<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, 1996
-------------
NATIONS
-------------
-------------
BALANCED
-------------
-------------
TARGET
-------------
-------------
MATURITY FUND
-------------
<PAGE> 2
- --------------------------------------------------------------------------------
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
- --------------------------------------------------------------------------------
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 semiannual report for
Nations Balanced Target Maturity Fund, Inc. (the "Company") for the six-month
period ended September 30, 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 long-term investment objective
remains to return at least the principal investment on the maturity date,
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, equity securities, and a repurchase agreement.
For the six-month period ended September 30, 1996, the total return of
Nations Balanced Target Maturity Fund was 5.02%** based on an ending market
price of $9.50. Over this period, the Company distributed $0.21 of ordinary
income per share to its shareholders. As of September 30, 1996, 52.8% of the
Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations, and
39.6% was invested in common stocks, with the remaining 7.6% invested in a
repurchase agreement. A breakdown of portfolio holdings by asset type is as
follows:
<TABLE>
PORTFOLIO BREAKDOWN AS OF SEPTEMBER 30, 1996
[PIE CHART]
<S> <C>
Zero Coupon U.S. Treasury Obligations 52.8%
Repurchase Agreement 7.6%
Utilities 8.7%
Technology 3.9%
Financial Services 4.5%
Energy 4.1%
Consumer Discretionary 7.0%
Producer Durables 3.6%
Other Common Stocks 7.8%
</TABLE>
INVESTMENT PHILOSOPHY
- ---------------------
The equity portion of the Company is invested according to 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
- ---------------
* THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE
OF FUTURE RESULTS.
** The average annual total return since inception (6/30/94) based on the market
price was 7.76%. 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
below-average risk over a market cycle. Consequently, the portfolio is broadly
diversified across many economic sectors, although certain sectors may, from
time to time, be over- or underweighted relative to the Standard & Poor's 500
Composite Stock Price Index ("S&P 500").
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 include improving earnings
estimates, changes in management, new product developments or corporate
restructurings.
MARKET ENVIRONMENT AND PORTFOLIO STRATEGY
- -----------------------------------------
Over the past six months, the economy has been accelerating and long-term
interest rates have experienced an upward swing. Strong corporate profits and
relatively low inflation resulted in favorable stock returns that enhanced the
performance of the Company. Higher interest rates dampened fixed income returns.
The Company reduced its exposure to the defense and drug groups. Upward
revisions in earnings estimates prompted stock price strength that decreased the
appreciation potential of these holdings. Proceeds from stock sales were
primarily reinvested into electric utilities and food producers. Price
performance of these sectors has lagged the general market, creating an
opportunity to build positions.
The Company's investment adviser believes that the electric utility, energy
and food producer sectors presently offer compelling valuations and the
potential for improving long-term earnings growth. 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.
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. Shares of food producers are
attractive based on stock market underperformance and an increasingly proactive
attitude towards corporate restructuring.
<TABLE>
TOP TEN EQUITY HOLDINGS AS OF SEPTEMBER 30, 1996*
<S> <C>
1. MCI Communications Corporation 0.62%
2. Nucor Corporation 0.61
3. Marsh & McLennan Companies Inc. 0.59
4. U.S. West Inc. 0.59
5. Unicom Corporation 0.58
6. Genuine Parts Company 0.55
7. Motorola, Inc. 0.55
8. Repsol SA, ADR 0.54
9. PECO Energy Company 0.53
10. Cyprus Amax Minerals Company 0.53
<FN>
* Portfolio holdings are subject to change and may not be representative of the
Company's current holdings.
