<PAGE>
Nations Balanced Target
Maturity Fund, Inc.
SEMI
ANNUAL
REPORT
For the Period Ended September 30, 1998
---------------------
Nations
---------------------
Balanced
---------------------
Target
---------------------
Maturity Fund
----------------------
<PAGE>
- --------------------------------------------------------------------------------
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>
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-month
period ended September 30, 1998.
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 the reporting
period 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.
For the six-month period ended September 30,1998, the total return of Nations
Balanced Target Maturity Fund, Inc. was (5.01)%/1/ based on an ending market
price of $9.31. Over this period, the Company distributed $0.19 per share of
ordinary income to its shareholders. As of September 30, 1998, 73.2% of the
Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations, and
27.0% was invested in common stocks, with the remaining 1.2% in shares of an
investment company. A breakdown of portfolio holdings by asset type follows.
Portfolio Breakdown as of September 30, 1998
[PIE CHART APPEARS HERE]
Investment Company 1.2%
Pharmaceuticals 1.2%
Oil-Domestic 1.4%
Electric Power 1.4%
Food Producers 1.4%
Banks 1.6%
Financial Services 1.6%
Computers 1.6%
Utilities - Telephone 1.7%
U.S. Government Obligations 73.2%
Other Common Stocks and Other
Assets & Liabilities(net) 13.7%
Investment Philosophy
The equity portion of the Company is invested based on 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 seeks to deliver above-average performance with
below-average risk over a market cycle. Consequently, the portfolio is broadly
diversified across many economic sectors, although certain sectors may be over-
or underweighted relative to the Standard & Poor's 500 Composite Stock Index
from time to time.
- ------------
/1/ The average annual total return since inception (6/30/94) based on the
market price was 11.99%. 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.
Past performance is no guarantee of future results.
1
<PAGE>
The emphasis in stock selection will continue to be a "bottom up" analysis of
individual company fundamentals. When evaluating specific equity investment
alternatives, the key investment criteria include a low price-to-earnings ratio,
strong financial quality and a catalyst for improved price performance.
Catalysts for improved price performance typically come in the form of improving
earnings estimates, changes in management, new product developments or corporate
restructurings.
Market Environment and Portfolio Strategy*
After a period of near perfection in terms of economic fundamentals, the
financial markets were poised to give back a portion of their extraordinary
gains. Over the last six months, the U.S. stock market was buffeted by
unsettling financial market events in Southeast Asia, Japan, Latin America, and
Russia, as well as by the bailout of a major hedge fund.
These events created fear and uncertainty among equity investors. As a result,
investors flocked to the stocks of companies with sustainable earnings
expectations, discarding companies with a cyclical bias or foreign exposure. The
Company's portfolio included investments in cyclical companies during the period
and accordingly was negatively impacted by this change in investor behavior.
Sectors that contributed positively to performance were utilities and consumer
staples. Technology and consumer cyclical companies experienced the greatest
declines in price, but are also in our view among the most undervalued and
therefore attractive opportunities in light of the Company's investment
discipline.
Looking forward, the Company's investment adviser believes that the utility
sector offers opportunity and the portfolio is slightly overweighted in this
area. In addition, it is underweighted in healthcare, as the investment adviser
believes the majority of companies in this sector are overvalued.
Top Ten Equity Holdings as of September 30, 1998*
1. SBC Communications Inc.................... 0.63%
2. Alltel Corporation........................ 0.59
3. Johnson & Johnson Corporation............. 0.49
4. Coastal Corporation....................... 0.48
5. Wellpoint Health Networks+................ 0.42
6. Tenet Healthcare Corporation+............. 0.42
7. Allstate Corporation...................... 0.42
8. Wendy's International..................... 0.41
9. GTE Corporation........................... 0.41
10. Williams Companies Inc.................... 0.40
Thank you for your investment in Nations Balanced Target Maturity Fund, Inc. The
Company looks forward to its next report to shareholders.
Sincerely,
/s/ Robert H. Gordon
Robert H. Gordon
President NationsBanc Advisors, Inc.
September 30, 1998
- ---------------
* Portfolio holdings, characteristics and outlook are subject to change and may
not be representative of current holdings, characteristics and outlook.
