<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, 1999
NATIONS
BALANCED
TARGET
MATURITY FUND
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
</TABLE>
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY BANK OF AMERICA, N.A. ("BANK OF AMERICA") 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.
AFFILIATES OF BANK OF AMERICA 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 ending September 30, 1999.
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 of 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 ending September 30, 1999, the total return of Nations
Balanced Target Maturity Fund, Inc. was -0.71%,(1) based on an ending market
price of $8.75. Over this period, the Company distributed $0.19 per share of
ordinary income to its shareholders. As of September 30, 1999, 74.4% of the
Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations and
26.0% was invested in common stocks. A breakdown of portfolio holdings by asset
type follows:
PORTFOLIO BREAKDOWN (AS OF SEPTEMBER 30, 1999)(2)
PIE CHART 10 LARGEST INDUSTRIES
<TABLE>
<CAPTION>
<S> <C>
Computer Related 3.7%
Utilities-Telephone 2.9%
Oil-International 2.1%
Banking 2.0%
Insurance 1.5%
Financial Services 1.0%
Drugs 0.9%
Office Equipment 0.8%
Electric Power 0.8%
Other 9.9%
U.S. Treasury Strips 74.4%
</TABLE>
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 and Poor's 500 Composite Stock Price
Index (S&P 500)(3) from time to time.
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
- ---------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
(1) The average annual total return since inception (6/30/94) based on the
market price was 8.26%. 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 distributions.
(2) Portfolio characteristics and holdings are subject to change and may not be
representative of current characteristics and holdings.
(3) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 widely held common stocks. It is unavailable for investment.
1
<PAGE> 4
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
The negative sentiment overhanging the financial markets during the last six
months stemmed from concerns ranging from higher interest rates and a weak
dollar to Y2K and potentially weaker than expected third quarter earnings. In
what were deemed pre-emptive moves, Federal Reserve Board Chairman Alan
Greenspan and the Federal Open Market Committee raised the Federal Funds rate by
0.25% in August, on the heels of their 0.25% increase in June.
The U.S. stock market, as represented by the S&P 500 Index, was essentially flat
during the six-month period, rising a mere 0.29%. Large-cap growth stocks
resumed their leadership position, with technology stocks at the forefront. The
Company's portfolio of technology stocks performed extremely well. Offsetting
this, however, were declines in the underlying stocks within the Index,
particularly those in the healthcare and consumer cyclicals sectors. Healthcare
stocks felt the brunt of legislative change and lower Medicare reimbursements,
and cyclicals were out of favor due to concerns over a slowing economy.
Financial stocks also declined sharply, but in our view this sector continues to
represent compelling opportunity for the long-term equity investor.
TOP 10 EQUITY HOLDINGS (AS OF SEPTEMBER 30, 1999)(4)
<TABLE>
<C> <S> <C>
1. Lexmark International Group, Inc., Class A........... 0.8%
2. GTE Corporation...................................... 0.8
3. Mellon Bank Corporation.............................. 0.7
4. SBC Communications Inc............................... 0.7
5. Mobil Corporation.................................... 0.7
6. BP Amoco plc, ADR.................................... 0.6
7. CIGNA Corporation.................................... 0.6
8. International Business Machines Corporation.......... 0.6
9. Gateway Inc. ........................................ 0.6
10. Compuware Corporation................................ 0.6
</TABLE>
Looking ahead, the Company's investment adviser believes that the recent
divergence in returns between growth and value stocks is not likely to continue.
Based on historical cycles, value stocks currently appear very attractive
relative to growth stocks. The investment adviser believes that the long-term
fundamentals in the technology, healthcare and financial sectors appear strong.
In addition, the investment adviser will continue to search for stocks with the
potential for promising returns across all industries.
Thank you for your investment in Nations Balanced Target Maturity Fund, Inc. The
Company looks forward to its next report to shareholders in March 2000.
Sincerely,
/s/ Robert H. Gordon
Robert H. Gordon
President
Banc of America Advisors, Inc.
September 30, 1999
- ---------------
(4) As a percentage of net assets. Portfolio holdings are subject to change and
may not be representative of current holdings.