</TABLE>
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
September 30, 1996
2
<PAGE> 5
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
===============================================================================================
<S> <C> <C>
COMMON STOCKS -- 39.8%
APPAREL AND TEXTILES -- 0.4%
4,300 V.F. Corporation.................................................... $ 258,538
----------
AUTOMOBILE AND TRUCK MANUFACTURERS -- 0.4%
7,900 Ford Motor Company.................................................. 246,875
----------
AUTOMOBILE PARTS MANUFACTURERS -- 1.9%
4,600 Eaton Corporation................................................... 277,725
8,000 Echlin Inc. ........................................................ 251,000
7,200 Genuine Parts Company............................................... 315,000
8,100 Snap-On, Inc. ...................................................... 260,213
----------
1,103,938
----------
BANKS -- 1.5%
2,900 Crestar Financial Corporation....................................... 171,100
4,100 First Chicago Corporation NBD....................................... 185,525
5,100 Fleet Financial Group Inc. ......................................... 226,950
3,700 Republic New York Corporation....................................... 255,763
----------
839,338
----------
BEVERAGES -- 0.5%
9,300 PepsiCo Inc. ....................................................... 262,725
----------
CHEMICALS -- 0.7%
7,400 Georgia Gulf Corporation............................................ 221,075
4,300 Mallinckrodt Group Inc. ............................................ 178,988
----------
400,063
----------
CHEMICALS -- SPECIALTY -- 0.9%
5,200 Great Lakes Chemical Corporation.................................... 296,400
14,500 Wellman, Inc. ...................................................... 253,750
----------
550,150
----------
COMMUNICATION EQUIPMENT -- 0.5%
11,700 Glenayre Technologies Inc.+ ........................................ 269,100
----------
COMPUTER RELATED -- 0.7%
4,600 Digital Equipment Corporation+...................................... 164,450
9,900 Silicon Graphics Inc.+.............................................. 219,038
----------
383,488
----------
COMPUTER SOFTWARE -- 0.7%
10,900 Bay Networks Inc.+ ................................................. 297,025
1,500 Cabletron Systems Inc.+ ............................................ 102,375
----------
399,400
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
DIVERSIFIED -- 0.3%
15,000 Hanson Plc, ADR..................................................... $ 185,625
----------
DRUGS -- 0.8%
3,200 Merck & Company, Inc. .............................................. 225,200
3,600 Schering-Plough Corporation......................................... 221,400
----------
446,600
----------
ELECTRIC POWER -- 3.7%
10,000 Baltimore Gas & Electric Company.................................... 261,250
6,000 Central & South West Corporation.................................... 156,000
10,200 DTE Energy Company.................................................. 285,600
11,900 Houston Industries Inc. ............................................ 263,287
13,700 New York State Electric & Gas Company............................... 301,400
9,100 Pacific Gas & Electric Company...................................... 197,925
12,800 PECO Energy Company................................................. 304,000
13,300 Unicom Corporation.................................................. 334,162
----------
2,103,624
----------
ELECTRICAL EQUIPMENT -- 0.5%
3,700 Grainger (W.W.) Inc. ............................................... 259,925
----------
ELECTRONICS -- 1.6%
6,300 AMP Inc. ........................................................... 244,125
3,500 Avnet, Inc. ........................................................ 169,750
2,700 Harris Corporation.................................................. 175,837
6,100 Motorola, Inc. ..................................................... 314,913
----------
904,625
----------
ENVIRONMENTAL -- 0.2%
4,900 Browning-Ferris Industries Inc. .................................... 122,500
----------
FINANCIAL SERVICES -- 1.6%
5,300 Dean Witter, Discover & Company..................................... 291,500
3,500 Marsh & McLennan Companies Inc. .................................... 339,938
4,000 Transamerica Corporation............................................ 279,500
----------
910,938
----------
FOOD PRODUCERS -- 2.4%
7,600 Cadbury Schweppes Plc, ADR.......................................... 248,900
7,500 Heinz (H.J.) Company................................................ 253,125
11,700 McCormack & Company, Inc. .......................................... 273,487
8,100 Quaker Oats Company................................................. 296,663
7,900 Sara Lee Corporation................................................ 282,425
----------
1,354,600
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
FOOD RETAILERS -- 0.8%
10,600 Supervalu Inc. ..................................................... $ 291,500
5,600 Sysco Corporation................................................... 188,300
----------
479,800
----------
INSURANCE COMPANIES -- 1.5%
2,100 General Re Corporation.............................................. 297,675
4,600 ITT Hartford Group Inc. ............................................ 271,400
6,100 Lincoln National Corporation Ltd.................................... 267,638
----------
836,713
----------
MACHINERY AND EQUIPMENT -- 0.9%
4,000 Foster Wheeler Corporation.......................................... 175,000
