<PAGE> 1
NATIONS BALANCED TARGET
MATURITY FUND, INC.
ANNUAL
REPORT
For the Year Ended March 31, 1999
NATIONS
BALANCED
TARGET
MATURITY FUND
<PAGE> 2
- -------------------------------------------------------------------------------
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
- -------------------------------------------------------------------------------
SHARES OF THE COMPANY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED,
ENDORSED OR GUARANTEED BY BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF THEIR AFFILIATES. SUCH
SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN THE COMPANY INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK OR ITS AFFILIATES PROVIDE INVESTMENT ADVISORY AND OTHER SERVICES TO
THE COMPANY, FOR WHICH THEY ARE COMPENSATED.
<PAGE> 3
NATIONS BALANCED TARGET MATURITY FUND, INC.
DEAR SHAREHOLDER:
We welcome this opportunity to provide you with the annual report for Nations
Balanced Target Maturity Fund, Inc. (the "Company") for the twelve-month period
ended March 31, 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 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
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 twelve-month period ended March 31, 1999, the total return of Nations
Balanced Target Maturity Fund was -4.08%(1) based on an ending market value of
$9.00. Over this period, the Company distributed $0.39 per share of ordinary
income to its shareholders. Additionally, a capital gain of $0.23 per share was
distributed over this same period. As of March 31, 1999, 72.9% of the Company's
portfolio was invested in Zero Coupon U.S. Treasury Obligations, and 26.9% was
invested in common stocks. A breakdown of portfolio holdings by asset type
follows.
PORTFOLIO BREAKDOWN AS OF AS OF MARCH 31, 1999(2)
PIE CHART
INVESTMENT PHILOSOPHY
The equity portion of the Company is invested under the philosophy that value
may be represented in all sectors of the market. By investing in those companies
that the Company's investment adviser believes represent the best value in each
sector, the Company 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 Price
Index (S&P 500 Index)(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-earnings ratio,
strong
- ---------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
1 The average annual total return since inception based on the market price was
9.33%. 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 gain distributions.
2 Portfolio characteristics and holdings are subject to change and may not be
representative of current characteristics and holdings.
3 Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
market-capitalization weighted index that measures the market value of 400
industrial stocks, 60 transportation and utility company stocks, and 40
financial issues. It is unmanaged and 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 development or corporate
restructuring.
MARKET ENVIRONMENT AND PORTFOLIO STRATEGY
Over the course of the reporting period, the S&P 500 Index was driven by
continued low inflation, stable economic growth, the global benefits from the
fall of communism, and increased global trade and competition. The stock market
was dominated by growth stocks, particularly in the technology, communications
services and health-care sectors. The Asian and, subsequently, global financial
crises dampened investors' enthusiasm for low p/e, cyclical companies, the kind
of company held in the equity portion of the Company's portfolio, though much of
the impact seems to have now run its course.
Over the course of the period, the Company focused on stocks that were out of
favor with the investing public. Cyclical stocks (including paper, metals,
chemicals, energy, and consumer-related cyclicals) comprised a large portion of
the portfolio. While this approach produced strong results in the 1998 fiscal
year, it proved to be unrewarding in 1999 as investors focused on large
capitalization companies with stable earnings growth.
The Company's investment advisor believes the tremendous increase in the market
value of technology stocks will dissipate as this sector is now selling at an
historically-high 33 times 1999 estimated earnings, with 15% expected
sustainable growth rates on average. These valuations represent a fully valued
sector in our opinion. Therefore, the Company has underweighted the sector
relative to the market (S&P 500 Index) and maintains positions in just those
stocks that we believe should continue to perform well with strong dominance in
their industry -- Sun Microsystems, Inc., International Business Machines
Corporation and Intel Corporation.
We have overweighted the financial sector within the Company leaning more
towards the life and annuity insurance companies than the banks. In our view the
insurance industry is in the beginning phase of a wave of mergers and
consolidations, much like the banking industry 10 years ago. Insurance companies
are moving to become strong competitors in the asset gathering business that is
so compelling from a demographic perspective.
We have increased the Company's weighting in the energy sector to an
overweighted position and believe the Company will benefit from an expected
increase in oil prices over the coming months. In addition, we continue to
overweight the utilities area, believing that industry consolidation, and
attractive valuations as well as strong dividend yields will be positive
contributors to performance over the coming year.
