<PAGE> 1
NATIONS BALANCED TARGET
MATURITY FUND, INC.
ANNUAL
REPORT
For the Year Ended March 31, 1996
Nations
Balanced
Target
Maturity Fund
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<TABLE>
<S> <C>
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
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</TABLE>
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY NATIONSBANK, N.A. ("NATIONSBANK") 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.
NATIONSBANK OR ITS AFFILIATES PROVIDE INVESTMENT ADVISORY AND OTHER SERVICES TO
THE COMPANY, FOR WHICH THEY ARE COMPENSATED.
<PAGE> 3
NATIONS BALANCED TARGET MATURITY FUND, INC.
DEAR SHAREHOLDER:
We welcome this opportunity to provide you with the annual report for
Nations Balanced Target Maturity Fund, Inc. (the "Company") for the fiscal year
ended March 31, 1996.
INVESTMENT OBJECTIVE
The Company, which trades on the New York Stock Exchange under the symbol
"NBM", is a closed-end diversified investment management 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 one-year
period by continuing to invest a portion of its assets in Zero Coupon U.S.
Treasury Obligations and the balance of its assets in equities.
For the twelve-month period ended March 31, 1996, the total return of
Nations Balanced Target Maturity Fund was 19.25%** based on an ending market
value of $9.25. Over this period, the Company distributed 40 cents per share of
ordinary income to its shareholders. Additionally, a capital gain of 50 cents
per share was distributed over this same period. As of March 31, 1996, 53.5% of
the Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations,
and 38.9% was invested in common stocks, with the remaining 7.6% in a repurchase
agreement. A breakdown of portfolio holdings by asset type follows.
PORTFOLIO BREAKDOWN AS OF MARCH 31, 1996
[PORTFOLIO BREAKDOWN GRAPH]
INVESTMENT PHILOSOPHY
The equity portion of the Company is invested under the philosophy that
value may be represented in all sectors of the market. 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 Standard & Poor's 500
Composite Stock Index ("S&P 500"), from time to time.
- ---------------
* THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE
OF FUTURE RESULTS.
** The average annual total return since inception based on the market price was
7.04%. Total return represents the change, over a specific period of time, in
the value of an investment in the Company after reinvesting all income and
capital gains.
1
<PAGE> 4
The emphasis in stock selection will continue to be a "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 price 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 year, the economy showed moderate growth and low inflation
which prompted the Federal Reserve Board to lower interest rates. Declining
long-term interest rates supported favorable returns in both the bond and stock
markets, enhancing the Company's performance over this period.
The Company reduced its exposure to the highly economically sensitive
sectors of the stock market this past year. Valuations of select equities became
less attractive as stock prices climbed and earnings growth slowed. Positions
were eliminated or reduced in automobile manufacturers, commodity chemicals,
paper and forest products, and semiconductor stocks. Proceeds from the sale of
these positions were then directed primarily into traditionally defensive
sectors of the market such as energy and electric utilities.
The Company's investment adviser believes that the defense, energy and
electric utility sectors presently offer attractive valuations and the prospects
for improving long-term earnings growth. The defense sector remains overweighted
in the portfolio, relative to the S&P 500, and the investment theme is
unchanged. The industry is consolidating, and the reinvestment of excess cash
flow is benefiting shareholders. Energy stocks, primarily domestic integrated
oils and natural gas, appear poised for improving earnings growth over the next
several years. Industry restructuring, primarily in the refining and marketing
sector, is accelerating and cost reduction programs are continuing. The electric
utility industry is in the early stages of deregulation which should ultimately
boost the long-term earnings growth rate of the more favorably positioned
companies.
TOP TEN EQUITY HOLDINGS AS OF MARCH 31, 1996*
<TABLE>
<C> <S> <C>
1. Royal Dutch Petroleum Company, ADR 0.68%
2. Eaton Corporation 0.65
3. Mallinckrodt Group Inc. 0.65
4. Sprint Corporation 0.65
5. CSX Corporation 0.60
6. NICOR Inc. 0.59
7. Unilever N.V., ADR 0.58
8. Marsh & McLennan Companies Inc. 0.58
9. Genuine Parts Company 0.57
10. New York State Electric & Gas Company 0.57
</TABLE>
---------------------------------------
* Portfolio holdings are subject to change and may not be representative of the
Company's current holdings.
