<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, 1997
Nations
Balanced
Target
Maturity Fund
<PAGE> 2
- -------------------------------------------------------------------------------
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
- -------------------------------------------------------------------------------
SHARES OF THE NATIONS BALANCED TARGET MATURITY FUND, INC. 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 AND 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 semi-annual report for
Nations Balanced Target Maturity Fund, Inc. (the "Company") for the six-months
ended September 30, 1997.
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 investment objective over the
six-months ended September 30, 1997 by continuing to invest a portion of its
assets in Zero Coupon U.S. Treasury Obligations, and the balance of its assets
in equity securities and a repurchase agreement.
For the six-months ended September 30, 1997, the total return of Nations
Balanced Target Maturity Fund was 17.71%** based on an ending market price of
$10.375. Over this period, the Company distributed $0.21 of ordinary income per
share to its shareholders. As of September 30, 1997, 56.4% of the Company's
portfolio was invested in Zero Coupon U.S. Treasury Obligations, and 40.6% was
invested in common stocks, with the remaining 4.0% invested in a repurchase
agreement. A breakdown of portfolio holdings is as follows:
Portfolio Breakdown as of September 30, 1997
Zero Coupon U.S. Treasury Obligations..........56.4%
Other Common Stocks & Net Assets...............24.7%
Repurchase Agreement............................4.0%
Electric Power..................................2.7%
Oil-Domestic....................................2.6%
Retail..........................................2.6%
Utilities.......................................2.6%
Medical Products & Supplies.....................2.5%
Insurance.......................................1.9%
INVESTMENT PHILOSOPHY
The equity portion of the Company is invested based on the philosophy that
value may be found 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, 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,
- ---------------
* THE PERFORMANCE 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 11.21%. 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
strong financial health 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***
The economic backdrop over the past six months has been quite favorable for
financial markets. Key economic characteristics have included moderate growth,
low inflation and declining interest rates. Both the stock and bond markets have
turned in above-trend returns over this period, enhancing the performance of the
Company.
Better performing stock holdings for the Company during the six months
ended September 30, 1997 were in the aerospace and defense sectors, and included
Litton Industries, Lockheed Martin and Raytheon. This group is overweighted
relative to the market based on low price-to-earnings ratios and the prospect
for continued margin expansion from cost cutting. In the food producer sector,
Company performance benefited from a rally in Sara Lee Corporation stock as
management announced a restructuring plan to boost earnings growth over the next
several years.
The Company's investment adviser believes that the consumer cyclical,
communications services, and electric utility sectors are very attractive. The
investment theme includes relatively low market valuations and price-to-earnings
ratios, along with the prospect for improving earnings growth. Holdings in the
consumer cyclical sector are diverse and include retailers and textile firms.
These industries are benefiting from cost cutting, new technologies and industry
consolidation. The communication services and electric utility sectors are
undergoing deregulation, which is prompting consolidation and restructuring that
should accelerate earnings growth for the more well positioned firms. The
Company is underweighted relative to the market in technology and finance. These
sectors have already experienced strong price performance that has dampened
expected total return potential moving forward.
TOP TEN EQUITY HOLDINGS AS OF SEPTEMBER 30, 1997***
<TABLE>
<CAPTION>
% OF
SECURITY TOTAL NET ASSETS
--------------------------------- ----------------
<C> <S> <C>
1. Woolworth Corporation 0.76%
2. MCI Communications Corporation 0.72%
3. Heilig-Meyers Company 0.69%
4. Advanta Corporation, Class A 0.67%
5. Wendy's International 0.66%
6. Ameritech Corporation 0.61%
7. Aetna, Inc. 0.60%
8. Walt Disney Company 0.60%
9. Lowe's Company, Inc. 0.60%
10. Motorola, Inc. 0.59%
</TABLE>
- ---------------
*** Portfolio holdings, characteristics and outlook were current as of September
30, 1997, are subject to change and may not be representative of current
holdings, characteristics and outlook.
Sincerely,
/S/ Mark H. Williamson
Mark H. Williamson
President, NationsBanc Advisors, Inc.
