with CS First Boston Corporation, 5.870% dated 09/29/1995
to be repurchased at $1,971,964 on 10/02/1995, collateralized by
$2,352,813 market value of U.S. Treasury Bonds at
7.625% -- 10.750% with maturities of 05/15/2003 through
08/15/2017........................................................ 1,971,000
===========
TOTAL INVESTMENTS (Cost $51,359,945*)................................... 100.5% 57,127,186
OTHER ASSETS AND LIABILITIES (NET)...................................... (0.5) (294,998)
----- -----------
NET ASSETS.............................................................. 100.0% $56,832,188
===== ===========
<FN>
- ---------------
* Aggregate cost for Federal tax purposes.
** Rate represents annualized yield at date of purchase.
+ Non-income producing security.
ABBREVIATIONS:
ADR -- American Depositary Receipt
TIGR -- Treasury Investor Growth Receipt
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $51,359,945) (Note 1)
See accompanying schedule.................................. $57,127,186
Cash......................................................... 725
Receivable for investment securities sold.................... 619,202
Unamortized organization costs (Note 5)...................... 41,458
Dividends and interest receivable............................ 39,199
Prepaid expense.............................................. 5,078
-----------
Total Assets............................................ 57,832,848
LIABILITIES:
Payable for investment securities purchased.................. $931,244
Investment advisory fee payable (Note 2)..................... 18,423
Administration fee payable (Note 2).......................... 11,627
Transfer agent fees payable (Note 2)......................... 9,332
Accrued Directors' fees and expenses (Note 2)................ 2,250
Custodian fees payable (Note 2).............................. 1,756
Accrued expenses and other payables.......................... 26,028
--------
Total Liabilities....................................... 1,000,660
-----------
NET ASSETS........................................................ $56,832,188
===========
NET ASSETS consist of:
Distributions in excess of net investment income earned to
date........................................................ $ (66,605)
Accumulated net realized gain on investments sold............ 2,326,813
Net unrealized appreciation of investments................... 5,767,241
Common Stock at par value (Note 4)........................... 5,231
Paid-in capital in excess of par value....................... 48,799,508
-----------
Total Net Assets........................................ $56,832,188
===========
NET ASSET VALUE PER SHARE:
($56,832,188 / 5,231,163 shares of common stock outstanding).... $10.86
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 11
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................... $1,036,961
Dividends..................................................... 327,118
----------
Total Investment Income.................................. 1,364,079
EXPENSES:
Investment advisory fee (Note 2).............................. $140,947
Administration fee (Note 2)................................... 68,173
Transfer agent fees (Note 2).................................. 41,934
Legal and audit fees.......................................... 38,594
Custodian fees (Note 2)....................................... 9,102
Amortization of organization costs (Note 5)................... 5,528
Directors' fees and expenses (Note 2)......................... 4,508
Other......................................................... 25,408
-------
Total Expenses........................................... 334,194
----------
NET INVESTMENT INCOME.............................................. 1,029,885
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTES 1 AND 3):
Net realized gain on investments sold during the period....... 2,210,780
Net change in unrealized appreciation/depreciation of
investments during the period................................ 4,100,103
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.................... 6,310,883
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................................... $7,340,768
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
09/30/95 ENDED
(UNAUDITED) 03/31/95*
----------- -----------
<S> <C> <C>
Net investment income............................................... $ 1,029,885 $ 1,500,821
Net realized gain on investments sold during the period............. 2,210,780 369,985
Net unrealized appreciation on investments during the period........ 4,100,103 1,667,138
----------- -----------
Net increase in net assets resulting from operations................ 7,340,768 3,537,944
Distributions to shareholders from net investment income............ (1,096,490) (1,500,821)
Distributions to shareholders in excess of net investment income.... -- (843)
Distributions to shareholders from net realized gains on
investments....................................................... -- (253,952)
Net increase in net assets from share transactions (Note 4)......... 349,684 48,355,890
----------- -----------
Net increase in net assets.......................................... 6,593,962 50,138,218
NET ASSETS:
Beginning of period................................................. 50,238,226 100,008
----------- -----------
End of period (including distributions in excess of net investment
income earned to date of $(66,605) at September 30, 1995)......... $56,832,188 $50,238,226
=========== ===========
<FN>
- ---------------
* Nations Balanced Target Maturity Fund, Inc. commenced operations on June 30,
1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 13