Thank you for your investment in Nations Balanced Target Maturity Fund,
Inc. The Company looks forward to its next report to shareholders.
Sincerely,
/S/ Mark H. Williamson
Mark H. Williamson
President
March 31, 1996
2
<PAGE> 5
Nations Balanced Target Maturity Fund, Inc.
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SCHEDULE OF INVESTMENTS MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
COMMON STOCKS -- 38.8%
AEROSPACE AND DEFENSE -- 0.9%
3,100 Lockheed Martin Corporation......................................... $ 235,213
3,400 Raytheon Company.................................................... 174,250
1,200 Rockwell International Corporation.................................. 70,650
-----------
480,113
-----------
AUTOMOBILE -- 0.2%
4,000 Ford Motor Company.................................................. 137,500
-----------
AUTOMOTIVE ACCESSORIES -- 1.6%
6,100 Eaton Corporation................................................... 367,525
6,300 Echlin Inc. ........................................................ 228,375
7,200 Genuine Parts Company............................................... 324,000
-----------
919,900
-----------
BEVERAGES -- 1.0%
3,800 Anheuser-Busch Companies, Inc. ..................................... 256,025
4,600 PepsiCo Inc. ....................................................... 290,950
-----------
546,975
-----------
BUSINESS EQUIPMENT -- 2.6%
6,800 AMP Inc. ........................................................... 281,350
7,100 Bay Networks, Inc.+................................................. 218,325
2,900 Cabletron Systems Inc.+............................................. 192,125
5,800 COMPAQ Computer Corporation+........................................ 224,025
1,700 International Business Machines Corporation......................... 188,913
1,300 Microsoft Corporation+.............................................. 134,063
2,900 Motorola, Inc. ..................................................... 153,700
2,000 Pitney Bowes Inc. .................................................. 98,000
-----------
1,490,501
-----------
CHEMICALS -- BASIC -- 0.1%
1,100 Imperial Chemical Industries Plc, ADR............................... 62,700
-----------
CHEMICALS -- SPECIALTY -- 0.7%
6,000 Lubrizol Corporation................................................ 177,000
4,700 PPG Industries, Inc. ............................................... 229,712
-----------
406,712
-----------
CONSUMER GOODS -- 0.4%
3,000 Kimberly-Clark Corporation.......................................... 223,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
Nations Balanced Target Maturity Fund, Inc.
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
DIVERSIFIED HEALTH CARE -- 1.1%
1,300 Becton, Dickinson & Company......................................... $ 106,438
14,000 Beverly Enterprises Inc.+........................................... 154,000
9,700 Mallinckrodt Group Inc. ............................................ 364,962
-----------
625,400
-----------
DIVERSIFIED HOLDING COMPANY -- 0.3%
11,700 Hanson Plc, ADR..................................................... 175,500
-----------
DOMESTIC PETROLEUM -- 2.0%
8,200 Ashland Oil, Inc. .................................................. 314,675
6,200 Murphy Oil Corporation.............................................. 265,825
9,600 Sun Company, Inc.................................................... 277,200
13,700 USX-Marathon Group.................................................. 263,725
-----------
1,121,425
-----------
DRUGS -- 2.2%
6,600 Abbott Laboratories................................................. 268,950
4,300 Baxter International Inc............................................ 194,575
2,700 Bristol-Myers Squibb Company........................................ 231,188
8,900 Glaxo Wellcome Plc, ADR............................................. 223,612
5,500 Schering-Plough Corporation......................................... 319,687
-----------
1,238,012
-----------
ELECTRICAL EQUIPMENT -- 0.9%
1,900 General Electric Company............................................ 147,963
5,200 General Signal Corporation.......................................... 188,500
2,700 Minnesota Mining & Manufacturing Company............................ 175,163
-----------
511,626
-----------
ELECTRONIC COMPONENTS -- 1.0%
4,900 Avnet, Inc. ........................................................ 236,425
1,200 Intel Corporation................................................... 68,250
2,100 Xerox Corporation................................................... 263,550
-----------
568,225
-----------
ENTERTAINMENT -- 0.6%
5,400 Circus Circus Enterprises Inc.+..................................... 181,575
2,500 Disney (Walt) Company............................................... 159,688
-----------
341,263
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
Nations Balanced Target Maturity Fund, Inc.