Finally, we are adding to the most out of favor sector -- basic
materials -- with the addition of several steel companies that should benefit
from higher steel prices now that the U.S. Government has imposed high tariffs
on foreign exporters to the United States. The eventual recovery in other global
economies (Asia, Japan, Brazil) could also be a positive influence.
TOP TEN EQUITY HOLDINGS AS OF MARCH 31, 1999(4)*
<TABLE>
<S> <C>
1. Lincoln National Corporation Ltd. ............... 0.78%
2. AT&T Corporation................................. 0.63
3. Sun Microsystems, Inc. .......................... 0.61
4. International Business Machines Corporation...... 0.59
5. United Technologies Corporation.................. 0.59
6. BP Amoco plc, ADR................................ 0.57
7. Mobil Corporation................................ 0.55
8. Wellpoint Health Networks, Inc. ................. 0.54
9. ALLTEL Corporation............................... 0.54
10. Hartford Financial Services Group, Inc. ......... 0.53
</TABLE>
Thank you for your investment in Nations Balanced Target Maturity Fund, Inc. The
Company looks forward to its next report to shareholders.
Sincerely,
Signature of Robert H. Gordon
Robert H. Gordon
President
March 31, 1999
- ---------------
(4) Portfolio holdings are subject to change and may not be representative of
current holdings.
* As a percentage of net assets.
2
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Nations Balanced Target Maturity Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF NET ASSETS MARCH 31, 1999
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VALUE
SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS -- 26.9%
AEROSPACE AND DEFENSE -- 0.6%
2,000 Lockheed Martin Corporation............................... $ 75
4,325 Raytheon Company, Class B................................. 254
-------
329
-------
APPAREL AND TEXTILES -- 0.6%
5,600 Liz Claiborne Inc......................................... 183
3,200 V.F. Corporation.......................................... 151
-------
334
-------
AUTOMOBILE PARTS MANUFACTURERS -- 0.5%
1,800 Dana Corporation.......................................... 68
4,900 Genuine Parts Company..................................... 142
900 Lear Corporation.......................................... 38
-------
248
-------
AUTOMOBILES AND TRUCKS -- 0.5%
1,800 Daimler Chrysler AG....................................... 155
2,400 Ford Motor Company........................................ 136
-------
291
-------
BANKING -- 2.9%
3,800 Banc One Corporation...................................... 209
4,000 Bank of New York Inc...................................... 144
2,400 BankBoston Corporation.................................... 104
3,100 Chase Manhattan Corporation............................... 252
1,900 Citigroup Inc............................................. 121
3,700 Mellon Bank Corporation................................... 260
4,350 PNC Bank Corporation...................................... 242
5,925 SouthTrust Corporation.................................... 221
-------
1,553
-------
BEVERAGES -- 0.9%
3,200 Anheuser-Busch Companies, Inc............................. 244
5,725 PepsiCo, Inc.............................................. 224
-------
468
-------
CHEMICALS -- BASIC -- 0.6%
900 Dow Chemical Company...................................... 84
3,700 E.I. duPont de Nemours and Company........................ 215
-------
299
-------
COMPUTER RELATED -- 2.8%
2,100 3Com Corporation+......................................... 49
5,500 Apple Computer Inc.+...................................... 198
3,800 Ceridian Corporation+..................................... 139
3,500 Compaq Computer Corporation............................... 111
1,900 Comverse Technology Inc.+................................. 162
SEE NOTES TO FINANCIAL STATEMENTS.
3
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Nations Balanced Target Maturity Fund, Inc.