September 30, 1997
ADDENDUM
Since the date of this report, equity markets worldwide have experienced
enormous volatility sparked by events in the Pacific Rim. However, the U.S.
economic picture remains positive -- fundamentals have not changed. Although we
expect continued volatility, our long-term view of the domestic market remains
intact.
November 26, 1997
2
<PAGE> 5
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 40.6%
AEROSPACE AND DEFENSE -- 1.6%
3,300 Litton Industries, Inc. ..................................................... $ 179,437
2,600 Lockheed Martin Corporation.................................................. 277,225
3,975 Raytheon Company............................................................. 235,021
5,700 TRW, Inc. ................................................................... 312,787
-----------
1,004,470
-----------
APPAREL AND TEXTILES -- 1.1%
11,625 Fruit of The Loom Inc. ...................................................... 326,953
1,775 Claiborne (Liz) Inc. ........................................................ 97,514
5,300 Nike Inc., Class B........................................................... 280,900
-----------
705,367
-----------
AUTOMOBILE PARTS MANUFACTURERS -- 0.7%
4,625 Genuine Parts Company........................................................ 142,507
6,800 Snap-On Tools Inc. .......................................................... 313,225
-----------
455,732
-----------
BANKS -- 0.9%
5,000 PNC Bank..................................................................... 244,062
5,550 Southtrust Corporation....................................................... 273,337
-----------
517,399
-----------
BEVERAGES -- 1.4%
7,300 Anheuser-Busch Companies, Inc. .............................................. 329,412
3,100 Coca-Cola Company............................................................ 188,906
7,300 PepsiCo, Inc. ............................................................... 296,106
-----------
814,424
-----------
BIO SPECIALTY PHARMACEUTICALS -- 0.5%
6,300 Amgen Inc.+.................................................................. 302,006
-----------
BUILDING PRODUCTS -- AIR AND HEATING -- 1.2%
5,250 Armstrong World Industries Inc. ............................................. 352,078
7,875 York International Corporation............................................... 352,406
-----------
704,484
-----------
CELULLAR TELECOMMUNICATIONS -- 0.2%
6,575 360 Communications Corporation............................................... 137,253
-----------
CHEMICALS -- BASIC -- 1.0%
3,775 Dow Chemical Company......................................................... 342,345
4,400 PPG Industries, Inc. ........................................................ 275,825
-----------
618,170
-----------
CHEMICALS -- SPECIALTY -- 1.6%
4,200 BetzDearborn, Inc. .......................................................... 287,175
8,500 Ferro Corporation............................................................ 324,593
6,650 Great Lakes Chemical Corporation............................................. 327,928
-----------
939,696
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
COAL, GAS AND PIPELINE -- 1.0%
5,700 Eastern Enterprises.......................................................... $ 212,681
6,750 Keyspan Energy Corporation................................................... 225,281
16,900 Transportadora de Gas, ADR................................................... 190,125
-----------
628,087
-----------
COMPUTER SOFTWARE AND SERVICES -- 1.0%
7,000 Automatic Data Processing Inc. .............................................. 350,000
7,150 Cabletron Systems, Inc.+..................................................... 228,800
-----------
578,800
-----------
CONSTRUCTION -- 0.3%
3,350 Fluor Corporation............................................................ 179,643
-----------
CONTAINERS -- 0.3%
3,950 Crown Cork & Seal, Inc. ..................................................... 182,194
-----------
COSMETICS AND TOILETRY -- 0.3%
1,775 Gillette Company............................................................. 153,205
-----------
DATA PROCESSING / MANAGEMENT -- 0.6%
9,025 First Data Corporation....................................................... 339,002
-----------
DRUG DELIVERY SYSTEMS -- 0.4%
4,300 R.P. Scherer Corporation..................................................... 266,331
-----------
ELECTRIC POWER -- 2.7%
9,500 Baltimore Gas & Electric Company............................................. 263,625
7,700 Cinergy Corporation.......................................................... 257,469
10,300 DPL, Inc. ................................................................... 252,350
4,550 DTE Energy Company........................................................... 138,491
6,700 Duke Energy Corporation...................................................... 331,231
13,500 Entergy Corporation.......................................................... 351,844
-----------
1,595,010
-----------
ELECTRONICS -- 0.6%
4,950 Motorola, Inc. .............................................................. 355,781
-----------
FINANCE -- MORTGAGE LOAN / BANKER -- 0.5%
8,700 Freddie Mac.................................................................. 306,675
-----------
FINANCIAL SERVICES -- 0.9%
13,700 Advanta Corporation, Class A................................................. 399,012
1,600 Transamerica Corporation..................................................... 159,200
-----------
558,212
-----------
FOOD PRODUCERS -- 1.0%