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
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COMMON STOCKS -- (CONTINUED)
FINANCE -- 1.6%
4,800 Dean Witter, Discover & Company..................................... $ 274,800
11,500 Edwards (A.G.), Inc. ............................................... 286,062
7,900 Fleet Financial Group Inc. ......................................... 319,950
-----------
880,812
-----------
FOOD -- 0.8%
4,500 Dean Foods Company ................................................. 112,500
152 Earthgrains Company................................................. 4,541
2,400 Unilever N.V., ADR.................................................. 325,800
-----------
442,841
-----------
HEALTH CARE PRODUCTS -- 0.2%
2,300 Rhone-Poulenc Rorer, Inc............................................ 140,300
-----------
INDUSTRIAL CONGLOMERATES -- 1.5%
8,500 Browning-Ferris Industries Inc. .................................... 267,750
2,400 ITT Corporation..................................................... 61,200
4,200 Premark International Inc. ......................................... 225,225
3,100 TRW Inc. ........................................................... 276,287
-----------
830,462
-----------
INSURANCE -- 2.9%
3,000 American International Group, Inc. ................................. 280,875
2,100 General Re Corporation.............................................. 306,075
4,200 ITT Hartford Group Inc.+............................................ 205,800
5,200 Lincoln National Corporation Ltd.................................... 263,900
3,500 Marsh & McLennan Companies Inc. .................................... 325,063
4,200 MGIC Investment Corporation......................................... 228,900
-----------
1,610,613
-----------
INTERNATIONAL OIL -- 1.5%
2,900 Exxon Corporation................................................... 236,712
2,100 Mobil Corporation................................................... 243,338
2,700 Royal Dutch Petroleum Company, ADR.................................. 381,375
-----------
861,425
-----------
LONG DISTANCE -- 1.2%
4,900 AT&T Corporation.................................................... 300,125
9,600 Sprint Corporation.................................................. 364,800
-----------
664,925
-----------
PAPER AND FOREST PRODUCTS -- 0.9%
5,900 Mead Corporation.................................................... 318,600
3,500 Weyerhaeuser Company................................................ 161,438
-----------
480,038
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
Nations Balanced Target Maturity Fund, Inc.
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
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COMMON STOCKS -- (CONTINUED)
PRODUCER GOODS -- MACHINERY -- 1.4%
6,100 Briggs & Stratton Corporation....................................... $ 263,062
11,900 Keystone International, Inc......................................... 267,750
6,600 Parker-Hannifin Corporation......................................... 247,500
-----------
778,312
-----------
REAL ESTATE -- 0.2%
5,100 Avalon Properties................................................... 109,650
-----------
REGIONAL BANKS -- 1.4%
2,300 Bankers Trust New York Corporation.................................. 163,012
6,200 First Chicago Corporation........................................... 257,300
3,300 Mellon Bank Corporation............................................. 181,913
3,000 Republic New York Corporation....................................... 178,500
-----------
780,725
-----------
RETAIL -- 1.0%
4,600 Federated Department Stores Inc.+................................... 148,350
3,500 May Department Stores Company....................................... 168,875
5,400 Penney (J.C.) Company, Inc. ........................................ 268,650
-----------
585,875
-----------
RETAIL -- SPECIALTY -- 0.4%
7,100 Circuit City Stores Inc. ........................................... 212,112
-----------
TELECOMMUNICATIONS EQUIPMENT -- 0.5%
4,400 DSC Communications Corporation+..................................... 118,800
3,800 Glenayre Technologies Inc.+......................................... 145,350
-----------
264,150
-----------
TELEPHONE -- 1.9%
4,300 Bell Atlantic Corporation........................................... 265,525
2,600 British Telecommunications plc, ADR................................. 146,900
5,300 GTE Corporation..................................................... 232,538
4,600 SBC Communications.................................................. 242,075
8,200 360 (Degrees) Communications Company................................ 195,775
-----------
1,082,813
-----------
TEXTILES -- 1.3%
8,200 Reebok International, Ltd. ......................................... 226,525
10,700 Unifi, Inc. ........................................................ 263,487
4,800 V.F. Corporation.................................................... 265,200
-----------
755,212
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Balanced Target Maturity Fund, Inc.