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
09/30/95 ENDED
(UNAUDITED) 03/31/95*
----------- ----------
<S> <C> <C>
Operating performance:
Net asset value, beginning of period................................... $ 9.67 $ 9.35#
------- --------
Net investment income.................................................. 0.20 0.29**
Net realized and unrealized gain on investments........................ 1.20 0.40
------- --------
Net increase in net assets resulting from investment operations........ 1.40 0.69
Offering expenses charged to paid-in capital........................... -- (0.03)
Distributions:
Dividends from net investment income................................... (0.21) (0.29)
Distributions in excess of net investment income....................... -- (0.00)##
Distributions from net realized capital gains.......................... -- (0.05)
------- --------
Total distributions.................................................... (0.21) (0.34)
------- --------
Net asset value, end of period......................................... $ 10.86 $ 9.67
======= ========
Market value, end of period............................................ $ 9.000 $ 8.500
======= ========
Total investment return++.............................................. 8.24% (5.54)%
======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................... $56,832 $ 50,238
Ratio of operating expenses to average net assets...................... 1.22%+ 1.10%+
Ratio of net investment income to average net assets................... 3.77%+ 4.12%+
Portfolio turnover rate................................................ 21% 25%
<FN>
- ---------------
* Nations Balanced Target Maturity Fund, Inc. commenced operations on June 30,
1994.
** Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the period since
the use of the undistributed method did not accord with the results of
operations.
+ Annualized.
++ Total return represents aggregate total return for the period based on
market value.
# Initial offering price net of sales commissions of $0.65 per share.
## Value represents less than $0.01 per share.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 14
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES.
Nations Balanced Target Maturity Fund, Inc. (the "Company") was
incorporated under the laws of the State of Maryland on March 23, 1994 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 "1940 Act"). The Company commenced operations on June 30,
1994. The policies described below are followed by the Company in the
preparation of its financial statements and are in conformity with generally
accepted accounting principles.
PORTFOLIO VALUATION: Securities traded on a recognized stock exchange are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sale price on the national
securities market. Securities traded on over-the-counter markets are valued on
the basis of the closing over-the-counter bid prices or, if no sale occurred on
such day, at the mean of the current bid and asked prices. Restricted
securities, securities for which market quotations are not readily available and
other assets are valued at fair value by the investment adviser under the
supervision of 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.
REPURCHASE AGREEMENTS: The Company may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, a Company takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Company to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Company's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Company's holding period. In the event
of counterparty default, the Company has the right to use the collateral to
offset losses incurred. There is potential loss to the Company in the event the
Company is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Company seeks to assert
its rights. The Company's investment adviser, acting under the supervision of
the Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Company enters into
repurchase agreements to evaluate potential risks.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Securities purchased or sold on a
when-issued or delayed-delivery basis may be settled a month or more after trade
date. Realized gains and losses are computed on the specific identification of
securities sold. Interest income, adjusted for amortization of discounts and
premiums on investments under the yield to maturity method, is earned from
settlement date and is recorded on the accrual basis. Discount on zero coupon
securities is accreted under the effective yield method. Dividend income is
recorded on the ex-dividend date.
DIVIDEND AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the
Company to pay quarterly distributions from net investment income to
shareholders. The Company expects that all or a portion of net capital gains, if
any, will be distributed at least once annually. The Company may elect to retain
net long-term gains and pay corporate income tax thereon which will result in
federal tax consequences. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Company, timing differences and differing characterization of distributions made
by the Company.
FEDERAL INCOME TAXES: It is the policy of the Company to qualify as a
regulated investment company, if such qualification is in the best interest of
its shareholders, by complying with the requirements of the Internal
12
<PAGE> 15
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 1995
Revenue Code of 1986, as amended, applicable to regulated investment companies
and by distributing substantially all of its earnings to its shareholders.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS.