7,600 Keystone International, Inc. ....................................... 149,150
3,900 Parker-Hannifin Corporation......................................... 163,800
----------
487,950
----------
MEDIA -- 0.8%
17,000 Tele-Communication, Inc., Class A+.................................. 253,937
4,800 Time Warner Inc. ................................................... 185,400
----------
439,337
----------
MEDICAL PRODUCTS AND SUPPLIES -- 0.7%
3,800 Abbott Laboratories................................................. 187,150
5,500 Bausch & Lomb Inc. ................................................. 202,125
----------
389,275
----------
MEDICAL SERVICES -- 0.5%
13,900 Humana Inc.+........................................................ 281,475
----------
METALS AND MINING -- 1.4%
14,100 Cyprus Amax Minerals Company........................................ 303,150
4,200 Phelps Dodge Corporation............................................ 269,325
4,500 Reynolds Metals Company............................................. 230,063
----------
802,538
----------
OIL -- DOMESTIC -- 2.5%
3,900 Amoco Corporation................................................... 274,462
5,800 Ashland Oil, Inc. .................................................. 230,550
2,300 Atlantic Richfield Company.......................................... 293,250
5,900 Diamond Shamrock, Inc............................................... 183,638
10,400 Occidental Petroleum Corporation.................................... 243,100
8,500 Sun Company, Inc. .................................................. 195,500
----------
1,420,500
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
OIL -- INTERNATIONAL -- 1.6%
6,700 Elf Aquitaine SA, ADR............................................... $263,812
1,700 Exxon Corporation................................................... 141,525
2,000 Mobil Corporation................................................... 231,500
9,300 Repsol SA, ADR...................................................... 308,062
--------
944,899
--------
PRINTING AND PUBLISHING -- 0.8%
6,500 Dow Jones & Company Inc. ........................................... 240,500
4,000 Dun & Bradstreet Corporation........................................ 238,500
--------
479,000
--------
RECREATION -- 0.9%
7,100 Circus Circus Enterprises Inc.+..................................... 251,162
4,200 Disney (Walt) Company............................................... 266,175
--------
517,337
--------
RESTAURANTS AND LODGING -- 0.8%
6,100 ITT Corporation..................................................... 266,112
9,800 Wendy's International Inc. ......................................... 210,700
--------
476,812
--------
RETAIL -- GENERAL -- 0.4%
7,500 Dayton Hudson Corporation........................................... 247,500
--------
RETAIL -- SPECIALTY -- 0.4%
6,000 Tandy Corporation................................................... 242,250
--------
STEEL -- 0.6%
6,900 Nucor Corporation................................................... 350,175
--------
TELECOMMUNICATIONS -- 0.5%
11,400 360 (Degrees) Communications Company................................ 267,900
--------
TRANSPORTATION -- AIRLINES -- 0.4%
10,400 Southwest Airlines Company.......................................... 237,900
--------
UTILITIES -- NATURAL GAS -- 1.3%
6,600 British Gas Plc, ADR................................................ 208,725
9,400 Brooklyn Union Gas Company.......................................... 262,025
10,500 Equitable Resources Inc............................................. 299,250
--------
770,000
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- TELEPHONE -- 3.7%
10,100 AirTouch Communications Inc.+....................................... $ 279,013
4,900 Ameritech Corporation............................................... 257,862
3,700 Bell Atlantic Corporation........................................... 221,537
7,800 GTE Corporation..................................................... 300,300
13,800 MCI Communications Corporation...................................... 353,625
2,800 NYNEX Corporation................................................... 121,800
5,600 SBC Communications Inc. ............................................ 269,500
11,300 U.S. West Inc. ..................................................... 336,175
-----------
2,139,812
-----------
TOTAL COMMON STOCKS (Cost $22,171,592).............................. 22,813,225
===========
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<S> <C> <C>
U.S. TREASURY STRIPPED SECURITIES -- 53.1%
$15,256,800 TIGR, Interest Receipt, 7.460% due 08/15/2004**..................... 9,039,654
20,000,000 TIGR, Principal Receipt, 7.440% due 08/15/2004**.................... 11,850,000
16,120,000 U.S. Treasury Strip, 7.440% due 08/15/2004**........................ 9,569,638
-----------
TOTAL U.S. TREASURY STRIPPED SECURITIES (Cost $28,872,089).......... 30,459,292
===========
REPURCHASE AGREEMENT -- 7.6% (Cost $4,380,000)
4,380,000 Agreement with Smith Barney, 5.680% dated 09/30/1996,
to be repurchased at $4,380,691 on 10/01/1996, collateralized by:
$4,468,056 U.S. Government Agency securities, 4.730% -- 9.375%
due 12/23/96 -- 07/15/43.......................................... 4,380,000
===========
TOTAL INVESTMENTS (Cost $55,423,681*)................................... 100.5% 57,652,517
OTHER ASSETS AND LIABILITIES (NET)...................................... (0.5) (315,048)
----- -----------
NET ASSETS.............................................................. 100.0% $57,337,469
===== ===========
<FN>
- ---------------
* Aggregate cost for Federal tax purposes.