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STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 1999
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VALUE
SHARES (000)
- -------------------------------------------------------------------------------
COMPUTER RELATED -- (CONTINUED)
2,500 Gateway 2000 Inc.+........................................ $ 171
1,775 International Business Machines Corporation............... 314
2,600 Sun Microsystems, Inc.+................................... 324
-------
1,468
-------
CONGLOMERATE -- 0.8%
1,600 Unilever NV, ADR.......................................... 106
2,300 United Technologies Corporation........................... 312
-------
418
-------
CONSTRUCTION -- 0.6%
4,600 Centex Corporation........................................ 154
5,100 Masco Corporation......................................... 144
-------
298
-------
DRUGS -- 1.4%
1,600 American Home Products Corporation........................ 104
2,900 Bergen Brunswig Corporation, Class A...................... 58
3,100 Bristol-Myers Squibb Company.............................. 199
1,950 Merck & Company, Inc...................................... 156
3,800 Schering-Plough Corporation............................... 211
-------
728
-------
ELECTRIC POWER -- 1.1%
1,600 Consolidated Edison, Inc.................................. 73
4,000 Energy East Corporation................................... 210
1,600 Florida Progress Corporation.............................. 60
2,900 Texas Utilities Company................................... 121
3,000 Unicom Corporation........................................ 110
-------
574
-------
ELECTRICAL EQUIPMENT -- 0.1%
2,100 Scientific-Atlanta Inc.................................... 57
-------
ELECTRONICS -- 0.1%
2,075 SCI Systems, Inc.+........................................ 61
-------
FINANCIAL SERVICES -- 0.6%
3,300 Paine Webber Group, Inc................................... 132
4,016 Washington Mutual, Inc.................................... 164
-------
296
-------
FOOD PRODUCERS -- 0.5%:
800 General Mills Inc......................................... 60
1,600 Interstate Bakeries Corporation........................... 35
2,400 Quaker Oats Company....................................... 150
1,300 Suiza Foods Corporation................................... 44
-------
289
-------
SEE NOTES TO FINANCIAL STATEMENTS.
4
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Nations Balanced Target Maturity Fund, Inc.
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STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 1999
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
INSURANCE -- 1.8%
3,300 CIGNA Corporation......................................... $ 277
4,950 Hartford Financial Services Group, Inc.................... 281
4,200 Lincoln National Corporation Ltd.......................... 415
-------
973
-------
MACHINERY AND EQUIPMENT -- 0.4%
2,200 Cooper Industries Inc..................................... 94
1,400 Sundstrand Corporation.................................... 97
-------
191
-------
MEDICAL SERVICES -- 0.8%
7,600 Tenet Healthcare Corporation+............................. 144
3,800 Wellpoint Health Networks, Inc............................ 288
-------
432
-------
OFFICE EQUIPMENT -- 0.6%
1,800 Lexmark International Group, Inc., Class A................ 201
2,700 Xerox Corporation......................................... 144
-------
345
-------
OIL -- DOMESTIC -- 0.4%
2,300 Coastal Corporation....................................... 76
3,100 Columbia Energy Group..................................... 162
-------
238
-------
OIL -- INTERNATIONAL -- 2.0%
3,000 BP Amoco plc, ADR......................................... 303
1,700 Chevron Corporation....................................... 150
2,000 Exxon Corporation......................................... 141
3,325 Mobil Corporation......................................... 293
3,000 Royal Dutch Petroleum Company............................. 156
-------
1,043
-------
OIL FIELD SERVICES & EQUIPMENT -- 0.2%
2,200 Halliburton Company....................................... 85
-------
RECREATION -- 0.5%
8,600 Hasbro, Inc............................................... 249
-------
RETAIL -- FOOD -- 0.4%
3,500 Kroger Company+........................................... 210
-------
RETAIL -- GENERAL -- 0.8%
1,700 Dillards, Inc., Class A................................... 43
3,700 Federated Department Stores, Inc.......................... 148
3,650 May Department Stores Company............................. 143
3,800 Saks Inc.+................................................ 99
-------
433
-------
RETAIL -- SPECIALTY -- 0.4%
6,500 TJX Companies Inc......................................... 221
-------
SEE NOTES TO FINANCIAL STATEMENTS.
5
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Nations Balanced Target Maturity Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 1999
- -------------------------------------------------------------------------------
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.5%
2,300 Intel Corporation......................................... $ 273
-------
STEEL -- 0.4%
3,200 Nucor Corporation......................................... 141
2,300 USX -- U.S. Steel Group Inc............................... 54
-------
195
-------
TOBACCO -- 0.2%
3,100 Philip Morris Companies Inc............................... 109
-------
TRANSPORTATION -- 0.2%
1,900 Delta Air Lines, Inc...................................... 132
-------
UTILITIES -- NATURAL GAS -- 0.2%
2,400 Williams Companies, Inc................................... 95
-------
UTILITIES -- TELEPHONE -- 2.4%
4,600 ALLTEL Corporation........................................ 287
4,200 AT&T Corporation.......................................... 335
1,400 BellSouth Corporation..................................... 56
3,850 GTE Corporation........................................... 233
2,200 MCI Worldcom, Inc.+....................................... 195
4,100 SBC Communications Inc.................................... 193
-------
1,299
-------
WASTE MANAGEMENT -- 0.1%
1,100 Waste Management Inc...................................... 49
-------
TOTAL COMMON STOCKS (Cost $12,930)........................ 14,283
-------
PRINCIPAL
AMOUNT
(000)
- ---------
U.S. TREASURY OBLIGATIONS -- 72.9%
U.S. TREASURY STRIPS -- 72.9%
$16,120 7.440% 08/15/04**......................................... 12,194
15,257 TIGR, Interest Receipt, 7.460% 08/15/04**................. 11,465
20,000 TIGR, Principal Receipt, 7.440% 08/15/04**................ 15,030
-------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $34,662)............ 38,689
-------
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
Nations Balanced Target Maturity Fund, Inc.