2
<PAGE> 5
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS -- 26.0%
AEROSPACE AND DEFENSE -- 0.3%
3,025 Raytheon Company, Class B............... $ 150
-------
APPAREL AND TEXTILES -- 0.1%
1,100 Jones Apparel Group, Inc.++............. 32
-------
AUTOMOBILE PARTS MANUFACTURERS -- 0.3%
4,900 Genuine Parts Company................... 130
-------
AUTOMOBILES AND TRUCKS -- 0.6%
5,700 Ford Motor Company...................... 286
-------
BANKING -- 2.0%
2,975 Banc One Corporation.................... 104
3,000 Bank of New York Inc. .................. 100
4,225 BankBoston Corporation.................. 183
3,900 Chase Manhattan Corporation............. 294
10,400 Mellon Bank Corporation................. 351
-------
1,032
-------
BEVERAGES -- 0.6%
2,800 Anheuser-Busch Companies, Inc. ......... 196
3,425 PepsiCo, Inc. .......................... 104
-------
300
-------
CHEMICALS -- BASIC -- 0.3%
2,160 E.I. duPont de Nemours and Company...... 131
1,200 Eastman Chemical Company................ 48
-------
179
-------
COMPUTER RELATED -- 3.7%
3,500 Apple Computer Inc.++................... 222
1,850 Comverse Technology Inc.++.............. 174
6,800 Gateway Inc.++.......................... 302
2,600 Honeywell Inc. ......................... 289
2,550 International Business Machines
Corporation........................... 309
2,700 Sun Microsystems, Inc.++................ 251
6,200 Unisys Corporation++.................... 280
-------
1,827
-------
COMPUTER SOFTWARE -- 0.6%
11,500 Compuware Corporation++................. 300
-------
CONGLOMERATE -- 0.5%
4,600 United Technologies Corporation......... 273
-------
CONSTRUCTION -- 0.6%
4,600 Centex Corporation...................... 136
5,100 Masco Corporation....................... 158
-------
294
-------
COSMETICS AND TOILETRIES -- 0.2%
1,300 Procter & Gamble Company................ 122
-------
DIVERSIFIED -- 0.3%
1,800 Textron Inc. ........................... 139
-------
DRUGS -- 0.9%
2,500 Bristol-Myers Squibb Company............ 169
1,950 Merck & Company, Inc. .................. 126
3,800 Schering-Plough Corporation............. 166
-------
461
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<C> <S> <C> <C>
ELECTRIC POWER -- 0.8%
8,000 Energy East Corporation................. $ 190
5,500 Unicom Corporation...................... 203
-------
393
-------
FINANCIAL SERVICES -- 1.0%
5,100 Citigroup Inc. ......................... 224
5,100 Paine Webber Group, Inc. ............... 185
3,816 Washington Mutual, Inc. ................ 112
-------
521
-------
FOOD PRODUCERS -- 0.7%
1,350 General Mills Inc. ..................... 110
2,250 Nabisco Group Holdings Corporation...... 34
2,000 Nabisco Holdings Corporation, Class A... 69
2,750 Quaker Oats Company..................... 170
-------
383
-------
FOREST AND PAPER PRODUCTS -- 0.2%
1,500 Boise Cascade Corporation............... 55
1,500 International Paper Company............. 72
-------
127
-------
FURNITURE AND APPLIANCES -- 0.2%
1,700 Whirlpool Corporation................... 111
-------
INSURANCE -- 1.5%
4,000 CIGNA Corporation....................... 312
4,950 Hartford Financial Services Group,
Inc. ................................. 202
7,200 Lincoln National Corporation Ltd. ...... 270
-------
784
-------
MANUFACTURING -- 0.1%
2,600 IMC Global, Inc. ....................... 38
-------
MEDICAL SERVICES -- 0.6%
14,600 HEALTHSOUTH Corporation++............... 89
4,125 Wellpoint Health Networks, Inc.++....... 235
-------
324
-------
METALS AND MINING -- 0.1%
1,300 Phelps Dodge Corporation................ 72
-------
OFFICE EQUIPMENT -- 0.8%
5,200 Lexmark International Group, Inc., Class
A++................................... 419
-------
OIL -- DOMESTIC -- 0.7%
6,643 Conoco, Inc. ........................... 181
5,900 USX-Marathon Group Inc. ................ 173
-------
354
-------
OIL -- INTERNATIONAL -- 2.1%
3,000 BP Amoco plc, ADR....................... 332
2,000 Exxon Corporation....................... 152
3,325 Mobil Corporation....................... 335
4,800 Royal Dutch Petroleum Company........... 284
-------
1,103
-------
OIL FIELD SERVICES & EQUIPMENT -- 0.1%
1,400 Halliburton Company..................... 57
-------
RECREATION -- 0.4%
8,600 Hasbro, Inc. ........................... 184
-------
RETAIL -- FOOD -- 0.2%
5,200 Kroger Company++........................ 115
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<C> <S> <C> <C>
RETAIL -- GENERAL -- 0.4%
4,900 Federated Department Stores, Inc.++..... $ 214
-------
RETAIL -- SPECIALTY -- 0.7%
2,800 AnnTaylor Stores Corporation++.......... 114
9,000 TJX Companies Inc. ..................... 253
-------
367
-------
SEMICONDUCTORS -- 0.3%
2,150 Intel Corporation....................... 160
-------
STEEL -- 0.6%
6,000 Bethlehem Steel Corporation++........... 44
3,200 Nucor Corporation....................... 152
3,400 USX - U.S. Steel Group Inc. ............ 88
-------
284
-------
TOBACCO -- 0.2%
2,600 Philip Morris Companies Inc. ........... 89
750 R.J. Reynolds Tobacco Holdings, Inc. ... 20
-------
109
-------
UTILITIES -- NATURAL GAS -- 0.4%
2,300 Coastal Corporation..................... 94
2,400 Williams Companies, Inc. ............... 90
-------
184
-------
UTILITIES -- TELEPHONE -- 2.9%
4,000 ALLTEL Corporation...................... 282
6,200 AT&T Corporation........................ 270
1,400 BellSouth Corporation................... 63
5,350 GTE Corporation......................... 410
1,750 MCI Worldcom, Inc.++.................... 126
6,600 SBC Communications Inc. ................ 337
