<PAGE> 1
Nations Balanced Target
Maturity Fund, Inc.
A N N U A L
R E P O R T
For the Year Ended March 31, 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 annual report for Nations
Balanced Target Maturity Fund, Inc. (the "Company") for the twelve-month period
ended March 31, 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 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 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 twelve-month period ended March 31, 2000, the total return of Nations
Balanced Target Maturity Fund, Inc. was (1.02)%(1) based on an ending market
value of $8.50. The underperformance of the equity portion of the Company was
attributable to the underperformance of value oriented stocks in a very strong
growth market environment. The fixed income portion of the portfolio was
negatively impacted by an increase in interest rates in the short-intermediate
portion of the yield curve. Over this period, the Company distributed $0.41 per
share of ordinary income to its shareholders. As of March 31, 2000, 76.0% of the
Company's portfolio was invested in Zero Coupon U.S. Treasury Obligations and
24.0% was invested in common stocks. A breakdown of portfolio holdings by asset
type follows.
PORTFOLIO BREAKDOWN AS OF MARCH 31, 2000(2)
[PIE CHART]
<TABLE>
<CAPTION>
<S> <C>
U.S. treasury obligations 76.0%
Utilities - Telephone 2.3%
Banking 2.1%
Oil - International 1.1%
Conglomerate 1.0%
Automobiles and trucks 0.9%
Retail - General 0.9%
Insurance 0.9%
Financial services 0.8%
Drugs 0.8%
Other 13.2%
</TABLE>
INVESTMENT PHILOSOPHY
Management of the equity portion of the Company is based on the premise that a
company's stock price is more volatile than its underlying business fundamentals
and that active security selection improves performance over time. We also
believe that proprietary research is a critical component of investment success
and that opportunities are uncovered by a constant search for new information.
Within this framework, the Company's equity strategy is a value approach where
the management team seeks superior returns by investing in sound, proven
businesses that are thought to be inexpensive relative to their intrinsic value.
---------------
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 7.46%. Total return represents the change, over a specific
period of time, in the value of an investment in the Company after
reinvesting all distributions.
(2) Portfolio characteristics and holdings are subject to change and may not be
representative of current characteristics and holdings.
1
<PAGE> 4
MARKET ENVIRONMENT AND PORTFOLIO STRATEGY
The economy continued to grow at a strong pace, while inflation remained at a
modest level. The Federal Reserve Board continued its inflation vigil, raising
short-term interest rates several times in what were deemed to be pre-emptive
moves. The stock market continued to be dominated by growth stocks, particularly
technology and communications services companies. Momentum investing carried the
day, as investors continued to flock to very highly valued technology and
communication stocks, leaving more undervalued companies we consider to have
more attractive valuation measures in their wake. Many of these companies did
not fit the valuation criteria used in the equity portion of the portfolio. As
noted earlier, the Fund's equity focus is on intrinsic value measures.
Due to the narrowness of the equity market, virtually every sector
underperformed the market except technology. Particularly out of favor were
cyclical companies, such as those found in the basic materials, capital goods
and consumer cyclicals sectors. This reflected a market of tremendous momentum,
not a market where traditional valuation criteria were recognized. We believe
these sectors should benefit as the global economies improve and the U.S.
economy remains strong. In our view, these companies potentially offer
significant opportunities for investors as we believe the stock market's focus
should broaden, bringing value investing back into favor over the coming year.
Looking ahead, we believe the tremendous increase in the value of technology
stocks will dissipate over the coming year as stocks in this sector are now
selling, on average, at incredibly high levels relative to what we think are
their sustainable growth rates. Therefore, we have underweighted the sector
relative to the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Index), and have major representation in just those stocks that should continue
to perform well with strong dominance in their respective
markets -- International Business Machines, Xerox Corporation and Pitney Bowes,
Inc. for example.
We have overweighted the financial sector. When viewed from a demographic as
well as from a bottom up valuation approach, we believe these companies
represent substantial opportunity for the long-term investor.
Finally, we expect improvement in the economies of our global trading partners,
Europe, Asia (ex-Japan) and Latin America in 2000 and beyond. This should
enhance the profits of commodity-like companies, such as Alcoa, Inc., Nucor
Corporation and Weyerhaeser Company. Multi-national conglomerates such as United
Technologies Corporation, Honeywell International Inc., Rockwell International
Corporation and Emerson Electric Company could also generate strong earnings
gains as they benefit from positive economic globalization trends. These stocks
are now selling substantially below their potential earnings power and
dividend-paying capabilities, in our view.