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 1999
- ------------------------------------------------------------------------------
VALUE
(000)
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $47,592*)......................... 99.8% $52,972
-------
TOTAL OTHER ASSETS AND LIABILITIES (NET).................. 0.2%
Receivable for investment securities sold......................... 520
Dividends receivable.............................................. 26
Interest receivable............................................... 1
Unamortized organization costs.................................... 3
Due to custodian.................................................. (250)
Legal and Audit fees payable...................................... (43)
Investment advisory fee payable................................... (19)
Administration fee payable........................................ (13)
Accrued Directors' fees and expenses.............................. (1)
Accrued expenses and other liabilities............................ (96)
-------
Total Other Assets and Liabilities (Net).......................... 128
-------
NET ASSETS................................................ 100.00% $53,100
=======
At March 31, 1999
Net Assets Consist Of:
Undistributed net investment income............................... $ 134
Accumulated net realized loss on investments sold................. (1,211)
Net unrealized appreciation of investments........................ 5,380
Common Stock at par value......................................... 5
Paid-in capital................................................... 48,792
-------
NET ASSETS........................................................ $53,100
=======
Net Asset Value Per Share ($53,099,685 / 5,231,163 shares of common
stock outstanding).............................................. $ 10.15
=======
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $5,876 and gross
depreciation of $496 for Federal income tax purposes. At March 31, 1999, the
aggregate cost of securities for Federal income tax purposes was $47,592.
** 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.
7
<PAGE> 10
Nations Balanced Target Maturity Fund, Inc.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED MARCH 31, 1999
(IN THOUSANDS)
INVESTMENT INCOME:
Interest Income........................................ $ 2,466
Dividend Income........................................ 318
-------
Total Investment Income........................... 2,784
EXPENSES:
Investment advisory fee................................ $235
Administration fee..................................... 136
Transfer agent fees.................................... 69
Legal and audit fees................................... 63
Custodian fees......................................... 14
Directors' fees and expenses........................... 12
Amortization of organization costs..................... 11
Income tax expense..................................... 6
Other.................................................. 68
----
Total Expenses.................................... 614
-------
NET INVESTMENT INCOME....................................... 2,170
-------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments................ (1,186)
Net unrealized appreciation/(depreciation) of
investments........................................... 552
-------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS...... (634)
-------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 1,536
=======
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 11
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/99 3/31/98
------- -------
<S> <C> <C>
Net investment income....................................... $ 2,170 $ 2,145
Net realized gain/(loss) on investments..................... (1,186) 5,397
Net unrealized appreciation/(depreciation) of investments... 552 4,084
------- -------
Net increase/(decrease) in net assets resulting from
operations................................................ 1,536 11,626
Distributions to shareholders from net investment income.... (2,040) (2,145)
Distributions to shareholders from net realized gain on
investments............................................... (1,192) (7,549)
------- -------
Net increase/(decrease) in net assets....................... (1,696) 1,932
------- -------
NET ASSETS:
Beginning of year........................................... 54,796 52,864
------- -------
End of year (including undistributed net investment income
of $134 and $2, respectively)............................. $53,100 $54,796
======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
Nations Balanced Target Maturity Fund, Inc.