-------
1,488
-------
TOTAL COMMON STOCKS
(Cost $12,171).......................... 13,316
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 74.4%
U.S. TREASURY STRIPS -- 74.4%
$16,120 Interest only
7.440%** 08/15/04.................... $12,097
15,257 TIGR, Interest Receipt,
7.460%** 08/15/04.................... 11,293
20,000 TIGR, Principal Receipt,
7.440%** 08/15/04.................... 14,804
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $35,964)......................... 38,194
-------
TOTAL INVESTMENTS
(Cost $48,135*)................. 100.4% 51,510
-------
OTHER ASSETS AND LIABILITIES
(NET)......................... (0.4)%
Receivable for investment securities
sold................................. $ 21
Dividends receivable................... 24
Investment advisory fee payable........ (38)
Administration fee payable............. (11)
Due to custodian....................... (45)
Payable for investment securities
purchased............................ (67)
Accrued Directors' fees and expenses... (2)
Accrued expenses and other
liabilities.......................... (82)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................ (200)
-------
NET ASSETS...................... 100.0% $51,310
=======
NET ASSETS CONSIST OF:
Undistributed net investment income.... $ 341
Accumulated net realized loss on
investments sold..................... (1,203)
Net unrealized appreciation of
investments.......................... 3,375
Paid-in capital........................ 48,797
-------
NET ASSETS............................. $51,310
=======
Net asset value per share
($51,310,062 / 5,231,163 shares of
common stock outstanding)............ $9.81
=====
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $4,094 and gross
depreciation of $719 for Federal income tax purposes. At September 30, 1999,
the aggregate cost of securities for Federal income tax purposes was $48,135.
** Rate represents annualized yield at date of purchase.
++ Non-income producing security.
ABBREVIATIONS:
ADR American Depository Receipt
TIGR Treasury Investor Growth Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF OPERATIONS (UNAUDITED)
For the six months ended September 30, 1999
<TABLE>
<S> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $ 1,304
Dividends (net of foreign witholding taxes of $2,269)....... 117
--------------
Total investment income................................. 1,421
--------------
EXPENSES:
Investment advisory fee..................................... 132
Administration fee.......................................... 66
Transfer agent fees......................................... 19
Amortization of organization costs.......................... 3
Other....................................................... 2
--------------
Total expenses.......................................... 222
Fees reduced by credits allowed by the custodian (Note 2)... (2)
--------------
Net expenses............................................ 220
--------------
NET INVESTMENT INCOME....................................... 1,201
--------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... 8
Net change in unrealized appreciation/(depreciation) of
investments............................................... (2,005)
--------------
Net realized and unrealized gain/(loss) on investments...... (1,997)
--------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ (796)
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
9/30/99 YEAR ENDED
(UNAUDITED) 3/31/99
<S> <C> <C>
(IN THOUSANDS)
Net investment income....................................... $ 1,201 $ 2,170
Net realized gain/(loss) on investments..................... 8 (1,186)
Net change in unrealized appreciation/(depreciation) of
investments............................................... (2,005) 552
-------------- --------------
Net increase/(decrease) in net assets resulting from
operations................................................ (796) 1,536
Distributions to shareholders from net investment income.... (994) (2,040)
Distributions to shareholders from net realized gain on
investments............................................... -- (1,192)
-------------- --------------
Net increase/(decrease) in net assets....................... (1,790) (1,696)
-------------- --------------
NET ASSETS:
Beginning of period......................................... 53,100 54,796
-------------- --------------
End of period............................................... $ 51,310 $ 53,100
============== ==============
Undistributed net investment income/(distributions in excess
of net investment income) at end of period................ $ 341 $ 134
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Balanced Target Maturity Fund, Inc.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
9/30/99 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 3/31/99 3/31/98 3/31/97 3/31/96 3/31/95*
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period........ $ 10.15 $ 10.47 $ 10.11 $ 10.78 $ 9.67 $ 9.35#
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income....................... 0.23** 0.41** 0.41 0.43 0.40 0.29**
Net realized and unrealized gain/(loss) on
investments............................... (0.38) (0.11) 1.80 0.49 1.61 0.40
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from investment operations...... (0.15) 0.30 2.21 0.92 2.01 0.69
Offering expenses charged to
paid-in-capital........................... -- -- -- -- -- (0.03)
Distributions:
Dividends from net investment income........ (0.19) (0.39) (0.41) (0.44) (0.40) (0.29)##