3,900 McCormack & Company, Inc. ................................................... 93,844
6,900 Nabisco Holdings Corporation, Class A........................................ 293,681
4,950 Universal Foods Corporation.................................................. 199,238
-----------
586,763
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FOOD RETAILERS -- 0.5%
8,900 Great Atlantic & Pacific Tea, Inc. .......................................... $ 282,575
-----------
FURNITURE AND APPLIANCES -- 0.5%
11,200 Rubbermaid, Inc. ............................................................ 286,300
-----------
INSURANCE COMPANIES -- 1.9%
4,450 Aetna, Inc. ................................................................. 362,397
1,400 CNA Financial Corporation+................................................... 177,713
6,588 W. R. Berkley Corporation.................................................... 283,674
3,650 Hartford Financial Services Group, Inc....................................... 314,128
-----------
1,137,912
-----------
MACHINERY AND EQUIPMENT -- 0.9%
5,225 General Signal Corporation................................................... 225,981
5,000 Nordson Corporation.......................................................... 293,125
-----------
519,106
-----------
MEDICAL PRODUCTS AND SUPPLIES -- 2.5%
5,100 Abbott Laboratories.......................................................... 326,081
4,850 American Home Products Corporation........................................... 354,050
7,100 Becton, Dickinson & Company.................................................. 339,913
2,950 Johnson & Johnson Corporation................................................ 169,994
9,850 United States Surgical Corporation........................................... 287,497
-----------
1,477,535
-----------
MEDICAL SERVICES -- 0.3%
11,600 Beverly Enterprises+......................................................... 201,550
-----------
MISCELLANEOUS MANUFACTURER -- 0.7%
5,900 Dexter Corporation........................................................... 236,369
3,500 Olin Corporation............................................................. 163,844
-----------
400,213
-----------
MULTIMEDIA -- 0.6%
4,450 Walt Disney Company.......................................................... 358,781
-----------
OIL -- DOMESTIC -- 2.6%
1,700 Amoco Corporation............................................................ 163,838
3,400 Kerr-McGee Corporation....................................................... 233,963
12,500 Occidental Petroleum Corporation............................................. 324,219
6,300 Repsol SA, ADR............................................................... 273,263
9,650 Ultramar Diamond Shamrock Corporation........................................ 311,816
5,850 Unocal Corporation........................................................... 253,013
-----------
1,560,112
-----------
OIL -- INTERNATIONAL -- 0.4%
3,075 Mobil Corporation............................................................ 227,550
-----------
PAPER AND FOREST PRODUCTS -- 0.3%
3,900 Kimberly-Clark Corporation................................................... 190,856
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RECREATION -- 0.6%
11,950 Hasbro, Inc. ................................................................ $ 336,094
-----------
RESTAURANTS AND LODGING -- 0.7%
18,625 Wendy's International........................................................ 395,781
-----------
RETAIL -- 2.6%
5,925 Sears, Roebuck and Company................................................... 337,355
20,525 Woolworth Corporation........................................................ 454,116
26,900 Heilig-Meyers Company........................................................ 413,588
9,225 Lowe's Companies, Inc. ...................................................... 358,622
-----------
1,563,681
-----------
STEEL -- 0.5%
5,450 Nucor Corporation............................................................ 287,147
-----------
TELECOMMUNICATIONS -- 0.5%
7,700 US West Communications, Inc. ................................................ 296,450
-----------
TEXTILES -- HOME FURNISHINGS -- 0.1%
5,800 Shaw Industries, Inc. ....................................................... 72,863
-----------
TOBACCO -- 0.6%
8,450 Philip Morris Companies, Inc. ............................................... 351,203
-----------
TRANSPORTATION -- RAILROADS -- 0.4%
2,700 Burlington Northern Santa Fe, Inc. .......................................... 260,888
-----------
UTILITIES -- NATURAL GAS -- 0.6%
10,600 Equitable Resources Inc. .................................................... 333,900
-----------
UTILITIES -- TELEPHONE -- 2.6%
5,525 Ameritech Corporation........................................................ 367,413
6,850 GTE Corporation.............................................................. 310,819
14,600 MCI Communications Corporation .............................................. 428,875
5,100 SBC Communications, Inc. .................................................... 313,013
3,300 Sprint Corporation........................................................... 165,000
-----------
1,585,120
-----------
WIRE AND CABLE PRODUCTS -- 0.4%
7,100 Belden Inc. ................................................................. 267,581
-----------
TOTAL COMMON STOCKS (Cost $23,033,241)....................................... 24,321,902
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY STRIPPED SECURITIES -- 56.4%