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<C> <S> <C>
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COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- 1.2%
7,400 CSX Corporation..................................................... $ 337,625
2,900 Federal Express Corporation+........................................ 202,637
5,000 Ryder Systems Inc. ................................................. 136,250
-----------
676,512
-----------
UTILITIES -- 3.3%
7,200 Baltimore Gas & Electric Company.................................... 198,900
8,600 Brooklyn Union Gas Company.......................................... 230,050
2,300 CINergy Corporation................................................. 69,000
10,000 Equitable Resources Inc. ........................................... 292,500
10,000 Houston Industries Corporation...................................... 216,250
13,700 New York State Electric & Gas Company............................... 321,950
12,500 NICOR Inc. ......................................................... 334,375
8,400 PECO Energy Corporation............................................. 223,650
-----------
1,886,675
-----------
TOTAL COMMON STOCKS (Cost $19,549,527).............................. 21,892,804
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
U.S. TREASURY STRIPPED SECURITIES -- 53.3%
$15,256,800 TIGR, Interest Receipt, 7.460% due 08/15/2004**..................... 8,914,853
20,000,000 TIGR, Principal Receipt, 7.440% due 08/15/2004**.................... 11,686,400
16,120,000 U.S. Treasury Strip, 7.440% due 08/15/2004**........................ 9,450,350
-----------
TOTAL U.S. TREASURY STRIPPED SECURITIES (Cost $27,832,937).......... 30,051,603
-----------
REPURCHASE AGREEMENT -- 7.6% (Cost $4,260,000)
4,260,000 Agreement with CS First Boston Corporation, 5.260% dated 03/29/1996,
to be repurchased at $4,261,867 on 04/01/1996, collateralized by:
$4,366,505 U.S. Treasury Bonds, 7.500% -- 12.000% due 05/15/05 --
05/15/18.......................................................... 4,260,000
-----------
TOTAL INVESTMENTS (Cost $51,642,464*)................................... 99.7% 56,204,407
OTHER ASSETS AND LIABILITIES (NET)...................................... 0.3 176,558
----- -----------
NET ASSETS.............................................................. 100.0% $56,380,965
----- -----------
</TABLE>
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* Aggregate cost for Federal tax purposes was $51,645,184.
** The rate shown is the effective yield at date of purchase.
+ Non-income producing security.
ABBREVIATIONS:
ADR -- American Depositary Receipt
TIGR -- Treasury Investor Growth Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $51,642,464) (Note 1)
See accompanying schedule.................................... $56,204,407
Cash........................................................... 751
Receivable for investment securities sold...................... 652,727
Dividends and interest receivable.............................. 53,705
Unamortized organization costs (Note 5)........................ 35,931
Prepaid expenses............................................... 13,230
-----------
Total Assets.............................................. 56,960,751
LIABILITIES:
Payable for investment securities purchased.................... $415,661
Investment advisory fee payable (Note 2)....................... 68,842
Accrued legal and audit fees payable........................... 33,730
Accrued shareholder reports expense............................ 27,565
Transfer agent fees payable (Note 2)........................... 17,089
Administration fee payable (Note 2)............................ 11,980
Accrued Directors' fees and expenses (Note 2).................. 2,250
Custodian fees payable (Note 2)................................ 2,074
Accrued expenses and other payables............................ 595
--------
Total Liabilities......................................... 579,786
-----------
NET ASSETS.......................................................... $56,380,965
-----------
NET ASSETS consist of:
Undistributed net investment income............................ $ 33,251
Accumulated net realized gain on investments sold.............. 2,983,895
Net unrealized appreciation of investments..................... 4,561,943
Common Stock at par value (Note 4)............................. 5,231
Paid-in capital in excess of par value......................... 48,796,645
-----------
Total Net Assets.......................................... $56,380,965
-----------
NET ASSET VALUE PER SHARE:
($56,380,965 / 5,231,163 shares of common stock outstanding)...... $10.78
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 11
Nations Balanced Target Maturity Fund, Inc.
