-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kLa86CTpjTQ+o7TJcH0o3+YxyleV0P0Tixl0EO7EEFOjy3WJ7QujSL8FWwKsNy92 NkSoLrIHFQTVVaffDZ7+tQ== 0000891093-95-001818.txt : 19950830 0000891093-95-001818.hdr.sgml : 19950830 ACCESSION NUMBER: 0000891093-95-001818 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN MERRITT INTERMEDIATE TERM HIGH INCOME TRUST CENTRAL INDEX KEY: 0000843506 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363616859 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05707 FILM NUMBER: 95567995 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLZ CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7086846000 N-30D 1 SEMI/ANNUAL REPORT
Table of Contents Letter to Shareholders ................ 1 Performance Results ................... 3 Portfolio of Investments ............. 4 Statement of Assets and Liabilities ... 9 Statement of Operations .............. 10 Statement of Changes in Net Assets .... 11 Financial Highlights ................. 12 Notes to Financial Statements ......... 14
Letter to Shareholders August 3, 1995 Dear Shareholder: The first half of 1995 has been a very positive one for most investors. Both the fixed-income and stock markets have made considerable gains for the period ended June 30, 1995. This year has been particularly rewarding for investors after weathering the difficult markets of 1994. The first six months of 1995 serve as a reminder of just how quickly markets can move, and how difficult it can be to predict the timing of those movements. Moreover, this year reinforces the importance of maintaining a long-term perspective, and reaffirms the principle that it is time---not timing---that leads to investment success. [PHOTO] Dennis J. McDonnell and Don G. Powell Economic Overview Due in large part to the Federal Reserve Board's efforts to tighten monetary supply in 1994, the economy has slowed significantly this year. Evidence of this guided slowdown was reflected in gross domestic product for the second quarter, which grew at an annual rate of 0.5 percent, substantially lower than its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1 percent. While other key economic data, including unemployment rates and housing starts, have shown mixed signs during recent weeks, the general trend for the first half of the year suggested a "soft landing" scenario. Subsequently, concern over inflation has subsided, as its annualized rate has run at a modest pace of 3.2 percent year-to-date. Financial markets, perceiving the Fed's monetary initiatives had taken hold without driving the economy into a recession, rallied through the first six months of the year. With slowing growth, interest rates declined and the value of fixed-income investments rose. For example, the yield on 30-year Treasury securities fell from 7.88 percent at the end of December to 6.62 percent at the end of June, while prices on the "long bond" rose 18 percent. The high yield market kept pace with the rally in the Treasury market for most of the period. Yields on high yield securities remained about 3.30 percentage points higher than Treasuries until June, when the "spread" between high yield bonds and Treasuries began to widen. Typically, in a period of economic slowdown, high yield bonds underperform other fixed income securities as investors become concerned about the health of the issuing companies. However, the underlying cash flows of companies issuing high yield debt remained healthy during the first half of 1995, keeping the high yield sector strong. Performance Summary The Van Kampen Merritt Intermediate Term High Income Trust is a diversified portfolio of high yield bonds. We are pleased to report that the Trust generated a total return at market price (Continued on page two) 1 of 27.36 percent for the six-month period ended June 30, 1995. This strong performance reflects a gain in market price per common share on the New York Stock Exchange from $5.50 on December 31, 1994, to $6.625 on June 30, 1995, and reinvestment of dividends totaling $0.3510 per share. Since the Fed was taking action to slow the economy, the Trust's portfolio emphasized bonds issued by consumer