2
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Value
Shares ( 000 )
================================================================================
Common Stocks - 27.0%
Aerospace and Defense - 1.0%
2,025 AlliedSignal Inc.................................... $ 72
2,950 Litton Industries Inc. +............................ 177
1,450 Lockheed Martin Corporation......................... 146
3,025 Raytheon Company, Class B........................... 163
-------------
558
-------------
Apparel and Textiles - 0.3%
5,900 Claiborne (Liz) Inc................................. 155
-------------
Banks - 1.6%
800 Citicorp............................................ 74
9,800 First Security Corporation.......................... 164
2,000 Mellon Bank Corporation............................. 110
3,505 One Valley Bancorp Inc.............................. 113
4,550 PNC Bank Corporation................................ 205
6,225 Southtrust Corporation.............................. 217
-------------
883
-------------
Beverages - 0.7%
3,400 Anheuser-Busch Companies Inc........................ 184
6,025 PepsiCo Inc......................................... 177
-------------
361
-------------
Building Products - Air and Heating - 0.3%
3,325 Armstrong World Industries Inc...................... 178
-------------
Chemicals - Basic - 0.3%
2,550 PPG Industries Inc.................................. 139
-------------
Chemicals - Specialty - 0.5%
3,000 Sigma-Aldrich Corporation........................... 87
8,450 Witco Corporation................................... 177
-------------
264
-------------
Computers - 1.6%
600 Ceridian Corporation +.............................. 34
3,600 Compaq Computer Corporation......................... 114
8,880 Flowserve Corporation............................... 180
4,150 Hewlett-Packard Company............................. 220
1,575 International Business Machines Corporation......... 202
2,700 Sun Microsystems Inc. +............................. 134
-------------
884
-------------
Computer Software - 0.4%
5,625 Computer Associates International Inc .............. 208
-------------
See Notes to Financial Statements.
3
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (000)
================================================================================
Cosmetics and Toiletry - 0.3%
7,800 Alberto Culver Company.............................. $ 182
-------------
Diversified - 0.5%
7,800 Coastal Corporation................................. 263
-------------
Durable Goods- Wholesale - 0.3%
3,650 Avnet Inc........................................... 134
-------------
Electric Power - 1.4%
1,600 Consolidated Edison Inc............................. 83
3,900 Dominion Resources Inc.............................. 174
2,500 Energy East Corporation............................. 128
5,000 Entergy Corporation................................. 154
1,700 Florida Progress Corporation........................ 74
3,300 Texas Utilities Company............................. 154
-------------
767
-------------
Electronics - 0.8%
2,400 AMP Inc............................................. 86
10,750 Arrow Electronics Inc. +............................ 141
6,675 SCI Systems Inc. +.................................. 180
-------------
407
-------------
Financial Services - 1.6%
5,500 Allstate Corporation................................ 229
2,800 Bank of New York Inc................................ 77
3,200 Chase Manhattan Corporation......................... 138
6,550 First Data Corporation.............................. 154
3,850 Hartford Financial Services Group Inc............... 183
3,500 Paine Webber Group Inc.............................. 105
-------------
886
-------------
Food Producers - 1.4%
3,900 Interstate Bakeries Corporation..................... 121
5,625 Nabisco Holdings Corporation, Class A............... 202
2,500 Quaker Oats Company................................. 148
3,800 Sara Lee Corporation................................ 205
1,300 Suiza Foods Corporation +........................... 41
1,100 Unilever NV ADR..................................... 67
-------------
784
-------------
Furniture and Appliances - 0.2%
4,350 Rubbermaid Inc...................................... 104
-------------
Hotels - 0.3%
8,050 Hilton Hotels Corporation........................... 137
-------------
See Notes to Financial Statements.