The Company has entered into an investment advisory agreement (the
"Advisory Agreement") with NationsBank, N.A. ("NationsBank"), as successor to
NationsBank of North Carolina, N.A., a wholly owned subsidiary of NationsBank
Corporation. Under the terms of the Advisory Agreement, the Company pays a fee
equal to an annual rate of 0.30% of the Company's average weekly net investment
in Zero Coupon (Stripped) Treasuries plus 0.75% of the Company's average weekly
net investment in assets other than Zero Coupon (Stripped) Treasuries.
NationsBank is the Company's Administrator. The daily administration of the
Company is conducted by or under the direction of officers of NationsBank, as
Administrator, subject to review by the Company's Board of Directors.
Pursuant to an administration agreement (the "Administration Agreement")
with NationsBank, the Company has retained NationsBank to supervise the overall
day-to-day operations of the Company (in addition to rendering investment
advice) and provide various types of administrative services to the Company.
Under the terms of the Administration Agreement, NationsBank 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. In addition,
NationsBank pays the salaries of all personnel, including officers of the
Company, who are employees of NationsBank.
As full compensation for the administrative services furnished to the
Company and expenses of the Company assumed by NationsBank, the Company pays
NationsBank a monthly fee equal to an annual rate of 0.25% of the Company's
average weekly net assets.
NationsBank has entered into a Sub-Administration Agreement with The
Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of First
Data Corporation, Inc. (the "Sub-Administrator"), pursuant to which the
Sub-Administrator provides certain administrative services in support of the
operations of the Company. The fees of the Sub-Administrator are paid by
NationsBank out of the fees paid to NationsBank by the Company pursuant to the
Administration Agreement.
No officer, director or employee of NationsBank, or any affiliate thereof,
receives any compensation from the Company for serving as a Director or officer
of the Company. The Company pays each Director an annual fee of $1,000, plus an
additional $500 for each board meeting attended, plus reimbursement of expenses
incurred in attending such meetings.
NationsBank of Texas, N.A. serves as the custodian of the Company's assets.
TSSG serves as the transfer agent and dividend disbursing agent for the Company.
3. SECURITIES TRANSACTIONS.
For the six months ended September 30, 1995, the cost of purchases and
proceeds from sales of investment securities (excluding long-term U.S.
government securities and short-term investments) aggregated $10,830,839 and
$12,292,030, respectively.
At September 30, 1995, gross unrealized appreciation and depreciation for
tax purposes was $6,054,226 and $286,985, respectively.
13
<PAGE> 16
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 1995
4. PORTFOLIO SHARES.
At September 30, 1995, 1,000,000,000 shares of common stock, $.001 par
value, were authorized.
The Company sold a total of 5,137,601 shares of common stock in the initial
public offering. Proceeds to the Company, before the expenditures of
underwriting commissions of $3,339,441, of which $805,466 and $2,522,275 was
paid to Stephens Inc. and Nations Securities, Inc., an affiliate of NationsBank,
respectively, amounted to $51,376,010. This expenditure has been charged against
paid-in capital.
The Board of Directors of the Company has approved a plan that gives the
Company the flexibility to engage in occasional 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 the open market when
management of the Company believes that such purchases are appropriate in light
of market conditions, including the presence of a market discount. For the six
months ended September 30, 1995, the Company did not repurchase shares of its
common stock in the open market.
Common stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
9/30/95 03/31/95*+
----------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------
<S> <C> <C> <C> <C>
Initial public offering............................. -- -- 5,137,601 $51,376,010
Underwriting commissions............................ -- -- -- (3,339,441)
Stock issuance costs................................ -- -- -- (134,436)
Issued as reinvestment of dividends................. 33,395 $349,684 49,471 453,757
------ -------- --------- -----------
Total increase...................................... 33,395 $349,684 5,187,072 $48,355,890
====== ======== ========= ===========
<FN>
- ---------------
* The Company commenced operations on June 30, 1994.
+ On June 10, 1994, the Company sold a total of 10,696 shares of common stock to
Stephens Inc. Proceeds to the Company amounted to $100,008. On June 23, 1994,
the Company commenced selling shares to the public. Stock issuance costs,
which totalled $134,436, were charged directly against the proceeds of the
offering.