products, entertainment, and other companies that are less likely to be adversely affected by an economic downturn. The average quality of the Trust was also improved by increasing its exposure to BB-rated issues, because higher-quality bonds perform better than lower-quality bonds in a slowing economy. We believe the portfolio's defensive posture will allow for relatively strong performance unless the economy deteriorates unexpectedly. To that end, we will continue to monitor economic data very carefully, and take further defensive action if it becomes warranted. Outlook Comfortable with the economy's rate of growth and level of inflation, the Fed reversed course and lowered short-term interest rates on July 6. We believe that the Fed will move cautiously before easing again, waiting for further signs that the economy has settled into a slow growth pattern. We anticipate that the economy will grow at an annual rate between 2 and 3 percent in the second half of the year, and that inflation will run at an annualized rate between 3.3 and 3.5 percent. Based upon this generally slow growth and low inflation outlook, we believe that fixed-income markets---including high yield bonds---will continue to make attractive gains as interest rates fall. During recent months, debate over tax reform has dominated the agenda in Washington. There has been varied speculation about the impact of reform, which may have caused you to wonder how it might affect your investment goals. At this point, no one knows for sure what will happen or when it might actually take place. As various proposals come to the forefront, there may be short-term market fluctuations, just as we saw during the debate over the U.S. health care system. We will continue to keep a close watch over any new developments and evaluate the potential impact that they may have on your investments. Once again, it is important to remember that financial markets will inevitably experience highs and lows, but by maintaining a long-term investment perspective, it may allow you to ride the ups and downs of the markets more easily as you pursue your investment goals. We appreciate your continued confidence in your investment with Van Kampen American Capital, and we look forward to communicating with you again regarding the performance of your Trust. Sincerely, Don G. Powell Dennis J. McDonnell Chairman President Van Kampen American Capital Van Kampen American Capital Investment Advisory Corp. Investment Advisory Corp. 2 Performance Results for the Period Ended June 30, 1995 Van Kampen Merritt Intermediate Term High Income Trust (NYSE Ticker Symbol VIT)
Total Returns Six-month total return based on market price ....................... 27.36% Six-month total return based on NAV ............................... 14.59% Distribution Rates Distribution rate as a % of initial offer common stock price ....... 7.02% Distribution rate as a % of 06/30/95 closing common stock price ... 10.60% Share Valuations Net asset value as of 06/30/95 ......................................... $ 6.07 Closing common stock price as of 06/30/95 .............................. $ 6.625 Six-month high common stock price (06/14/95) ........................... $ 7.000 Six-month low common stock price (01/25/95) ........................... $ 5.500 Preferred share rate as of 06/30/95 ................................ 5.830% Total return based on market price assumes an investment at the market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing stock price at the end of the period indicated. Total return based on Net Asset Value (NAV) assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period, and sale of all shares at the end of the period, all at net asset value. Distribution rate represents the monthly annualized distributions of the Trust at the end of the period, and not the earnings of the Trust. See "Notes to Financial Statements" footnote #4, for more information concerning Preferred Share reset periods.
Past performance does not guarantee future results. Investment return, stock price and net asset value will fluctuate with market conditions. Trust shares, when sold, may be worth more or less than their original cost. 3 Portfolio of Investments June 30, 1995 (Unaudited)