Distributions from net realized capital
gains..................................... -- (0.23) (1.44) (1.15) (0.50) (0.05)
------- ------- ------- ------- ------- -------
Total distributions......................... (0.19) (0.62) (1.85) (1.59) (0.90) (0.34)
------- ------- ------- ------- ------- -------
Net asset value, end of period.............. $ 9.81 $ 10.15 $ 10.47 $ 10.11 $ 10.78 $ 9.67
======= ======= ======= ======= ======= =======
Market value, end of period................. $ 8.75 $ 9.00 $ 10.00 $ 9.00 $ 9.25 $ 8.50
======= ======= ======= ======= ======= =======
Total return++.............................. (0.71)% (4.08)% 32.73% 13.93% 19.25% (5.54)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (000)............. $51,310 $53,100 $54,796 $52,864 $56,381 $50,238
Ratio of operating expenses to average net
assets.................................... 0.83%+ 1.13% 1.23% 1.18% 1.24% 1.10%+
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................. 0.84%+ -- -- -- -- --
Ratio of net investment income to average
net assets................................ 4.54%+ 3.99% 3.78% 4.01% 3.75% 4.12%+
Portfolio turnover rate..................... 10% 57% 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 indicated,
assumes reinvestment of all distributions, and is based on market value at
period end.
# Initial offering price net of sales commissions of $0.65 per share.
## Includes distributions in excess of net investment income of less than $0.01
per share.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
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 investment 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 are valued at the closing 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 advisor 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 trade date. Realized gains or losses are computed based on the
specific identification of securities sold. Interest income, adjusted for
accretion of discounts and amortization of premiums, is earned from settlement
date and is recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date.
Dividends 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 tax: 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 Banc of
America Advisors, Inc. ("BAAI") (formerly known as NationsBanc Advisors, Inc.),
a wholly-owned subsidiary of Bank of America, N.A. ("Bank of America") (formerly
known as NationsBank, N.A.), which in turn is a wholly-owned banking subsidiary
of Bank of America Corporation, a bank holding company organized as a Delaware
corporation. Pursuant to the investment advisory agreement, the Company pays
BAAI 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 BAAI have entered into a sub-advisory agreement with TradeStreet
Investment Associates, Inc. ("TradeStreet"), a wholly-owned subsidiary of Bank
of America, pursuant to which TradeStreet is entitled to receive a sub-advisory
fee from BAAI 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.
BAAI is the Company's administrator. In its role as administrator, BAAI
supervises the Company's overall day-to-day operations and provides certain
administrative services. BAAI 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
8
<PAGE> 11
Nations Balanced Target Maturity Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
conduct of its business. As compensation for both the administrative services
and the expenses assumed by BAAI, the Company pays BAAI a monthly fee equal to
an annual rate of 0.25% of the Company's average weekly net assets.
The Bank of New York ("BNY") serves as sub-administrator of the Company pursuant
to an agreement with BAAI and provides certain administrative services in
support of the operations of the Company. The fees of BNY are paid out of the
fees paid to BAAI by the Company for administration services. First Data
Investor Services Group, Inc., a wholly-owned subsidiary of First Data
Corporation ("First Data"), serves as the transfer agent and dividend disbursing
agent for the Company.
BNY also serves as the custodian of the Company's assets. For the six months
ended September 30, 1999, expenses of the Company were reduced by $1,973 under
expense offset arrangements with BNY. The Company could have invested a portion
of the assets utilized in connection with the expense offset arrangements in an
income producing asset if it 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.
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
long-term U.S. government securities and short-term investments, for the six
months ended September 30, 1999, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- -----------------------
<S> <C>
$5,221,727 $5,987,898
</TABLE>
There were no purchases or sales of long-term U.S. government securities for the
six months ended September 30, 1999.
4. COMMON STOCK
At September 30, 1999, 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 and the year ended March 31,
1999, respectively.
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Nations Balanced Target Maturity Fund, Inc.
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
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Nations Balanced Target Maturity Fund, Inc.
DIVIDEND REINVESTMENT PLAN (CONTINUED)
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 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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PO Box 34602
Charlotte, NC 28234-4602
Toll Free 1.800.982.2271
BTMSA 991408 (9/99)