4
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Value
Shares (000)
================================================================================
Insurance - 1.0%
2,100 CIGNA Corporation................................... $ 139
5,975 Conseco Inc......................................... 183
6,525 St. Paul Companies Inc.............................. 212
--------------
534
--------------
Manufacturing - 0.5%
2,450 Eaton Corporation................................... 154
3,825 National Service Industries Inc..................... 122
--------------
276
--------------
Medical Products and Supplies - 0.7%
3,275 Bard (C.R.) Inc..................................... 121
3,475 Johnson & Johnson Corporation....................... 272
--------------
393
--------------
Medical Services - 1.1%
4,600 Beverly Enterprises Inc.+........................... 37
5,800 Columbia/HCA Healthcare Corporation................. 116
8,000 Tenet Healthcare Corporation+....................... 230
4,100 Wellpoint Health Networks Inc.+..................... 230
--------------
613
--------------
Multimedia - 0.3%
7,425 CBS Corporation..................................... 180
--------------
Office Equipment - 0.3%
5,650 Harris Corporation.................................. 181
--------------
Oil - Domestic - 1.4%
1,300 Columbia Energy Group............................... 76
2,625 Mobil Corporation................................... 199
7,600 Occidental Petroleum Corporation.................... 163
4,750 Phillips Petroleum Company.......................... 216
3,200 Ultramar Diamond Shamrock Corporation............... 73
--------------
727
--------------
Oil - International - 0.3%
1,700 British Petroleum Company ADR....................... 148
--------------
Oil Services - 0.7%
8,795 Questar Corporation................................. 169
7,700 Williams Companies Inc.............................. 221
--------------
390
--------------
Paper and Forest Products - 0.3%
3,950 Kimberly-Clark Corporation.......................... 160
--------------
See Notes to Financial Statements.
5
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Value
Shares ( 000 )
================================================================================
Pharmaceuticals - 1.2%
700 American Home Products Corporation.................. $ 37
1,600 Bristol-Myers Squibb Company........................ 166
1,625 Merck & Co. Inc..................................... 210
2,000 Schering-Plough Corporation......................... 207
--------------
620
--------------
Restaurants and Lodging - 0.4%
10,225 Wendy's International Inc........................... 227
--------------
Retail - 0.3%
5,300 Dillards Inc., Class A.............................. 150
--------------
Savings and Loans - 0.4%
3,700 Ahmanson (H.F.) & Company........................... 205
--------------
Telecommunications - 0.9%
6,900 Alltel Corporation.................................. 327
8,400 Scientific-Atlanta Inc.............................. 177
--------------
504
--------------
Tobacco - 0.4%
3,300 Phillip Morris Companies Inc........................ 152
2,500 UST Inc............................................. 74
--------------
226
--------------
Tools - 0.3%
6,025 Snap-On Inc......................................... 186
--------------
Transportation - Railroads - 0.3%
5,085 Burlington Northern Santa Fe Inc.................... 163
--------------
Trucking and Shipping - 0.6%
4,325 CNF Transportation Inc.............................. 126
7,525 Ryder Systems Inc................................... 187
--------------
313
--------------
Utilities - Natural Gas - 0.4%
8,050 Equitable Resources Inc............................. 205
--------------
Utilities - Telephone - 1.7%
3,500 AT&T Corporation.................................... 204
700 BellSouth Corporation............................... 53
4,050 GTE Corporation..................................... 223
2,300 MCI Worldcom Inc.................................... 112
7,800 SBC Communications Inc.............................. 347
--------------
939
--------------
Total Common Stocks
(Cost $15,701).................................... 14,634
--------------
See Notes to Financial Statements.