** The rate shown is the effective yield at date of purchase.
+ Non-income producing security.
</TABLE>
ABBREVIATIONS:
ADR -- American Depositary Receipt
TIGR -- Treasury Investor Growth Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Cost $55,423,681) (Note 1)
See accompanying schedule.................................... $57,652,517
Cash........................................................... 887
Receivable for investment securities sold...................... 462,968
Dividends and interest receivable.............................. 75,882
Unamortized organization costs (Note 5)........................ 30,403
Prepaid expenses............................................... 4,410
-----------
Total Assets.............................................. 58,227,067
LIABILITIES:
Payable for investment securities purchased.................... $789,773
Investment advisory fee payable (Note 2)....................... 23,883
Accrued shareholder reports expense............................ 20,923
Accrued legal and audit fees payable........................... 19,736
Transfer agent fees payable (Note 2)........................... 15,011
Administration fee payable (Note 2)............................ 11,716
Custodian fees payable (Note 2)................................ 5,772
Accrued Directors' fees and expenses (Note 2).................. 2,250
Accrued expenses and other payables............................ 534
--------
Total Liabilities......................................... 889,598
-----------
NET ASSETS.......................................................... $57,337,469
===========
NET ASSETS consist of:
Undistributed net investment income............................ $ 71,673
Accumulated net realized gain on investments sold.............. 6,235,084
Net unrealized appreciation of investments..................... 2,228,836
Common Stock at par value (Note 4)............................. 5,231
Paid-in capital in excess of par value......................... 48,796,645
-----------
Total Net Assets.......................................... $57,337,469
===========
NET ASSET VALUE PER SHARE:
($57,337,469 [divided by] 5,231,163 shares of common stock
outstanding).................................................... $ 10.96
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 11
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- -----------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest....................................................... $ 1,130,923
Dividends...................................................... 340,102
-----------
Total Investment Income................................... 1,471,025
EXPENSES:
Investment advisory fee (Note 2)............................... $145,390
Administration fee (Note 2).................................... 70,883
Transfer agent fees (Note 2)................................... 44,888
Legal and audit fees........................................... 24,660
Custodian fees (Note 2)........................................ 17,432
Directors' fees and expenses (Note 2).......................... 6,775
Amortization of organization costs (Note 5).................... 5,528
Shareholder reports expense.................................... 4,639
Other.......................................................... 13,864
--------
Total Expenses............................................ 334,059
-----------
NET INVESTMENT INCOME............................................... 1,136,966
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 3):
Net realized gain on investments during the period............. 3,251,189
Net unrealized depreciation of investments during the period... (2,333,107)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS..................... 918,082
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 2,055,048
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- ------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR
09/30/96 ENDED
(UNAUDITED) 03/31/96
=========== ===========
<S> <C> <C>
Net investment income............................................... $ 1,136,966 $ 2,094,645
Net realized gain on investments.................................... 3,251,189 5,478,212
Net unrealized appreciation/(depreciation) on investments........... (2,333,107) 2,894,805
----------- -----------
Net increase in net assets resulting from operations................ 2,055,048 10,467,662
Distributions to shareholders from net investment income............ (1,098,544) (2,064,257)
Distributions to shareholders from net realized gains on
investments....................................................... -- (2,610,350)
Net increase in net assets from Company share transactions
(Note 4).......................................................... -- 349,684
----------- -----------
Net increase in net assets.......................................... 956,504 6,142,739
NET ASSETS:
Beginning of period................................................. 56,380,965 50,238,226
----------- -----------
End of period (including undistributed net investment income
of $71,673 and $33,251, respectively)............................. $57,337,469 $56,380,965
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 13
NATIONS BALANCED TARGET MATURITY FUND, INC.