$15,256,800 TIGR, Interest Receipt, 7.460% due 08/15/2004**.............................. $10,004,952
20,000,000 TIGR, Principal Receipt, 7.440% due 08/15/2004**............................. 13,115,400
16,120,000 U.S. Treasury Strip, 7.440% due 08/15/2004**................................. 10,627,594
-----------
TOTAL U.S. TREASURY STRIPPED SECURITIES (Cost $31,066,666)................... 33,747,946
===========
REPURCHASE AGREEMENT -- 4.0% (Cost $2,408,000)
2,408,000 Agreement with Smith Barney, 5.480% dated 09/30/1997, to be repurchased at
$2,408,367 on 10/01/1997, collateralized by: $1,025,383 U.S. Treasury Note,
7.375% due 11/15/97; $279,736 U.S. Treasury Bond, 11/250% due 02/15/15;
$720,818 Resolution Funding Corporation Strips, Principal Only, due
04/15/05; $516,948 GNMA, 6.000% due 05/20/27............................... 2,408,000
===========
TOTAL INVESTMENTS (Cost $56,507,907*)........................................... 101.0% 60,477,848
OTHER ASSETS AND LIABILITIES (NET).............................................. (1.0) (574,361)
----- -----------
NET ASSETS...................................................................... 100.0% $59,903,487
===== ===========
</TABLE>
- ---------------
* Aggregate cost for federal tax purposes.
** The rate shown is the effective yield at date of purchase.
+ Non-income producing security.
ABRREVIATIONS:
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 SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $56,507,907) (Note 1) See accompanying
schedule.............................................................. $60,477,848
Cash................................................................... 729
Receivable for investment securities sold.............................. 1,369,102
Dividends and interest receivable...................................... 41,322
Unamortized organization costs (Note 5)................................ 19,347
Prepaid expenses....................................................... 5,390
-----------
Total Assets...................................................... 61,913,738
LIABILITIES:
Payable for investment securities purchased............................ $1,563,982
Dividends payable...................................................... 366,536
Investment advisory fee payable (Note 2)............................... 24,161
Administration fee payable (Note 2).................................... 12,214
Transfer agent fees payable (Note 2)................................... 6,911
Custodian fees payable (Note 2)........................................ 5,552
Accrued Directors' fees and expenses (Note 2).......................... 1,500
Accrued expenses and other payables.................................... 29,395
----------
Total Liabilities................................................. 2,010,251
-----------
NET ASSETS.................................................................. $59,903,487
===========
NET ASSETS consist of:
Distributions in excess of net investment income....................... $ 17,930
Accumulated net realized gain on investments sold...................... 7,115,856
Net unrealized appreciation of investments............................. 3,969,941
Common Stock at par value (Note 4)..................................... 5,231
Paid-in capital in excess of par value................................. 48,794,529
-----------
Total Net Assets.................................................. $59,903,487
===========
NET ASSET VALUE PER SHARE:
($59,903,487 / 5,231,163 shares of common stock outstanding).............. $11.45
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 11
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................................. $1,185,307
Dividends................................................................ 257,522
----------
Total Investment Income............................................. 1,442,829
EXPENSES:
Investment advisory fee (Note 2)......................................... $140,074
Administration fee (Note 2).............................................. 75,641
Transfer agent fees (Note 2)............................................. 33,424
Custodian fees (Note 2).................................................. 10,894
Amortization of organization costs (Note 5).............................. 5,528
Directors' fees and expenses (Note 2).................................... 4,875
Other.................................................................... 55,480
--------
Total Expenses...................................................... 325,916
----------
NET INVESTMENT INCOME......................................................... 1,116,913
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain on investments during the period....................... 3,795,681
Net unrealized appreciation of investments during the period............. 3,225,470
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............................... 7,021,151
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $8,138,064
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
09/30/97 ENDED
(UNAUDITED) 03/31/97
----------- -----------
<S> <C> <C>
Net investment income........................................................ $ 1,116,913 $ 2,247,549
Net realized gain on investments............................................. 3,795,681 6,344,318
Net unrealized appreciation/(depreciation) on investments.................... 3,225,470 (3,817,472)
----------- -----------
Net increase in net assets resulting from operations......................... 8,138,064 4,774,395
Distributions to shareholders from net investment income..................... (1,098,544) (2,281,662)
