<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, 2000
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 ended September 30, 2000.
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 distributions, the 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 majority 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, 2000, the total return of Nations
Balanced Target Maturity Fund, Inc. was 2.90%,(1) based on an ending market
value of $8.50. Over this period, the Company distributed $0.22 per share of
ordinary income to its shareholders. As of September 30, 2000, 79.3% of the
Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations and
20.8% was invested in common stocks. A breakdown of portfolio holdings by asset
type follows:
PORTFOLIO BREAKDOWN (AS OF SEPTEMBER 30, 2000)(2)
PIE CHART 10 LARGEST INDUSTRIES
<TABLE>
<S> <C>
Integrated oil 2.8%
Commercial banking 2.1%
Electric Power - Non nuclear 1.7%
Utilities - Miscellaneous 1.5%
Insurance 1.4%
Consumer credit and mortgages 0.9%
Finance - Miscellaneous 0.9%
Food products 0.9%
Investment services 0.8%
Other 7.7%
U.S. Treasury obligations 79.3%
</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 industry sectors, although certain sectors may be over-
or underweighted relative to the Standard and Poor's 500 Composite Stock Price
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-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 2.59%. 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.
(2) Portfolio characteristics are subject to change and may not be
representative of current characteristics.
(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 market volatility of the last six months stemmed from concerns ranging from
Federal Reserve Board (Fed) interest rate hikes, a slowing economy and
potentially weaker third quarter earnings to higher fuel prices and the
uncertainty of the outcome of the November presidential election. Larger
technology and communication services companies -- former market leaders and
priced to perfection -- incurred the largest declines. So far this year, value
investors have fared better than growth players.
A few segments of the market did perform well. Higher prices for oil, natural
gas and electricity boosted the fortunes of the energy and utility sectors,
while healthcare providers benefited from a better pricing environment. The
financial services sector moved forward as intense competition led to a
continuation of mergers and consolidations, and companies attempting to increase
market share gains while reducing costs. Expectations of more military spending
bolstered defense stocks. Conversely, technology, telecommunications, consumer
cyclical, and basic material companies moved lower due to the expected slowdown
of domestic economic growth.
While the Company's investment adviser expects the U.S. economic expansion to
celebrate its eleventh anniversary next year, growth of real GDP (Gross Domestic
Product) should slow to average 3.3% in 2001. In contrast, final numbers for
2000 are expected to show GDP growth at a very robust, but unsustainable 5.1%.
TOP 10 EQUITY HOLDINGS (AS OF SEPTEMBER 30, 2000)(4)
<TABLE>
<C> <S> <C>
1. American International Group, Inc.................... 0.8%
2. Exxon Mobil Corporation.............................. 0.8
3. AT&T Corporation..................................... 0.5
4. American Express Company............................. 0.5
5. Morgan Stanley Dean Witter & Company................. 0.5
6. Wells Fargo Company.................................. 0.5
7. Associates First Capital Corporation................. 0.5
8. Bristol-Myers Squibb Company......................... 0.5
9. Chase Manhattan Corporation.......................... 0.5
10. J.P. Morgan & Company Inc. .......................... 0.5
</TABLE>
Looking ahead, the Company's investment adviser believes the overall tone of the
market has improved for value investors. The perceived end to Fed tightening,
higher energy prices, a slowing domestic economy, the weaker euro, negative
earnings pre-announcements of several major bell-weather companies -- many in
the growth stock universe -- the demise of many inflated dot.com stocks and
uncertainty prior to the U.S. political elections have given investors reasons
to be cautious. We believe a more conservative assessment of a company's
valuation relative to its earnings growth potential should broaden investors'
focus and perhaps tilt investors' attention toward value stocks.
The current strategy is to continue to overweight the most attractive sectors
within the value discipline when viewed from a bottom-up, fundamental valuation
approach. These sectors are financial, utility, energy and consumer staples. The
most underweighted sectors at this time are technology and basic materials.
Should valuations in the technology sector become more attractive, the
investment adviser may add to this group.
Thank you for your investment in Nations Balanced Target Maturity Fund, Inc.
Should you have any questions or comments regarding your investments, we would
be delighted to hear from you. The Company looks forward to its next report to
shareholders.
Sincerely,
/s/ Robert H. Gordon
ROBERT H. GORDON
PRESIDENT
September 30, 2000
---------------
(4) Portfolio holdings are subject to change and may not be representative of
current holdings.