Par Amount (000) Description Coupon Maturity Market Value Corporate Bonds Aerospace & Defense 3.8% $ 2,000 Sequa Corp. ............................. 9.625% 10/15/99 $ 1,990,000 1,055 Sequa Corp. ............................. 9.375 12/15/03 981,150 2,520 Talley Manufacturing & Technology Inc. ... 10.750 10/15/03 2,469,600 ----------- 5,440,750 ----------- Automobile 0.9% 1,200 Exide Corp. .............................. 10.000 04/15/05 1,236,000 ----------- Beverage, Food & Tobacco 1.4% 2,000 Fleming Cos. Inc. Var. Rate Cpn. ........ 8.313 12/15/01 1,950,000 ----------- Buildings & Real Estate 7.8% 3,750 American Standard Inc. .................. 10.875 05/15/99 4,068,750 1,300 Building Material Corp. ............ 0/11.750 07/01/04 773,500 2,250 Overhead Door Corp. ..................... 12.250 02/01/00 2,261,250 3,950 Walter Industries Inc. .............. 12.190 03/15/00 3,989,500 ----------- 11,093,000 ----------- Chemicals, Plastics & Rubber 1.4% 1,300 Foamex L.P. ............................. 11.250 10/01/02 1,287,000 1,000 G. I. Holdings Inc. ...................... * 10/01/98 680,000 ----------- 1,967,000 ----------- Consumer Non-Durables 4.0% 900 Astrum Intl Corp. ....................... 11.500 06/08/03 945,000 2,600 Playtex Family Products Corp. ............ 9.000 12/15/03 2,444,000 2,290 Revlon Consumer Products Corp. .......... 9.375 04/01/01 2,221,300 ----------- 5,610,300 ----------- Containers, Packaging & Glass 10.6% 2,925 Anchor Glass Container Corp. ............. 10.250 06/30/02 2,939,625 500 Anchor Glass Container Corp. ............. 9.875 12/15/08 460,000 1,300 Atlantis Group Inc. ..................... 11.000 02/15/03 1,280,500 2,300 Malette Inc. ............................. 12.250 07/15/04 2,553,000 1,000 Owens Illinois Inc. ...................... 10.500 06/15/02 1,040,000 3,000 Owens Illinois Inc. ...................... 11.000 12/01/03 3,300,000 500 Repap New Brunswick Inc. ................. 9.875 07/15/00 505,000 1,000 South Dakota Warren Co. ................. 12.000 12/15/04 1,080,000 1,850 Stone Consolidated Corp. ................ 10.250 12/15/00 1,933,250 ----------- 15,091,375 -----------
4 See Notes to Financial Statements Portfolio of Investments (Continued) June 30, 1995 (Unaudited)
Par Amount (000) Description Coupon Maturity Market Value Diversified/Conglomerate Manufacturing 4.8% $ 3,340 IMO Industries Inc. ..................... 12.000% 11/01/01 $ 3,440,200 3,650 Jordan Industries Inc. .................. 10.375 08/01/03 3,358,000 ----------- 6,798,200 ----------- Diversified/Conglomerate Service 2.6% 2,750 Comdata Network Inc. ..................... 12.500 12/15/99 3,011,250 550 Comdata Network Inc. ..................... 13.250 12/15/02 621,500 ----------- 3,632,750 ----------- Farming & Agriculture 1.9% 2,000 Trans Resources Inc. ..................... 14.500 09/01/98 2,030,000 800 Trans Resources Inc. ..................... 11.875 07/01/02 724,000 ----------- 2,754,000 ----------- Finance 2.2% 3,000 American Annuity Group Inc. .............. 11.125 02/01/03 3,135,000 ----------- Grocery 0.8% 1,200 Pathmark Stores Inc. ..................... 9.625 05/01/03 1,176,000 ----------- Healthcare 4.4% 2,000 Hospital Corp. of America ............... 10.750 10/21/95 2,040,000 1,700 Ornda Healthcorp ........................ 11.375 08/15/04 1,861,500 1,700 Tenet Healthcare Corp. .................. 9.625 09/01/02 1,802,000 550 Tenet Healthcare Corp. .................. 10.125 03/01/05 583,000 ----------- 6,286,500 ----------- Hotel, Motel, Inns & Gaming 6.5% 1,600 Aztar Corp. ............................. 11.000 10/01/02 1,600,000 2,100 Aztar Corp. ............................. 13.750 10/01/04 2,373,000 2,950 California Hotel Finance Corp. ........... 11.000 12/01/02 3,053,250 1,900 Trump Plaza Funding Inc. ................ 10.875 06/15/01 1,757,500 575 Trump Taj Mahal Funding Inc. ............. 11.350 11/15/99 457,420 ----------- 9,241,170 -----------
See Notes to Financial Statements 5 Portfolio of Investments (Continued) June 30, 1995 (Unaudited)