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
3/31/99 3/31/98 3/31/97 3/31/96 3/31/95*
--------- --------- --------- --------- ---------
<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................................ 0.41** 0.41 0.43 0.40 0.29**
Net realized and unrealized gain/(loss) on
investments........................................ (0.11) 1.80 0.49 1.61 0.40
------- ------- ------- ------- -------
Net increase in net assets resulting from
operations......................................... 0.30 2.21 0.92 2.01 0.69
Offering expenses charged to paid-in-capital......... -- -- -- -- (0.03)
Distributions:
From net investment income........................... (0.39) (0.41) (0.44) (0.40) (0.29)##
From net realized capital gains...................... (0.23) (1.44) (1.15) (0.50) (0.05)
------- ------- ------- ------- -------
Total distributions.................................. (0.62) (1.85) (1.59) (0.90) (0.34)
------- ------- ------- ------- -------
Net asset value, end of period....................... $ 10.15 $ 10.47 $ 10.11 $ 10.78 $ 9.67
======= ======= ======= ======= =======
Market value, end of period.......................... $ 9.00 $ 10.00 $ 9.00 $ 9.25 $ 8.50
======= ======= ======= ======= =======
Total return++....................................... (4.08)% 32.73% 13.93% 19.25% (5.54)%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)................... $53,100 $54,796 $52,864 $56,381 $50,238
Ratio of operating expenses to average net assets.... 1.13% 1.23% 1.18% 1.24% 1.10%+
Ratio of net investment income to average net
assets............................................. 3.99% 3.78% 4.01% 3.75% 4.12%+
Portfolio turnover rate.............................. 57% 106% 99% 46% 25%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* 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 commisions of $0.65 per
share.
## Includes distributions in excess of net investment income
less than $0.01 per share.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 13
Nations Balanced Target Maturity Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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.
Certain reclassifications are made to the Company's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryforwards) under Federal income tax regulations. For the year ended March
31, 1999, reclassifications have been made to increase undistributed net
investment income by $2,388, decrease paid-in capital by $1,448 and decreased
accumulated net realized gain/(loss) by $940.
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 NationsBanc
Advisors, Inc. ("NBAI"), a wholly-owned subsidiary of NationsBank, N.A.
("NationsBank"), which in turn is an indirect wholly-owned banking subsidiary of
Bank of America Corporation, a bank holding company organized as a Delaware
corporation, 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, 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> 14
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 Company's 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.
Effective February 12, 1999, The Bank of New York ("BNY") became
sub-administrator of the Company pursuant to an agreement with NBAI and provides
certain administrative services in support of the operations of the Company.
Prior to that date, First Data Investor Services Group, Inc. ("First Data"), a
wholly-owned subsidiary of First Data Corporation, was sub-administrator. The
fees of BNY (and previously First Data) are paid out of the fees paid to NBAI by
the Company for administration services. First Data serves as the transfer agent
and dividend disbursing agent for the Company.
Effective October 19, 1998, BNY began serving as the custodian of the Company's
assets. Previously, NationsBank served as custodian. For the year ended March
31, 1999, NationsBank (and its predecessor, NationsBank of Texas, N.A.) earned
$3,531 for providing such services. For the year ended March 31, 1999, 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 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.
During the year ended March 31, 1999, the Company 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 year ended March 31, 1999, the Company earned
$21,487 in the aggregate from such investments.
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 year
ended March 31, 1999, were as follows:
PURCHASES SALES
-----------------------------------------
$30,586,407 $34,301,688
There were no purchases or sales of long-term U.S. government securities for the
year ended March 31, 1999.
4. COMMON STOCK
At March 31, 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 years ended March 31, 1999 and 1998, respectively.
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Nations Balanced Target Maturity Fund, Inc.
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REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE SHAREHOLDERS AND DIRECTORS OF
NATIONS BALANCED TARGET MATURITY FUND, INC.
In our opinion, the accompanying statement of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Nations Balanced Target Maturity Fund, Inc. (the "Company") at March 31, 1999,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
May 24, 1999
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Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN
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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.
DIVIDEND REINVESTMENT 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
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Nations Balanced Target Maturity Fund, Inc.
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DIVIDEND REINVESTMENT PLAN (CONTINUED)
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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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Nations Balanced Target Maturity Fund, Inc.
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TAX INFORMATION (UNAUDITED)
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For the year ended March 31, 1999 the long term capital gain distributed to
shareholders by the fund was $294,812. Of the ordinary income (including
short-term capital gain) distributions made by the Company during the fiscal
year ended March 31, 1999, 4.76% qualified for the dividends received deduction
available to corporate shareholders.
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BULK RATE
U.S. POSTAGE
PO Box 34602 PAID
Charlotte, NC 28234-4602 N READING, MA
Toll Free 1-800-982-2271 PERMIT NO.
105
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AR6 IN-96216-399