2
<PAGE> 5
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 20.8%
AEROSPACE AND DEFENSE -- 0.3%
4,875 Honeywell International Inc. ........... $ 174
-------
AUTOMOTIVE -- 0.3%
2,525 Johnson Controls Inc. .................. 134
-------
COMMERCIAL BANKING -- 2.1%
5,075 Chase Manhattan Corporation............. 234
6,066 Citigroup Inc. ......................... 328
1,425 J.P. Morgan & Company Inc. ............. 233
5,550 Wells Fargo Company..................... 255
-------
1,050
-------
COMPUTERS AND OFFICE EQUIPMENT -- 0.5%
500 Hewlett-Packard Company................. 49
2,050 International Business Machines
Corporation........................... 230
-------
279
-------
CONSUMER CREDIT AND MORTGAGES -- 0.9%
4,350 American Express Company................ 264
5,300 MBNA Corporation........................ 204
-------
468
-------
DIVERSIFIED MANUFACTURING -- 0.4%
2,675 Eastman Kodak Company................... 109
1,700 Procter & Gamble Company................ 114
-------
223
-------
ELECTRIC POWER -- NON NUCLEAR -- 1.7%
3,800 Ameren Corporation...................... 159
3,625 Consolidated Edison, Inc. .............. 124
3,000 Dominion Resources, Inc. ............... 174
2,800 FPL Group Inc. ......................... 184
7,325 TECO Energy, Inc. ...................... 211
-------
852
-------
ELECTRICAL EQUIPMENT -- 0.3%
2,675 Emerson Electric Company................ 179
-------
FINANCE -- MISCELLANEOUS -- 0.9%
6,650 Associates First Capital Corporation.... 253
4,225 Freddie Mac............................. 228
-------
481
-------
FOOD PRODUCTS -- 0.9%
8,600 ConAgra Inc. ........................... 172
4,500 H.J. Heinz Company...................... 167
5,775 Kellogg Company......................... 140
-------
479
-------
HEAVY MACHINERY -- 0.5%
3,975 Caterpillar Inc. ....................... 134
4,025 Parker Hannifin Corporation............. 136
-------
270
-------
HOUSING AND FURNISHING -- 0.2%
4,550 Stanley Works........................... 105
-------
INSURANCE -- 1.4%
4,275 American International Group, Inc. ..... 409
1,575 CIGNA Corporation....................... 164
2,600 MGIC Investment Corporation............. 159
-------
732
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-----------------------------------------------------------
<C> <S> <C>
INTEGRATED OIL -- 2.8%
2,400 Anadarko Petroleum Corporation.......... $ 160
2,700 BP Amoco plc, ADR....................... 143
2,675 Chevron Corporation..................... 228
4,393 Conoco, Inc. ........................... 118
4,500 Exxon Mobil Corporation................. 402
2,900 Royal Dutch Petroleum Company........... 174
4,500 Unocal Corporation...................... 159
-------
1,384
-------
INVESTMENT SERVICES -- 0.8%
2,600 Merrill Lynch & Company Inc. ........... 172
2,800 Morgan Stanley Dean Witter & Company.... 256
-------
428
-------
MEDICAL DEVICES AND SUPPLIES -- 0.8%
4,025 Abbott Laboratories..................... 191
2,225 Cardinal Health, Inc. .................. 197
-------
388
-------
METALS AND MINING -- 0.4%
2,225 Minnesota Mining & Manufacturing
Company............................... 203
-------
NATURAL GAS DISTRIBUTION -- 0.3%
2,700 El Paso Energy Corporation.............. 166
-------
PHARMACEUTICALS -- 0.5%
4,300 Bristol-Myers Squibb Company............ 246
-------
PUBLISHING AND ADVERTISING -- 0.3%
2,600 Dow Jones & Company Inc. ............... 157
-------
RAILROADS, TRUCKING AND SHIPPING -- 0.4%
4,250 FedEx Corporation++..................... 188
-------
RESTAURANTS -- 0.1%
1,700 McDonald's Corporation.................. 51
-------
SEMICONDUCTORS -- 0.3%
1,700 Intergrated Device Technology, Inc.++... 154
-------
SOFTWARE -- 0.6%
3,875 Electronic Data Systems Corporation..... 161
4,250 First Data Corporation.................. 166
-------
327
-------
TELECOMMUNICATIONS SERVICES -- 0.8%
4,150 SBC Communications Inc. ................ 208
3,763 Verizon Communications.................. 182
-------
390
-------
TOBACCO -- 0.8%
7,675 Philip Morris Companies Inc. ........... 226
7,400 UST Inc. ............................... 169
-------
395
-------
UTILITIES -- MISCELLANEOUS -- 1.5%
5,950 American Water Works Company, Inc. ..... 164
9,100 AT&T Corporation........................ 267
4,000 NICOR Inc. ............................. 145
6,300 Sprint Corporation (FON Group).......... 185
-------
761
-------
TOTAL COMMON STOCKS
(Cost: $9,620).......................... 10,664
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 79.3%
U.S. TREASURY STRIPS -- 79.3%
$16,120 Interest only
7.440%** 08/15/04.................... $12,894
15,257 TIGR, Interest Receipt,
7.460%** 08/15/04.................... 11,980
20,000 TIGR, Principal Receipt,
7.440%** 08/15/04.................... 15,705
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $38,696)........................ 40,579
-------
TOTAL INVESTMENTS
(Cost $48,316*)................ 100.1% 51,243
-------
OTHER ASSETS AND LIABILITIES
(NET)........................ (0.1)%
Cash................................... $ 64
Dividends receivable................... 17
Investment advisory fee payable........ (19)
Administration fee payable............. (10)
Payable for investment securities
purchased............................ (49)
Accrued Trustees'/Directors' fees and
expenses............................. (1)
Accrued expenses and other
liabilities.......................... (63)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................ (61)
-------
NET ASSETS..................... 100.0% $51,182
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
-----------------------------------------------------------
-------------------------------------------------------------