6
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- ----------------------------------------------------------------------------
Statement of Net Assets (continued) September 30, 1998 (unaudited)
- ----------------------------------------------------------------------------
Value
Shares ( 000 )
============================================================================
Investment Company - 1.2% (Cost $675)
674,589 Nations Cash Reserves (b) ........................ $ 675
--------------
Principal
Amount
(000)
===========
U.S. Government Obligations - 73.2%
$ 15,257 TIGR, Interest Receipt, 4.480% 08/15/04**......... 11,764
20,000 TIGR, Principal Receipt, 4.480% 08/15/04**........ 15,421
16,120 U.S. Treasury Strips, 4.420% 08/15/04**.......... 12,467
--------------
Total U.S. Government Obligations (Cost $33,428).. 39,652
--------------
Total Investments (Cost $49,804)(a)........ 101.4% 54,961
--------------
Other Assets and Liabilities (Net)......... (1.4)%
Receivable for investment securities sold......... 421
Dividends and interest receivable................. 35
Unamortized organization costs.................... 8
Other assets...................................... 22
Due to custodian.................................. (993)
Investment advisory fee payable................... (18)
Administration fee payable........................ (11)
Accrued Directors' fees and expenses.............. (2)
Accrued expenses and other liabilities............ (221)
--------------
Total Other Assets and Liabilities (Net).......... (759)
--------------
Net Assets................................. 100.0% $ 54,202
==============
Net Asset Value Per Share:
($54,202,000 / 5,231,163 shares of
beneficial interest outstanding).................. $ 10.36
Net Assets consist of:
Common Stock at par value......................... $ 5
Paid-in capital in excess of par value............ 48,792
Undistributed net investment income............... 40
Accumulated net realized gain on investments sold. 208
Unrealized appreciation of investments............ 5,157
--------------
Net Assets.................................... $ 54,202
==============
- -------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $6,791,000 and gross
depreciation of $1,634,000 for federal income tax purposes. At
September 30, 1998, the aggregate cost of securities for federal income tax
purposes was $49,804,000.
(b) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates,
Inc.
** The rate shown is the effective yield at date of purchase.
+ Non-income producing security.
ABBREVIATIONS:
ADR - American Depository Receipt
TIGR - Treasury Investor Growth Receipt
7
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998
(In thousands)
INVESTMENT INCOME:
Dividends ........................................... $ 182
Interest ............................................ 1,230
-------
Total Investment Income .......................... 1,412
EXPENSES:
Investment advisory fee ............................. $ 120
Administration fee ................................. 68
Transfer agent fees ................................. 92
Legal and audit fees ................................ 49
Custodian fees ...................................... 6
Amortization of organization costs .................. 6
Directors' fees and expenses ........................ 6
Other ............................................... 33
-------
Total Expenses ................................... 380
-------
NET INVESTMENT INCOME ..................................... 1,032
-------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss on investments ................. (961)
Net change in unrealized appreciation of
investments ..................................... 329
-------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS .... (632)
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 400
=======
See Notes to Financial Statements.
8
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year
9/30/98 Ended
(unaudited) 3/31/98
<S> <C> <C>
(In thousands) -------- --------
Net investment income ............................................. $ 1,032 $ 2,145
Net realized gain/(loss) on investments ........................... (961) 5,397
Net change in unrealized appreciation of investments .............. 329 4,084
-------- --------
Net increase in net assets resulting from operations .............. 400 11,626
Distributions to shareholders from net investment income .......... (994) (2,145)
Distributions to shareholders from net realized gain
on investments ................................................... -- (7,549)
-------- --------
Net increase/(decrease) in net assets ............................. (594) 1,932
NET ASSETS:
Beginning of period ......................................... 54,796 52,864
-------- --------
End of period (including undistributed net investment income
of $40 and $2, respectively) ............................. $ 54,202 $ 54,796
======== ========
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Period
09/31/98 Ended Ended Ended Ended
(unaudited) 03/31/98 03/31/97 03/31/96 03/31/95*
----------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ................. $ 10.47 $ 10.11 $ 10.78 $ 9.67 $ 9.35#
--------- --------- --------- --------- ---------
Net investment income ................................ 0.20 0.41 0.43 0.40 0.29**
Net realized and unrealized gain/(loss)
on investments .................................... (0.12) 1.80 0.49 1.61 0.40
--------- --------- --------- --------- ---------
Net increase in net assets resulting from
investment operations ............................. 0.08 2.21 0.92 2.01 0.69
Offering expenses charged to paid in capital ......... -- -- -- -- (0.03)
Distributions:
Distributions from net investment income ............. (0.19) (0.41) (0.44) (0.40) (0.29)
Distributions in excess of net investment income ..... -- -- -- -- (0.00)##
Distributions from net realized capital gains ........ -- (1.44) (1.15) (0.50) (0.05)
--------- --------- --------- --------- ---------
Total distributions .................................. (0.19) (1.85) (1.59) (0.90) (0.34)
--------- --------- --------- --------- ---------
Net asset value, end of period ....................... $ 10.36 $ 10.47 $ 10.11 $ 10.78 $ 9.67
========= ========= ========= ========= =========
Market value, end of period .......................... $ 9.31 $ 10.00 $ 9.00 $ 9.25 $ 8.50
--------- --------- --------- --------- ---------
Total return++ ....................................... (5.01)% 32.73% 13.93% 19.25% (5.54)%
--------- --------- --------- --------- ---------
Ratios to average net assets /supplemental data:
Net assets, end of period (in 000's) ................. $ 54,202 $ 54,796 $ 52,864 $ 56,381 $ 50,238
Ratio of operating expenses to average net assets .... 1.40%+ 1.23% 1.18% 1.24% 1.10%+
Ratio of net investment income to average net assets . 3.79%+ 3.78% 4.01% 3.75% 4.12%+
Portfolio turnover rate .............................. 26% 106% 99% 46% 25%
</TABLE>
- -----------------
* Nations Balanced Target Maturity Fund, Inc. commenced operations on June
30, 1994.