The long-term case for value investing remains strong. We think the markets will
ultimately recognize the highly attractive characteristics of the portfolio's
fundamentally undervalued stocks.
TOP TEN EQUITY HOLDINGS AS OF MARCH 31, 2000(3)
<TABLE>
<C> <S> <C>
1. Exxon Mobil Corporation.............................. 0.8%
2. Comverse Technology, Inc. ........................... 0.7%
3. AT&T Corporation..................................... 0.7%
4. Chase Manhattan Corporation.......................... 0.7%
5. LSI Logic Corporation................................ 0.6%
6. Mellon Financial Corporation......................... 0.6%
7. Citigroup Inc. ...................................... 0.6%
8. United Technologies Corporation...................... 0.6%
9. Ford Motor Company................................... 0.5%
10. Honeywell International Inc. ........................ 0.5%
</TABLE>
Thank you for your investment in Nations Balanced Target Maturity Fund, Inc. The
Company looks forward to its next report to shareholders.
Sincerely,
/s/ Robert H. Gordon
ROBERT H. GORDON
PRESIDENT
March 31, 2000
---------------
(3) As a percentage of net assets.
2
<PAGE> 5
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-----------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS -- 24.0%
AEROSPACE AND DEFENSE -- 0.5%
4,875 Honeywell International Inc. ........... $ 257
-------
AUTOMOBILE PARTS MANUFACTURERS -- 0.2%
4,325 Genuine Parts Company................... 103
-------
AUTOMOBILES AND TRUCKS -- 0.9%
5,700 Ford Motor Company...................... 262
2,525 General Motors Corporation.............. 209
-------
471
-------
BANKING -- 2.1%
3,000 Bank of New York Company Inc. .......... 125
3,900 Chase Manhattan Corporation............. 341
5,100 Citigroup Inc. ......................... 302
10,400 Mellon Financial Corporation............ 307
-------
1,075
-------
BEVERAGES -- 0.5%
2,425 Anheuser-Busch Companies, Inc. ......... 151
3,425 PepsiCo, Inc. .......................... 118
-------
269
-------
CHEMICALS -- BASIC -- 0.6%
1,525 Dow Chemical Company.................... 174
2,085 E.I. duPont de Nemours and Company...... 110
775 Eastman Chemical Company................ 35
-------
319
-------
COMPUTER RELATED -- 0.5%
2,075 Adaptec, Inc.++......................... 80
3,400 Gateway Inc.++.......................... 180
-------
260
-------
COMPUTER SOFTWARE -- 0.7%
2,400 Computer Associates International
Inc. ................................. 142
3,100 Symantec Corporation++.................. 233
-------
375
-------
CONGLOMERATE -- 1.0%
4,650 Rockwell International Corporation...... 194
4,600 United Technologies Corporation......... 291
-------
485
-------
COSMETICS AND TOILETRIES -- 0.5%
3,350 Avon Products, Inc. .................... 97
1,500 Kimberly-Clark Corporation.............. 84
1,300 Procter & Gamble Company................ 73
-------
254
-------
DIVERSIFIED -- 0.5%
1,625 Minnesota Mining & Manufacturing
Company............................... 143
1,800 Textron Inc. ........................... 110
-------
253
-------
DRUGS -- 0.8%
2,500 Bristol-Myers Squibb Company............ 144
1,950 Merck & Company, Inc. .................. 121
3,800 Schering-Plough Corporation............. 140
-------
405
-------
ELECTRICAL EQUIPMENT -- 0.5%
4,700 Emerson Electric Company................ 249
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-----------------------------------------------------------
<C> <S> <C> <C>
ELECTRONICS -- 0.7%
1,100 CTS Corporation......................... $ 63
4,400 LSI Logic Corporation++................. 319
-------
382
-------
ENERGY -- 0.8%
5,325 Coastal Corporation..................... 245
7,325 TECO Energy, Inc. ...................... 142
-------
387
-------
FINANCIAL SERVICES -- 0.8%
1,925 Freddie Mac............................. 85
1,125 Merrill Lynch & Company Inc. ........... 118
5,100 Paine Webber Group, Inc. ............... 225
-------
428
-------
FOOD PRODUCERS -- 0.4%
2,700 General Mills Inc. ..................... 98
1,625 Quaker Oats Company..................... 98
-------
196
-------
FOREST AND PAPER PRODUCTS -- 0.5%
1,300 Boise Cascade Corporation............... 45
2,500 International Paper Company............. 107
1,500 Weyerhaeuser Company.................... 86
-------
238
-------
FURNITURE AND APPLIANCES -- 0.2%
1,700 Whirlpool Corporation................... 100
-------
INSURANCE -- 0.9%
2,650 CIGNA Corporation....................... 201
7,200 Lincoln National Corporation Ltd. ...... 241
-------
442
-------