Distributions to shareholders from net realized gains on investments......... -- (6,009,731)
Net increase in net assets from Company share transactions (Note 4).......... -- --
----------- -----------
Net increase/(decrease) in net assets........................................ 7,039,520 (3,516,998)
NET ASSETS:
Beginning of period.......................................................... 52,863,967 56,380,965
----------- -----------
End of period (including undistributed net investment income/(distributions
in excess of net investment income) of $17,930 and $(439), respectively)... $59,903,487 $52,863,967
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 13
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR PERIOD
09/30/97 ENDED ENDED ENDED
(UNAUDITED) 03/31/97 03/31/96 03/31/95*
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period.......................... $ 10.11 $ 10.78 $ 9.67 $ 9.35#
------- ------- ------- -------
Net investment income......................................... 0.21 0.43 0.40 0.29**
Net realized and unrealized gain on investments............... 1.34 0.49 1.61 0.40
------- ------- ------- -------
Net increase in net assets resulting from investment
operations.................................................. 1.55 0.92 2.01 0.69
Offering expenses charged to paid-in-capital.................. -- -- -- (0.03)
Distributions:
Dividends from net investment income.......................... (0.21) (0.44) (0.40) (0.29)
Distributions in excess of net investment income.............. -- -- -- (0.00)##
Distributions from net realized capital gains................. -- (1.15) (0.50) (0.05)
------- ------- ------- -------
Total distributions........................................... (0.21) (1.59) (0.90) (0.34)
------- ------- ------- -------
Net asset value, end of period................................ $ 11.45 $ 10.11 $ 10.78 $ 9.67
======= ======= ======= =======
Market value, end of period................................... $10.375 $ 9.000 $ 9.250 $ 8.500
======= ======= ======= =======
Total return++................................................ 17.71% 13.93% 19.25% (5.54)%
======= ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................... $59,903 $52,864 $56,381 $50,238
Ratio of operating expenses to average net assets............. 1.14%+ 1.18% 1.24% 1.10%+
Ratio of net investment income to average net assets.......... 3.89%+ 4.01% 3.75% 4.12%+
Portfolio turnover rate....................................... 63% 99% 46% 25%
Average commission rate (per share of security)+++............ $0.0593 $0.0592 $0.0623 N/A
</TABLE>
- ---------------
* Nations Balanced Target Maturity Fund, Inc. commenced operations on June
30, 1994.
** Per share numbers have been calculated using the monthly average share
method, which more appropriately represents the per share data for the
period since 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.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 14
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 ("SEC") 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.
1. SIGNIFICANT ACCOUNTING POLICIES.
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 following is a
summary of significant accounting policies followed by the Company in the
preparation of its financial statements.
Securities Valuation: The Company's portfolio securities which are traded
on a recognized securities exchange are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the last
sales price on a national securities market. Securities traded only on
over-the-counter markets (but not including securities reported on the NASDAQ
National Market System) 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. Each security reported on the
NASDAQ National Market System is valued at the last sales price on the valuation
date. Restricted securities, securities for which market quotations are not
readily available, and certain other assets are valued 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, including joint repurchase agreement transactions in which the
Company, along with other registered investment companies advised by NationsBanc
Advisors, Inc. ("NBAI"), invest their aggregate cash balances. 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. 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
must be 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 losses incurred. There
would be a potential loss to the Company in the event the Company is delayed or
prevented from exercising its right 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 right. Unless
expressly permitted by the SEC, the Company will not enter into repurchase
agreements with the Company's investment adviser, distributor or any of their
affiliates. The Company's investment adviser, acting under the supervision of
the Board of Directors, monitors the value of the collateral received as well as
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 based on the specific
identification of the securities sold. Interest income, adjusted for accretion
of discounts and amortization of premiums, is earned ratably 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 declare and 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 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 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
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Nations Balanced Target Maturity Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
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 applicable.