** Per share amounts have been calculated using the monthly average shares
method.
+ Annualized.
++ Total return represents aggregate total return for the period based on
market value at period end.
# 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.
10
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Nations Balanced Target Maturity Fund, Inc. (the "Company") is registered as a
diversified, closed-end management company under the Investment Company Act of
1940, as amended (the "1940 Act").
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 the
significant accounting policies followed by the Company in the preparation of
its financial statements.
Securities Valuation -- Securities which are traded on a recognized securities
exchange or on NASDAQ are valued at the last sales price on the exchange or
market on which such securities are primarily traded. Securities traded only on
over-the-counter markets (other than 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. 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. Certain
securities may be valued by one or more principal market makers. Short-term
investments that mature in 60 days or less are valued at amortized cost.
Securities Transactions and Investment Income -- Securities transactions are
accounted for on a trade date basis. 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 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 distributions from net investment income quarterly 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.
Federal Income Taxes -- The Company intends to continue to qualify as a
regulated investment company, if such qualification is in the best interest of
its shareholders, by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
taxable earnings to its shareholders. Therefore, no provision is made for
Federal income or excise taxes.
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 of the Company.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND OTHER
RELATED PARTY TRANSACTIONS.
The Company has entered into an investment advisory agreement with NationsBanc
Advisors, Inc. ("NBAI"), pursuant to which it 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 with TradeStreet
Investment Associates, Inc. ("TradeStreet"), a wholly-owned subsidiary of
NationsBank, N.A. ("NationsBank") pursuant to which TradeStreet is entitled to
receive a sub-advisory fee from NBAI at 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.
11
<PAGE>
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
NBAI is the Company's administrator. In its role as administrator, NBAI
supervises the overall day-to-day operations and provides certain administrative
services. NBAI also maintains certain of the Company's books and records and
furnishes, at its own expense, such clerical assistance, bookkeeping and other
administrative services as the Company may reasonably require in the conduct of
its business. As compensation for both the administrative services and the
expenses assumed by NBAI, the Company pays NBAI a monthly fee equal to an annual
rate of 0.25% of the Company's average weekly net assets.
Pursuant to a sub-administration agreement dated January 1, 1998, between NBAI
and First Data Investor Services Group, Inc.("First Data"), a wholly-owned
subsidiary of First Data Corporation, 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 NBAI by the Company for administration services.
First Data also serves as the transfer agent and dividend disbursing agent for
the Company.
NationsBank of Texas, N.A. ("NationsBank of Texas") served as the custodian of
the Company's assets until it merged with NationsBank on May 6, 1998.
NationsBank began serving as custodian for the Company's assets on that date and
is providing the same services as were previously provided by NationsBank of
Texas. For the six months ended September 30, 1998, NationsBank of Texas and
NationsBank earned $1,000 and $2,000 respectively, for providing such services.