<TABLE>
- ------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
09/30/96 ENDED ENDED
(UNAUDITED) 03/31/96 03/31/95*
========== ======== =========
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period.......................... $ 10.78 $ 9.67 $ 9.35#
------- ------- -------
Net investment income......................................... 0.21 0.40 0.29**
Net realized and unrealized gain on investments............... 0.18 1.61 0.40
------- ------- -------
Net increase in net assets resulting from investment
operations.................................................. 0.39 2.01 0.69
Offering expenses charged to paid-in capital.................. -- -- (0.03)
Distributions:
Dividends from net investment income.......................... (0.21) (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........................................... (0.21) (0.90) (0.34)
------- ------- -------
Net asset value, end of period................................ $ 10.96 $ 10.78 $ 9.67
======= ======= =======
Market value, end of period................................... $ 9.500 $ 9.250 $ 8.500
======= ======= =======
Total return++................................................ 5.02% 19.25% (5.54)%
======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................... $57,337 $56,381 $50,238
Ratio of operating expenses to average net assets............. 1.18%+ 1.24% 1.10%+
Ratio of net investment income to average net assets.......... 4.01%+ 3.75% 4.12%+
Portfolio turnover rate....................................... 47% 46% 25%
Average commission rate (per share of security)+++............ $0.0595 $0.0623 NA
<FN>
- ---------------
* 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 (UNAUDITED)
- --------------------------------------------------------------------------------
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 may 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 that are traded on
a recognized securities exchange are valued at the last sales price on the
securities exchange that such securities are primarily traded or at the last
sales 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 certain other assets
are valued at market 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. The value of
the collateral is at least equal at all times to the total amount of the
repurchase obligation including interest. Generally, in the event of
counterparty default, the Company has the right to use the collateral to offset
any losses incurred. There is risk of a 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. Unless permitted by the Securities and Exchange Commission,
the Company will not enter into repurchase agreements with the Company's
investment adviser, distributor or any of its affiliates. The Company's
investment adviser, acting under the supervision of the Board of Directors,
monitors the value of the collateral received 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 the
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
the 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 to shareholders 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 Federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily
12
<PAGE> 15
NATIONS BALANCED TARGET MATURITY FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
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 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. ("NationsBank"). 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 assets in investments
other than Zero-Coupon (Stripped) U.S. Treasuries.
The Company has entered into a sub-advisory agreement ("Sub-Advisory
Agreement") with NBAI and TradeStreet Investment Associates, Inc.,
("TradeStreet"), a wholly-owned subsidiary of NationsBank. 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 assets in investments other than Zero-Coupon
(Stripped) U.S. Treasuries.
NationsBank is the Company's administrator. Pursuant to an administration
agreement (the "Administration Agreement"), the Company has retained NationsBank
to supervise the overall day-to-day operations of the Company and to 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 conducting its business.
As compensation for both the administrative services furnished to the
Company and the 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
("Sub-Administration Agreement") with First Data Investor Services Group, Inc.
("First Data"), a wholly-owned subsidiary of First Data Corporation, pursuant to
which First Data provides certain administrative services in support of the
operations of the Company. The fees of First Data are paid out of the fees paid
to NationsBank by the Company pursuant to the Administration Agreement.