MACHINERY AND EQUIPMENT -- 0.4%
4,900 Parker Hannifin Corporation............. 202
-------
MEDIA -- 0.2%
2,625 Comcast Corporation, Class A Special.... 114
-------
MEDICAL PRODUCTS AND SUPPLIES -- 0.4%
3,625 Abbott Laboratories..................... 127
1,425 Johnson & Johnson....................... 100
-------
227
-------
METALS AND MINING -- 0.4%
3,200 Nucor Corporation....................... 160
1,300 Phelps Dodge Corporation................ 62
-------
222
-------
NETWORKING EQUIPMENT AND PRODUCTS -- 0.7%
1,850 Comverse Technology, Inc.++............. 350
-------
OFFICE EQUIPMENT -- 0.4%
3,125 Electronics for Imaging, Inc.++......... 188
-------
OIL -- DOMESTIC -- 0.3%
4,393 Conoco, Inc., Class B................... 112
1,450 Ultramar Diamond Shamrock Corporation... 37
-------
149
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 6
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-----------------------------------------------------------
<C> <S> <C> <C>
OIL -- INTERNATIONAL -- 1.1%
5,000 Exxon Mobil Corporation................. $ 389
3,300 Royal Dutch Petroleum Company........... 190
-------
579
-------
OIL FIELD SERVICES & EQUIPMENT -- 0.2%
2,650 Tosco Corporation....................... 81
-------
PHOTO AND OPTICAL -- 0.3%
2,675 Eastman Kodak Company................... 145
-------
PRINTING AND PUBLISHING -- 0.3%
3,025 Knight-Ridder Inc. ..................... 154
-------
RETAIL -- GENERAL -- 0.9%
1,675 Federated Department Stores, Inc.++..... 70
4,325 Sears, Roebuck and Company.............. 134
3,275 Target Corporation...................... 244
-------
448
-------
RETAIL -- SPECIALTY - 0.7%
3,325 Circuit City Stores - Circuit City
Group................................. 203
1,700 Family Dollar Stores.................... 35
2,400 Lowe's Companies Inc. .................. 140
-------
378
-------
SEMICONDUCTORS -- 0.7%
1,800 Intel Corporation....................... 237
2,900 Integrated Device Technology, Inc.++.... 115
-------
352
-------
TELECOMMUNICATIONS -- 0.6%
5,175 American Power Conversion
Corporation++......................... 222
1,625 CommScope, Inc.++....................... 74
-------
296
-------
TRANSPORTATION -- 0.3%
4,250 FedEx Corporation++..................... 166
-------
UTILITIES -- ELECTRIC -- 0.2%
5,800 Energy East Corporation................. 115
-------
UTILITIES -- TELEPHONE -- 2.3%
1,500 ALLTEL Corporation...................... 95
6,200 AT&T Corporation........................ 349
3,650 BellSouth Corporation................... 172
2,675 GTE Corporation......................... 190
2,625 MCI Worldcom, Inc.++.................... 119
5,150 SBC Communications Inc. ................ 216
-------
1,141
-------
TOTAL COMMON STOCKS
(Cost $10,873).......................... 12,255
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 76.0%
U.S. TREASURY STRIPS -- 76.0%
$16,120 Interest only
7.440%** 08/15/04.................... $12,250
15,257 TIGR, Interest Receipt,
7.460%** 08/15/04.................... 11,454
20,000 TIGR, Principal Receipt,
7.440%** 08/15/04.................... 15,015
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $37,301)......................... 38,719
-------
TOTAL INVESTMENTS
(Cost $48,174*)................. 100.0% 50,974
-------
OTHER ASSETS AND LIABILITIES
(NET)......................... 0.0%
Receivable for investment securities
sold................................. $ 574
Dividends receivable................... 14
Investment advisory fee payable........ (23)
Administration fee payable............. (11)
Due to custodian....................... (516)
Accrued expenses and other
liabilities.......................... (51)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................ (13)
-------
NET ASSETS...................... 100.0% $50,961
=======
NET ASSETS CONSIST OF:
Undistributed net investment income.... $ 393
Accumulated net realized loss on
investments sold..................... (1,029)
Net unrealized appreciation of
investments.......................... 2,800
Paid-in capital........................ 48,797
-------
NET ASSETS............................. $50,961
=======
Net asset value per share ($50,961,458
/ 5,231,163 shares of common stock
outstanding)......................... $9.74
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized appreciation of $2,792 on
investment securities was comprised of gross appreciation of $3,413 and gross
depreciation of $621 for Federal income tax purposes. At March 31, 2000, the
aggregate cost of securities for Federal income tax purposes was $48,182.