Par Amount (000) Description Coupon Maturity Market Value Leisure 4.8% $ 3,200 AMC Entertainment Inc. ................... 12.625% 08/01/02 $ 3,520,001 2,260 Viacom International Inc. ................ 10.250 09/15/01 2,531,200 850 Viacom International Inc. ................ 8.000 07/07/06 824,500 ------------ 6,875,701 ------------ Mining, Steel, Iron & Non-Precious Metal 3.1% 625 Armco Inc. ............................... 11.375 10/15/99 640,625 3,700 Easco Corp. .............................. 10.000 03/15/01 3,700,000 ------------ 4,340,625 ------------ Oil & Gas 8.8% 2,000 Clark R & M Holdings Inc. ................ * 02/15/00 1,250,000 2,900 Global Marine Inc. ........................ 12.750 12/15/99 3,204,500 1,750 Petroleum Heat & Power Inc. ............... 12.250 02/01/05 1,881,250 2,050 Plains Resources Inc. .................... 12.000 10/01/99 2,132,000 1,200 TransTexas Gas Corp. ..................... 11.500 06/15/02 1,230,000 450 Triton Energy Corp. ....................... * 11/01/97 371,250 2,800 Triton Energy Corp. ................. 0/9.750 12/15/00 2,478,000 ------------ 12,547,000 ------------
See Notes to Financial Statements 6 Portfolio of Investments (Continued) June 30, 1995 (Unaudited)
Par Amount (000) Description Coupon Maturity Market Value Printing, Publishing & Broadcasting 16.0% $ 4,000 Century Communications Corp. ............... 9.750% 02/15/02 $ 4,060,000 1,200 Comcast Corp. ................................... 9.375 05/15/05 1,206,000 4,000 Insight Communications Co. .......... 8.250/11.250 03/01/00 4,060,000 2,400 K - III Communications Corp. .................... 10.625 05/01/02 2,544,000 250 K - III Communications Corp. .................... 10.250 06/01/04 262,500 2,450 Rogers Communications Inc. ....................... 10.875 04/15/04 2,523,500 2,200 SCI Television Inc. ............................. 11.000 06/30/05 2,299,000 2,500 Storer Communications Inc. ...................... 10.000 05/15/03 2,500,000 1,700 Williamhouse Regency Delaware Inc. ............... 11.500 06/15/05 1,717,000 1,050 Young Broadcasting Inc. ......................... 11.750 11/15/04 1,155,000 350 Young Broadcasting Inc. ......................... 10.125 02/15/05 353,500 ------------ 22,680,500 ------------ Retail 2.2% 1,000 Hosiery Corp. America Inc. ...................... 13.750 08/01/02 995,000 2,100 Waban Inc. ...................................... 11.000 05/15/04 2,079,000 ------------ 3,074,000 ------------
See Notes to Financial Statements 7 Portfolio of Investments (Continued) June 30, 1995 (Unaudited)
Par Amount (000) Description Coupon Maturity Market Value Telecommunications 3.9% $ 750 Centennial Cellular Corp. ...................... 10.125% 05/15/05 $ 738,750 600 Intermedia Communications ...................... 13.500 06/01/05 603,000 1,500 Mobile Telecommunication Technology ............ 13.500 12/15/02 1,605,000 2,520 Panamsat L. P. ................................. 9.750 08/01/00 2,583,000 5,529,750 ------------ Total Corporate Bonds 91.9% ................................................... 130,459,621 ------------ Equities 0.0% Hosiery Corp. America Inc. (1,000 common stock warrants) ...................... 15,000 ------------ Total Long-Term Investments 91.9% (Cost $126,157,999) ....................................................... 130,474,621 Repurchase Agreement 6.0% UBS Securities, U.S. T-Note, $6,615,000 par, 9.250% coupon, due 02/15/16, dated 06/30/95, to be sold on 07/03/95 at $8,508,323 .......................... 8,504,000 Other Assets in Excess of Liabilities 2.1% ..................................... 3,046,409 ------------ Net Assets 100% ............................................................... $142,025,030 ------------ *Zero coupon bond At June 30, 1995, cost for federal income tax purposes is $126,157,999; the aggregate gross unrealized appreciation is $4,654,890 and the aggregate gross unrealized depreciation is $338,268, resulting in net unrealized appreciation of $4,316,622. Securities purchased on a when issued or delayed delivery basis. Assets segregated as collateral for when issued or delayed delivery purchase commitments. Security is a "Step-up" bond where the coupon increases or steps up at a predetermined date.