No officer, director or employee of NationsBank, NBAI, TradeStreet or First
Data, or any affiliate thereof, receives any compensation from the Company for
serving as a director or officer of the Company. The Company pays the Chairman
of the Board and 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. In addition, each eligible director may be entitled to
certain benefits upon retirement from the Board of Directors.
NationsBank of Texas, N.A. serves as the custodian of the Company's assets.
First Data 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 (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
3. SECURITIES TRANSACTIONS.
For the six months ended September 30, 1996, the cost of purchases and
proceeds from sales of investment securities (excluding long-term U.S.
government securities and short-term investments) aggregated $25,080,921 and
$25,710,045, respectively.
At September 30, 1996, gross unrealized appreciation and depreciation for
tax purposes was $2,833,918 and $605,082, respectively.
4. COMMON STOCK.
At September 30, 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 six
months ended September 30, 1996, the Company did not repurchase shares of its
common stock in the open market.
<TABLE>
Common stock transactions were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
09/30/96 03/31/96
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
================== ==================
<S> <C> <C> <C> <C>
Issued as reinvestment of dividends................ -- $ -- 33,395 $349,684
------- -------- ------ --------
Total increase..................................... -- $ -- 33,395 $349,684
======= ======== ====== ========
</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.
14
<PAGE> 17
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 OTHERWISE instructed First Data (the "Plan Agent"), acting as agent for
each participant in the Plan, in writing. Such a notice must be received by the
Plan Agent not less than 5 business days prior to the record date for a dividend
or distribution in order to be effective with respect to that dividend or
distribution. A notice which is not received by that time will be effective only
with respect to subsequent dividends and distributions.
Shareholders who do not participate in the Plan will receive all
distributions by check mailed directly to the shareholder by First Data, as
dividend paying agent. For Federal income tax purposes, dividends are treated as
income or capital gains, regardless of whether they are received in cash or
reinvested in additional shares.
Participants may terminate their participation in the Plan by written
notice to the Plan Agent. If the written notice is received at least 5 business
days before the record date of any distribution, it will be effective
immediately. If received after that date, it will be effective as soon as
possible after the reinvestment of the dividend or distribution.
PRICING OF DIVIDENDS AND DISTRIBUTIONS
Whenever the Company's Board of Directors declares a dividend or other
distribution payable in cash or, at the option of the Plan Agent, in shares of
capital stock issued by the Company, the Plan Agent will elect on behalf of the
participants to receive the dividend in authorized but unissued shares of
capital stock if the net asset value per share (as determined by the investment
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
15
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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 including estimated brokerage
commissions on such record date, the Plan Agent will elect to take the dividend
in cash and as soon as practicable. Consistent with obtaining the best price and
execution, the Plan Agent will proceed to purchase in one or more transactions
the shares of capital stock in the open market, at the then current price as
hereinafter provided. Each participant's account will be credited with the
number of shares corresponding in value, as determined by the price actually
paid on the open market for such shares including brokerage expenses, to the
amount such participant would have received in cash had such participant not
elected to participate in this Plan.
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.
16
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NATIONS BALANCED TARGET MATURITY FUND, INC.
- --------------------------------------------------------------------------------
STOCK REPURCHASE PROGRAM AND ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
STOCK REPURCHASE PROGRAM
- ------------------------
The Board of Directors of the Company has approved certain guidelines that
give 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. No such
purchases have been made by the Company.
ANNUAL MEETING OF STOCKHOLDERS
- ------------------------------
On April 26, 1996, the Company held its Annual Meeting of Stockholders in
Charlotte, North Carolina. William H. Grigg was elected as a director of the
Company, with a term to expire in 1999, by the following votes: 2,673,574 For,
and 46,887 Withheld. In the only other matter voted upon at the Annual Meeting,
the selection of Price Waterhouse LLP as the Company's independent public
accountant for the fiscal year ending March 31, 1997, was ratified by the
following votes: 2,644,847 For, 49,902 Against, and 125,712 Abstaining.
17
<PAGE> 20
================
PO Box 34602 BULK RATE
Charlotte, NC 28234-4602 U.S. POSTAGE
Toll Free 1-800-982-2271 PAID
BOSTON, MA
PERMIT NO.
54201
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