<C> <S> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income.... $ 496
Accumulated net realized loss on
investment........................... (1,038)
Net unrealized appreciation of
investment........................... 2,927
Paid-in capital........................ 48,797
-------
Net assets............................. $51,182
=======
Net asset value per share
($51,181,507 / 5,231,163 shares of
common stock outstanding)............ $9.78
=======
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized appreciation of $2,927 on
investment securities was comprised of gross appreciation of $3,279 and gross
depreciation of $352 for federal income tax purposes. At September 30, 2000,
the aggregate cost of securities for federal income tax purposes was $48,316.
** Rate represents annualized yield at date of purchase.
++ Non-income producing security.
ABBREVIATIONS:
TIGR Treasury Investor Growth Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 7
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF OPERATIONS (UNAUDITED)
For the six months ended September 30, 2000
<TABLE>
<S> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $ 1,394
Dividends (net of foreign witholding taxes of $1)........... 122
--------------
Total investment income................................. 1,516
--------------
EXPENSES:
Investment advisory fee..................................... 104
Administration fee.......................................... 63
Legal and audit fees........................................ 26
Printing expense............................................ 26
Transfer agent fees......................................... 22
Directors' fees and expenses................................ 6
Custodian fees.............................................. 6
Other....................................................... 13
--------------
Total expenses.......................................... 266
Fees reduced by credits allowed by the custodian (Note 2)... (3)
--------------
Net expenses............................................ 263
--------------
NET INVESTMENT INCOME/(LOSS)................................ 1,253
--------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... (10)
Net change in unrealized appreciation/(depreciation) of
investments............................................... 128
--------------
Net realized and unrealized gain/(loss) on investments...... 118
--------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 1,371
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 8
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
9/30/00 YEAR ENDED
(UNAUDITED) 3/31/00
--------------------------------
<S> <C> <C>
(IN THOUSANDS)
Net investment income/(loss)................................ $ 1,253 $ 2,405
Net realized gain/(loss) on investments..................... (10) 181
Net change in unrealized appreciation/(depreciation) of
investments............................................... 128 (2,580)
-------------- --------------
Net increase/(decrease) in net assets resulting from
operations................................................ 1,371 6
Distributions to shareholders from net investment income.... (1,150) (2,145)
-------------- --------------
Net increase/(decrease) in net assets....................... 221 (2,139)
-------------- --------------
NET ASSETS:
Beginning of period......................................... 50,961 53,100
-------------- --------------
End of period............................................... $ 51,182 $ 50,961
============== ==============
Undistributed net investment income/(loss)/(distributions in
excess of net investment income) at end of period......... $ 496 $ 393
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 9
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
9/30/00 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 3/31/00 3/31/99 3/31/98 3/31/97 3/31/96
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period........ $ 9.74 $ 10.15 $ 10.47 $ 10.11 $ 10.78 $ 9.67
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income....................... 0.24# 0.46 0.41# 0.41 0.43 0.40
Net realized and unrealized gain/(loss) on
investments............................... 0.02 (0.46) (0.11) 1.80 0.49 1.61
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from investment operations...... 0.26 0.00 0.30 2.21 0.92 2.01
Distributions:
Dividends from net investment income........ (0.22) (0.41) (0.39) (0.41) (0.44) (0.40)
Distributions from net realized capital
gains..................................... -- -- (0.23) (1.44) (1.15) (0.50)
------- ------- ------- ------- ------- -------
Total distributions......................... (0.22) (0.41) (0.62) (1.85) (1.59) (0.90)
Net asset value, end of period.............. $ 9.78 $ 9.74 $ 10.15 $ 10.47 $ 10.11 $ 10.78
======= ======= ======= ======= ======= =======
Market value, end of period................. $ 8.50 $ 8.50 $ 9.00 $ 10.00 $ 9.00 $ 9.25
======= ======= ======= ======= ======= =======
Total return++.............................. 2.59% (1.02)% (4.08)% 32.73% 13.93% 19.25%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (000)............. $51,182 $50,961 $53,100 $54,796 $52,864 $56,381
Ratio of operating expenses to average net
assets.................................... 1.04%+ 0.86% 1.13% 1.23% 1.18% 1.24%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................. 1.05%+ 0.87% -- -- -- --
Ratio of net investment income to average
net assets................................ 4.92%+ 4.65% 3.99% 3.78% 4.01% 3.75%
Portfolio turnover rate..................... 18% 21% 57% 106% 99% 46%
</TABLE>
---------------
+ 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.