The Bank of New York ("BNY") has entered into an agreement with the Company and
NationsBank whereby BNY serves as a sub-custodian for the Company. For the six
months ended September 30, 1998, expenses of the Company were reduced under
expense offset arrangements with BNY. These amounts were less than $500. The
Company could have invested a portion of the assets utilized in connection with
the expense offset arrangements in an income producing asset if they had not
entered into such arrangements.
The Company pays the Chairman of the Board of Directors 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.
The Company has made daily investments of cash balances in Nations Cash
Reserves, a portfolio of Nations Institutional Reserves, pursuant to an
exemptive order received from the Securities and Exchange Commission. For the
six months ended September 30, 1998, the Company earned $19,000 in the aggregate
from such investments.
On September 30, 1998, NationsBank Corporation, the parent company of
NationsBank, merged into BankAmerica Corporation.
3. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government securities and short-term investments, for the six months ended
September 30, 1998, were as follows:
Purchases Sales
----------- -----------
$14,193,000 $13,917,000
There were no purchases or sales of long-term U.S. government securities for the
six months ended September 30, 1998.
4. COMMON STOCK
At September 30, 1998, 1,000,000,000 shares of common stock, $0.001 par value
were authorized.
The Board of Directors 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 an 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, 1998.
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Nations Balanced Target Maturity Fund, Inc.
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Dividend Reinvestment Plan
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Dividend Reinvestment Plan
The Company's Dividend Reinvestment Plan (the "Plan") offers an automatic way to
reinvest dividends and capital gains distributions in shares of the Company.
Participation
Shareholders of record will receive their dividends in cash unless they have
otherwise instructed 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
advisor of the Company as of the close of business on the record date for the
dividend or distribution) is equal to or less than 95% of the closing market
price per share of the capital stock of the Company on the New York Stock
Exchange (the "Exchange") on such record date plus estimated brokerage
commissions. The number of such authorized but unissued shares to be credited to
a participant's account will be determined as of the close of business on the
record date for the dividend, by valuing such shares at the greater of the net
asset value per share or 95% of the market price per share. The Plan Agent will
credit each participant's account with the number of shares corresponding in
value, as determined under the foregoing formula, to the amount such participant
would have received in cash had such participant not elected to participate in
this Plan.
If the net asset value per share is equal to or less than the closing market
price per share of the capital stock of the Company on the Exchange on such
record date plus estimated brokerage commissions but exceeds 95% of such closing
market price plus estimated brokerage commissions, the Plan Agent may elect on
behalf of all participants (i) to take the dividend in cash and as soon as
practicable thereafter, consistent with obtaining the best price and execution,
proceed to purchase in one or more transactions the shares of capital stock in
the open market, at the then current price as hereinafter provided, and will
credit each participant's account with the number of shares corresponding in
value, as determined by the price actually paid on the open market for such
shares including brokerage expenses, to the amount such participant would have
received in cash had such participant not elected to participate in this Plan or
(ii) to receive the dividend in authorized but unissued shares of capital stock,
in which case the Plan Agent will credit each participant's account with the
number of shares corresponding in value (determined by valuing such shares at
the greater of the net asset value per share or 95% of the market price per
share, in each case as of the close of business on the record date for the
dividend or distribution) to the amount such participant would have received in
cash had such participant not elected to participate in this Plan.
If the net asset value per share is higher than the closing market price per
share of the capital stock of the Company on the Exchange including estimated
brokerage commissions on such record date, the Plan Agent will elect to take the
dividend in cash and as soon as practicable. Consistent with obtaining the best
price and execution, the Plan Agent will proceed to purchase in one or more
transactions the shares of capital stock in the open market, at the then current
price as hereinafter provided. Each participant's account will be credited with
the number of shares corresponding in value, as determined by the price actually
paid on the open market for such shares including brokerage expenses, to the
amount such participant would have received in cash had such participant not
elected to participate in this Plan. Under such circumstances, in anticipation
of receipt of a dividend in cash, the Plan Agent may purchase shares in 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.
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Nations Balanced Target Maturity Fund, Inc.
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Dividend Reinvestment Plan (continued)
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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 Investors Services Group, Inc., P.O. Box 34602, Charlotte, NC 28234,
(800) 982-2271.
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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
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BTMSA 9/98