** 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
For the year ended March 31, 2000
<TABLE>
<S> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $ 2,641
Dividends (net of foreign witholding taxes of $2)........... 209
--------------
Total investment income................................. 2,850
--------------
EXPENSES:
Investment advisory fee..................................... 223
Administration fee.......................................... 130
Transfer agent fees......................................... 22
Legal and audit fees........................................ 26
Printing Fees............................................... 22
Custodian fees.............................................. 13
Directors' fees and expenses................................ 11
Miscellaneous expenses...................................... 3
--------------
Total expenses.......................................... 450
Fees reduced by credits allowed by the custodian (Note 2)... (5)
--------------
Net expenses............................................ 445
--------------
NET INVESTMENT INCOME....................................... 2,405
--------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... 181
Net change in unrealized appreciation/(depreciation) of
investments............................................... (2,580)
--------------
Net realized and unrealized gain/(loss) on investments...... (2,399)
--------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 6
==============
</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>
YEAR ENDED YEAR ENDED
3/31/00 3/31/99
--------------------------------
<S> <C> <C>
(IN THOUSANDS)
Net investment income....................................... $ 2,405 $ 2,170
Net realized gain/(loss) on investments..................... 181 (1,186)
Net change in unrealized appreciation/(depreciation) of
investments............................................... (2,580) 552
-------------- --------------
Net increase/(decrease) in net assets resulting from
operations................................................ 6 1,536
Distributions to shareholders from net investment income.... (2,145) (2,040)
Distributions to shareholders from net realized gain on
investments............................................... -- (1,192)
-------------- --------------
Net increase/(decrease) in net assets....................... (2,139) (1,696)
-------------- --------------
NET ASSETS:
Beginning of year........................................... 53,100 54,796
-------------- --------------
End of year................................................. $ 50,961 $ 53,100
============== ==============
Undistributed net investment income/(distributions in excess
of net investment income) at end of year.................. $ 393 $ 134
============== ==============
</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 year.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
3/31/00 3/31/99 3/31/98 3/31/97 3/31/96
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year..................... $ 10.15 $ 10.47 $ 10.11 $ 10.78 $ 9.67
------- ------- ------- ------- -------
Income from investment operations:
Net investment income.................................. 0.46 0.41* 0.41 0.43 0.40
Net realized and unrealized gain/(loss) on
investments.......................................... (0.46) (0.11) 1.80 0.49 1.61
------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting from
investment operations................................ -- 0.30 2.21 0.92 2.01
Distributions:
Dividends from net investment income................... (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.................................... (0.41) (0.62) (1.85) (1.59) (0.90)
------- ------- ------- ------- -------
Net asset value, end of year........................... $ 9.74 $ 10.15 $ 10.47 $ 10.11 $ 10.78
======= ======= ======= ======= =======
Market value, end of year.............................. $ 8.50 $ 9.00 $ 10.00 $ 9.00 $ 9.25
======= ======= ======= ======= =======
Total return++......................................... (1.02)% (4.08)% 32.73% 13.93% 19.25%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000).......................... $50,961 $53,100 $54,796 $52,864 $56,381
Ratio of operating expenses to average net assets...... 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............................................ 0.87% -- -- -- --
Ratio of net investment income to average net assets... 4.65% 3.99% 3.78% 4.01% 3.75%
Portfolio turnover rate................................ 21% 57% 106% 99% 46%
</TABLE>
---------------
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and is based on market value at
period end.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 10
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
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 generally accepted
accounting principles 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 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 sale 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 last sale price 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 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 value.
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 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.
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") (formerly known as TradeStreet
Investment Associates, Inc.), 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.