# Per share amounts have been calculated using the monthly average shares
method.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Nations Balanced Target Maturity Fund, Inc. (the "Company") is registered with
the Securities and Exchange Commission as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Company's investment objective is to seek long-term growth with income as a
secondary consideration.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the Company in the preparation of its financial statements.
Securities valuation: Securities traded on a recognized exchange or on NASDAQ
are valued at the last sale price on the exchange or market on which such
securities are primarily traded. Securities traded only over-the-counter are
valued at the last sale price, or if no sale occurred on such day, at the mean
of the current bid and asked prices. Certain securities may be valued using
broker quotations or on the basis of prices provided by pricing services.
Restricted securities, securities for which market quotations are not readily
available, and certain other assets may be valued under procedures adopted by
the Board of Directors. Short-term investments that mature in 60 days or less
are valued at amortized cost, which approximates current market value.
Securities transactions and investment income: Securities transactions are
accounted for on trade date. Realized gains and 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 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 distributions and
capital gain distributions are determined in accordance with federal income tax
regulations which may differ from accounting principles generally accepted in
the United States of America.
Federal income tax: The Company intends to continue to qualify as a regulated
investment company by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
earnings to its shareholders. Therefore, no provision is made for federal income
or excise taxes.
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"), a wholly-owned subsidiary of Bank of America,
N.A. ("Bank of America"), 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 Banc of
America Capital Management, Inc. ("BACAP"), a wholly-owned subsidiary of Bank of
America, pursuant to which BACAP 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 also 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
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
8
<PAGE> 11
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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.
PFPC Inc. ("PFPC") serves as the transfer agent and dividend disbursing agent
for the Company.
BNY serves as the custodian of the Company's assets. For the six months ended
September 30, 2000, expenses of the Company were reduced by $2,923 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.
No officer, director or employee of Bank of America, BAAI or BACAP, or any
affiliate thereof, receives any compensation from the Company for serving as a
Director or Officer of the Company.
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, 2000, were $8,971,373 and $10,214,126, respectively.
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the six months ended September 30, 2000 were $7,922
and $7,852, respectively.
4. COMMON STOCK
At September 30, 2000, 1,000,000,000 shares of common stock, $0.001 par value
were authorized.
The Board of Directors of the Company has approved a stock repurchase plan that
gives the Company the flexibility to engage in 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 believes that such purchases are appropriate in light of market
conditions, including the presence of a market discount. There were no share
repurchases during the year ended March 31, 2000 and the six months ended
September 30, 2000.
5. CAPITAL LOSS CARRY FORWARD
At March 31, 2000, the Company had available for federal income tax purposes
unused capital losses expiring March 31, 2007 of $1,020,764.
At March 31, 2000, the Company utilized capital losses of $9,579 during the
year.
9
<PAGE> 12
NATIONS FUNDS
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 PFPC (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 PFPC, 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
such notice is 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 during the period between the record date and the payable date for the
dividend or distribution.
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NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
DIVIDEND REINVESTMENT PLAN (CONTINUED)
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
PFPC Inc., P.O. Box 34602, Charlotte, NC 28234, 1.800.982.2271.
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PO Box 34602
Charlotte, NC 28254-4602
Toll Free 1.800.982.2271
BTMSAR 991408 (9/00)