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest....................................................... $ 2,110,621
Dividends...................................................... 677,242
-----------
Total Investment Income................................... 2,787,863
EXPENSES:
Investment advisory fee (Note 2)............................... $285,994
Administration fee (Note 2).................................... 139,889
Transfer agent fees (Note 2)................................... 81,249
Legal and audit fees........................................... 80,360
Shareholder reports expense.................................... 42,256
Custodian fees (Note 2)........................................ 20,471
Amortization of organization costs (Note 5).................... 11,055
Directors' fees and expenses (Note 2).......................... 9,022
Other.......................................................... 22,922
--------
Total Expenses............................................ 693,218
-----------
NET INVESTMENT INCOME............................................... 2,094,645
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTES 1 AND 3):
Net realized gain on investments during the year............... 5,478,212
Net unrealized appreciation of investments during the year..... 2,894,805
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................... 8,373,017
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $10,467,662
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
Nations Balanced Target Maturity Fund, Inc.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
03/31/96 03/31/95*
<S> <C> <C>
----------- -----------
Net investment income............................................... $ 2,094,645 $ 1,500,821
Net realized gain on investments.................................... 5,478,212 369,985
Net unrealized appreciation on investments.......................... 2,894,805 1,667,138
----------- -----------
Net increase in net assets resulting from operations................ 10,467,662 3,537,944
Distributions to shareholders from net investment income............ (2,064,257) (1,500,821)
Distributions to shareholders in excess of net investment income.... -- (843)
Distributions to shareholders from net realized gains on
investments....................................................... (2,610,350) (253,952)
Net increase in net assets from Company share transactions (Note
4)................................................................ 349,684 48,355,890
----------- -----------
Net increase in net assets.......................................... 6,142,739 50,138,218
NET ASSETS:
Beginning of year................................................... 50,238,226 100,008
----------- -----------
End of year (including undistributed net investment income of
$33,251 and $0, respectively)..................................... $56,380,965 $50,238,226
----------- -----------
</TABLE>
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* Nations Balanced Target Maturity Fund, Inc. commenced operations on June 30,
1994.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 13
Nations Balanced Target Maturity Fund, Inc.
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
03/31/96 03/31/95*
<S> <C> <C>
--------- ---------
Operating performance:
Net asset value, beginning of year...................................... $ 9.67 $ 9.35#
--------- ---------
Net investment income................................................... 0.40 0.29**
Net realized and unrealized gain on investments......................... 1.61 0.40
--------- ---------
Net increase in net assets resulting from investment operations......... 2.01 0.69
Offering expenses charged to paid-in capital............................ -- (0.03)
Distributions:
Dividends from net investment income.................................... (0.40) (0.29)
Distributions in excess of net investment income........................ -- (0.00)##
Distributions from net realized capital gains........................... (0.50) (0.05)
--------- ---------
Total distributions..................................................... (0.90) (0.34)
--------- ---------
Net asset value, end of year............................................ $ 10.78 $ 9.67
--------- ---------
Market value, end of year............................................... $ 9.250 $ 8.500
--------- ---------
Total return++.......................................................... 19.25% (5.54)%
--------- ---------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)...................................... $56,381 $50,238
Ratio of operating expenses to average net assets....................... 1.24% 1.10%+
Ratio of net investment income to average net assets.................... 3.75% 4.12%+
Portfolio turnover rate................................................. 46% 25%
Average commission rate (per share of security)+++...................... $0.0623 NA
</TABLE>
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<TABLE>
<C> <S>
* Nations Balanced Target Maturity Fund, Inc. commenced operations on June 30, 1994.
** Per share numbers have been calculated using the monthly average shares method, which
more appropriately represents the per share data for the period since the use of the
undistributed income method did not accord with the results of operations.
+ Annualized.
++ Total return represents aggregate total return for the period based on market value at
period end.
+++ Average commission rate paid per share of securities purchased and sold by the Company.
# 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
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 preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The policies
described below are followed by the Company in the preparation of its financial
statements and are in accordance with generally accepted accounting principles.
Portfolio Valuation: The Company's portfolio securities which are 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 only 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. Certain securities are valued using broker quotations or on
the basis of prices provided by a pricing service. Certain securities may be
valued by one or more principal market makers. 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. 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, the 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 or losses are computed on the specific identification of
the 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. 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 to shareholders. 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. Permanent differences incurred for the year
ended March 31, 1996, resulting from differences in book and tax accounting for
organization costs, have been
12
<PAGE> 15
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reclassified at year end to reflect an increase to undistributed net investment
income of $2,863 and a decrease to paid-in capital of $2,863.
Federal Income Tax: 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 Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no federal income or excise tax provision is required.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND OTHER
RELATED PARTY TRANSACTIONS.