8
<PAGE> 11
NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
Effective December 1, 1999, First Data Investor Services Group, Inc. ("First
Data"), the Company's transfer agent and dividend disbursing agent, was acquired
by PFPC Inc. ("PFPC"). PFPC began serving as the transfer agent and dividend
disbursing agent for the Company on that date, and is providing the same
services as those previously provided by First Data.
BNY also serves as the custodian of the Company's assets. For the year ended
March 31, 2000, expenses of the Company were reduced by $4,954 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, 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 year
ended March 31, 2000, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------
<S> <C>
$10,842 $13,080
</TABLE>
There were no purchases or sales of long-term U.S. government securities for the
year ended March 31, 2000.
4. COMMON STOCK
At March 31, 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 years ended March 31, 2000 and March 31, 1999.
5. CAPITAL LOSS CARRYFORWARD
At March 31, 2000, the Fund had available for Federal income tax purposes unused
capital losses expiring March 31, 2007 of $1,020,764.
At March 31, 2000 the Fund utilized capital losses during the year in the amount
of $9,579.
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NATIONS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
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, 2000,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
May 19, 2000
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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
received after that date, it will be effective as soon as possible after the
reinvestment of the dividend or distribution.
PRICING OF DIVIDENDS AND DISTRIBUTIONS
Whenever the Company's Board of Directors declares a dividend or other
distribution payable in cash or, at the option of the Plan Agent, in shares of
capital stock issued by the Company, the Plan Agent will elect on behalf of the
participants to receive the dividend in authorized but unissued shares of
capital stock if the net asset value per share (as determined by the investment
advisor of the Company as of the close of business on the record date for the
dividend or distribution) is equal to or less than 95% of the closing market
price per share of the capital stock of the Company on the New York Stock
Exchange (the "Exchange") on such record date plus estimated brokerage
commissions. The number of such authorized but unissued shares to be credited to
a participant's account will be determined as of the close of business on the
record date for the dividend, by valuing such shares at the greater of the net
asset value per share or 95% of the market price per share. The Plan Agent will
credit each participant's account with the number of shares corresponding in
value, as determined under the foregoing formula, to the amount such participant
would have received in cash had such participant not elected to participate in
this Plan.
If the net asset value per share is equal to or less than the closing market
price per share of the capital stock of the Company on the Exchange on such
record date plus estimated brokerage commissions but exceeds 95% of such closing
market price plus estimated brokerage commissions, the Plan Agent may elect on
behalf of all participants (i) to take the dividend in cash and as soon as
practicable thereafter, consistent with obtaining the best price and execution,
proceed to purchase in one or more transactions the shares of capital stock in
the open market, at the then current price as hereinafter provided, and will
credit each participant's account with the number of shares corresponding in
value, as determined by the price actually paid on the open market for such
shares including brokerage expenses, to the amount such participant would have
received in cash had such participant not elected to participate in this Plan or
(ii) to receive the dividend in authorized but unissued shares of capital stock,
in which case the Plan Agent will credit each participant's account with the
number of shares corresponding in value (determined by valuing such shares at
the greater of the net asset value per share or 95% of the market price per
share, in each case as of the close of business on the record date for the
dividend or distribution) to the amount such participant would have received in
cash had such participant not elected to participate in this Plan.
If the net asset value per share is higher than the closing market price per
share of the capital stock of the Company on the Exchange including estimated
brokerage commissions on such record date, the Plan Agent will elect to take the
dividend in cash and as soon as practicable, consistent with obtaining the best
price and execution, the Plan Agent will proceed to purchase in one or more
transactions the shares of capital stock in the open market, at the then current
price as hereinafter provided. Each participant's account will be credited with
the number of shares corresponding in value, as determined by the price actually
paid on the open market for such shares including brokerage expenses, to the
amount such participant would have received in cash had such participant not
elected to participate in this Plan. Under such circumstances, in anticipation
of receipt of a dividend in cash, the Plan Agent may purchase shares in the open
market during the period between the record date and the payable date for the
dividend or distribution.
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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, (800) 982-2271.
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NATIONS FUNDS
Nations Balanced Target Maturity Fund, Inc.
TAX INFORMATION (UNAUDITED)
Of the ordinary income (including short-term capital gain) distributions made by
the Company during the fiscal year ended March 31, 2000, 7.66% qualified for the
dividends received deduction available to corporate shareholders.
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PO Box 34602
Charlotte, NC 28254-4602
Toll Free 1.800.982.2271
BTMA 991408 (3/00)