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 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 and NBAI have entered into a sub-advisory agreement (the
"Sub-Advisory Agreement") with TradeStreet Investment Associates, Inc.,
("TradeStreet"), a wholly-owned subsidiary of NationsBank. Under the terms of
the Sub-Advisory Agreement, TradeStreet is entitled to receive a sub-advisory
fee from NBAI 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 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
certain administrative services to the Company. Under the terms of the
Administration Agreement, NationsBank also maintains certain of the Company's
books and records and furnishes, at its own expense, such clerical assistance,
bookkeeping and other administrative services as the Company may reasonably
require in the conduct of its business. 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 (the
"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.
NationsBank of Texas, N.A. acts as the custodian of the Company's assets
and for the six months ended September 30, 1997, earned $3,373 for providing
such services. The Bank of New York ("BONY") acts as the sub-custodian of the
Company. First Data also serves as the transfer agent and dividend disbursing
agent for the Company.
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 unaffiliated 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.
3. PURCHASES AND SALES OF SECURITIES.
For the six months ended September 30, 1997, the cost of purchases and
proceeds from sales of securities (excluding long-term U.S. government
securities and short-term investments) aggregated $34,452,487 and $34,365,404,
respectively.
At September 30, 1997, gross unrealized appreciation and depreciation for
tax purposes was $4,285,273 and $315,332, respectively.
4. COMMON STOCK.
At September 30, 1997, 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. Due
to the lack of activity in Company shares, a schedule of Capital Stock Activity
has not been provided.
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Nations Balanced Target Maturity Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
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. There were no
share repurchases for the six months ended September 30, 1997 or for the year
ended March 31, 1997.
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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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 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 of the Company on the Exchange on such record
date including estimated brokerage commissions, 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, the Plan Agent will proceed to purchase
in one or more transactions the shares of capital stock in the open market, at
the then current price as hereinafter provided. Each participant's account will
be credited with the number of shares corresponding in value, as determined by
the price actually paid on the open market for such shares including brokerage
expenses, to the amount such participant would have received in cash had such
participant not elected to participate in this Plan. Under
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Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN (CONTINUED)
such circumstances, in anticipation of receipt of a dividend in cash, the Plan
Agent may purchase shares in the open market during the period between the
record date and the payable date for the dividend or distribution. The Plan has
been amended to specifically authorize such anticipatory purchases.
If the Plan Agent elects to purchase shares in the open market, and if
before the Plan Agent has completed its purchases the market price exceeds the
net asset value per share, the average per share purchase price paid by the Plan
Agent may exceed the net asset value of the Company's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Company. During certain market conditions, it may be
impracticable or impossible to complete a market purchase program at prices that
are below or not substantially in excess of net asset value, and, in such event,
the Company may in its discretion issue the required shares.
NO SERVICE FEE TO REINVEST
There is no service fee charged to participants for reinvesting dividends
or distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Company. There will be no brokerage commissions with respect to
shares issued directly by the Company as a result of dividends or capital gains
distributions payable either in stock or 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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ANNUAL MEETING OF STOCKHOLDERS
ANNUAL MEETING OF STOCKHOLDERS
On June 6, 1997, the Company held its Annual Meeting of Stockholders in
Charlotte, North Carolina. Thomas F. Keller was elected as a director of the
Company for an additional three-year term, to expire in 2000, by the following
votes: 2,747,099 For, and 80,957 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, 1998, was
ratified by the following votes: 2,621,270 For, 18,883 Against, and 187,903
Abstaining.
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_______________
PO Box 34602 BULK RATE
Charlotte, NC 28234-4602 U.S. POSTAGE
Toll Free 1-800-982-2271 PAID
N READING, MA
PERMIT NO.
105
______________