The Company has entered into an investment advisory agreement (the
"Advisory Agreement") with NationsBanc Advisors, Inc. ("NBAI"), a wholly-owned
subsidiary of NationsBank, N.A. Under the terms of the Advisory Agreement, the
Company pays NBAI a monthly fee equal to an annual rate of 0.30% of the
Company's average weekly net investment in Zero Coupon (Stripped) U.S.
Treasuries plus 0.75% of the Company's average weekly net investment in assets
other than Zero Coupon (Stripped) U.S. Treasuries.
The Company and NBAI have entered into a Sub-Advisory Agreement with
TradeStreet Investment Associates, Inc. ("TradeStreet"), a wholly-owned
subsidiary of NationsBank, N.A. Under the terms of the Sub-Advisory Agreement,
TradeStreet is entitled to receive from NBAI a sub-advisory fee equal to an
annual rate of 0.15% of the Company's average weekly net investment in Zero
Coupon (Stripped) U.S. Treasuries plus 0.25% of the Company's average weekly net
investment in assets other than Zero Coupon (Stripped) U.S. Treasuries.
NationsBank, N.A. is the Company's Administrator. Pursuant to an
administration agreement (the "Administration Agreement") with NationsBank,
N.A., the Company has retained NationsBank, N.A. to supervise the overall
day-to-day operations of the Company and provide various types of administrative
services to the Company. Under the terms of the Administration Agreement,
NationsBank, N.A. 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 full compensation for the administrative services furnished to the
Company and expenses of the Company assumed by NationsBank, N.A., the Company
pays NationsBank, N.A. a monthly fee equal to an annual rate of 0.25% of the
Company's average weekly net assets.
NationsBank, N.A. has entered into a Sub-Administration Agreement with
First Data Investor Services Group, Inc., formerly known as The Shareholder
Services Group, Inc., a wholly-owned subsidiary of First Data Corporation ("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 out of the fees paid to NationsBank, N.A. by the
Company pursuant to the Administration Agreement.
No officer, director or employee of NationsBank, N.A., NBAI, TradeStreet or
First Data Investor Services Group, Inc., 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.
First Data Investor Services Group, Inc. serves as the transfer agent and
dividend disbursing agent for the Company.
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Nations Balanced Target Maturity Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SECURITIES TRANSACTIONS.
For the year ended March 31, 1996, the cost of purchases and proceeds from
sales of investment securities (excluding long-term U.S. government securities
and short-term investments) aggregated $24,763,449 and $32,502,895,
respectively.
At March 31, 1996, gross unrealized appreciation and depreciation for tax
purposes was $4,761,449 and $202,226, respectively.
4. COMMON STOCK.
At March 31, 1996, 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 NationsSecurities, respectively amounted to
$51,376,010. These expenditures have 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 year
ended March 31, 1996, the Company did not repurchase shares of its common stock
in the open market.
Common stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
03/31/96 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
---------- ----------- ---------- -----------
</TABLE>
- ---------------
* 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.
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.
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Nations Balanced Target Maturity Fund, Inc.
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REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
NATIONS BALANCED TARGET MATURITY FUND, INC.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Nations Balanced Target Maturity
Fund, Inc. (the "Company") at March 31, 1996, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for the year then ended and for the period June 30, 1994 (commencement of
operations) through March 31, 1995, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 15, 1996
15
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Nations Balanced Target Maturity Fund, Inc.
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TAX INFORMATION (UNAUDITED)
For the year ended March 31, 1996 the amount of long term capital gain
distributed to shareholders by the Company was $1,072,388. Of the ordinary
income (including short-term capital gain) distributions made by the Company
during the fiscal year ended March 31, 1996, 13.37% qualified for the dividends
received deduction available to corporate shareholders.
16
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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 First Data Investor Services Group, Inc. (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 First Data Investor
Services Group, Inc., 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 day 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
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Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN (CONTINUED)
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 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 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 First Data Investor Services Group, Inc., P.O. Box 34602, Charlotte,
NC 28234, (800) 982-2271.
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Nations Balanced Target Maturity Fund, Inc.
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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
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PO Box 34602 BULK RATE
Charlotte, NC 28234-4602 U.S. POSTAGE
Toll Free 1-800-982-2271 PAID
BOSTON, MA
PERMIT NO.
54201
AR6 IN-96216-596