</TABLE>
5. ORGANIZATION COSTS.
The Company bears all costs in connection with its organization. All such
costs are being amortized on the straight-line method over a period of five
years from the commencement of operations for the Company.
6. SUBSEQUENT EVENT.
As of November 1, 1995, The Shareholder Services Group, Inc. will be known
as First Data Investor Services Group, Inc.
14
<PAGE> 17
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 1995
7. QUARTERLY RESULTS OF OPERATIONS.
<TABLE>
The following is a summary of quarterly results of operations:
<CAPTION>
NET
INCREASE/(DECREASE)
NET REALIZED AND IN NET ASSETS
INVESTMENT NET INVESTMENT UNREALIZED GAIN/(LOSS) RESULTING FROM
INCOME INCOME ON INVESTMENTS OPERATIONS
---------------------- ---------------------- ---------------------- ----------------------
QUARTER ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
September 30, 1994...... $ 652,204 $0.13 $ 518,165 $0.10 $ (667,807) $(0.13) $ (149,642) $(0.03)
December 31, 1994....... 643,454 0.12 509,153 0.10 (574,227) (0.11) (65,074) (0.01)
March 31, 1995.......... 605,331 0.12 473,503 0.09 3,279,157 0.64 3,752,660 0.73
---------- ----- ---------- ----- ---------- ------ ---------- ------
Total................... $1,900,989 $0.37 $1,500,821 $0.29 $2,037,123 $ 0.40 $3,537,944 $ 0.69
========== ===== ========== ===== ========== ====== ========== ======
June 30, 1995........... $ 663,118 $0.13 $ 513,167 $0.10 $4,520,212 $ 0.86 $5,033,379 $ 0.96
September 30, 1995...... 700,961 0.13 516,718 0.10 1,790,671 0.34 2,307,389 0.44
---------- ----- ---------- ----- ---------- ------ ---------- ------
Total................... $1,364,079 $0.26 $1,029,885 $0.20 $6,310,883 $ 1.20 $7,340,768 $ 1.40
========== ===== ========== ===== ========== ====== ========== ======
</TABLE>
15
<PAGE> 18
Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN
THE PLAN
The Company's Dividend Reinvestment Plan (the "Plan") offers an automatic
way to reinvest your dividends and capital gains distributions in shares of the
Company.
PARTICIPATION
Shareholders of record will receive their dividends in cash unless they
have instructed TSSG (the "Plan Agent"), acting as agent for each participant in
the Plan, in writing otherwise. 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 TSSG, 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, as agent for
all participants, 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 adviser 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.
16
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Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN (CONTINUED)
If the net asset value per share is higher than the closing market price
per share of the capital stock on the Exchange plus estimated brokerage
commissions on such record date, the Plan Agent will elect 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.
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 itself 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 in 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 Balanced Target Maturity Fund, Inc., Dividend Reinvestment
Plan, c/o The Shareholder Services Group, Inc., P.O. Box 1376, Boston, MA 02104,
(800) 331-1710.
17
<PAGE> 20
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
MEETING OF STOCKHOLDERS
On April 28, 1995, the Company held its Annual Meeting of Stockholders. The
following directors were elected by the following votes: (i) William H.
Grigg -- 2,564,783.966 For, 134,111.97 Against; (ii) Thomas F.
Keller -- 2,566,136.981 For, 132,758.957 Against; (iii) A. Max
Walker -- 2,567,503.038 For, 131,392.900 Against; in the only other matter voted
upon at the Annual Meeting, the selection of Price Waterhouse LLP as the
Company's independent public accountants for the fiscal year ending March 31,
1996, was ratified by the following votes: 2,436,178.323 For, 66,250.811
Against, 196,466.804 Abstaining.
18
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Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STOCK REPURCHASE PROGRAM
The Board of Directors of the Company has approved a plan that gives the
Company the flexibility to engage in occasional 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 the open market when
management of the Company believes that such purchases are appropriate in light
of market conditions, including the presence of a market discount.
19
<PAGE> 22
------------------
PO Box 9654 BULK RATE
Providence, RI 02940-9654 U.S. POSTAGE
Toll Free 1-800-982-2271 PAID
BOSTON, MA
PERMIT NO.
54201
------------------
BTM-9/95