The following table summarizes the portfolio composition at June 30, 1995, based upon quality ratings issued by Standard & Poor's. For securities not rated by Standard & Poor's, the Moody's rating is used. Portfolio Composition by Credit Quality
BBB .......... 1.6% BB ........... 27.6 B ........... 67.4 CCC ......... .3 Non-Rated ... 3.1 ------ 100.0% ------
See Notes to Financial Statements 8 Statement of Assets and Liabilities June 30, 1995 (Unaudited)
Assets: Investments, at Market Value (Cost $126,157,999) (Note 1) ................................ $ 130,474,621 Short-Term Investments (Note 1) .......................................................... 8,504,000 Cash .................................................................................... 1,541 Receivables: Investments Sold ...................................................................... 8,262,418 Interest ............................................................................... 3,197,605 ------------- Total Assets ............................................................................. 150,440,185 ------------- Liabilities: Payables: Investments Purchased .................................................................. 7,915,494 Income Distributions - Common and Preferred Shares .................................... 279,058 Investment Advisory Fee (Note 2) ...................................................... 87,762 Accrued Expenses ......................................................................... 132,841 ------------- Total Liabilities ........................................................................ 8,415,155 ------------- Net Assets ............................................................................... $ 142,025,030 ------------- Net Assets Consist of: Preferred Shares ($.01 par value, 1,000,000 shares authorized, 588 shares outstanding with liquidation preference of $100,000 per share) (Note 4) .................................. $ 58,800,000 ------------- Common Shares ($.01 par value with an unlimited number of shares authorized, 13,710,760 shares issued and outstanding) ............................................... 137,108 Paid in Surplus ......................................................................... 124,655,459 Net Unrealized Appreciation on Investments .............................................. 4,316,622 Accumulated Undistributed Net Investment Income ......................................... 488,911 Accumulated Net Realized Loss on Investments ............................................. (46,373,070) ------------- Net Assets Applicable to Common Shares ................................................... 83,225,030 ------------- Net Assets ............................................................................... $ 142,025,030 ------------- Net Asset Value Per Common Share ($83,225,030 divided by 13,710,760 shares outstanding) ..................................................................... $ 6.07 -------------
See Notes to Financial Statements 9 Statement of Operations For the Six Months Ended June 30, 1995 (Unaudited)
Investment Income: Interest ....................................................... $ 7,356,924 Other ......................................................... 15,000 ------------- Total Income .................................................. 7,371,924 ------------- Expenses: Investment Advisory Fee (Note 2) .............................. 517,730 Preferred Share Maintenance (Note 4) ........................... 91,872 Shareholder Services (Note 2) .................................. 41,113 Legal (Note 2) ................................................ 9,050 Trustees Fees and Expenses (Note 2) ............................ 9,050 Other ......................................................... 92,406 ------------- Total Expenses ................................................. 761,221 ------------- Net Investment Income .......................................... $ 6,610,703 ------------- Realized and Unrealized Gain/Loss on Investments: Realized Gain/Loss on Investments: Proceeds from Sales ............................................ $ 92,674,141 Cost of Securities Sold ........................................ (93,094,808) ------------- Net Realized Loss on Investments ............................. (420,667) ------------- Unrealized Appreciation/Depreciation on Investments: Beginning of the Period ....................................... (2,188,785) End of the Period ............................................. 4,316,622 ------------- Net Unrealized Appreciation on Investments During the Period ... 6,505,407 ------------- Net Realized and Unrealized Gain on Investments ................ $ 6,084,740 ------------- Net Increase in Net Assets from Operations .................... $ 12,695,443 -------------
See Notes to Financial Statements 10 Statement of Changes in Net Assets For the Six Months Ended June 30, 1995 and the Year Ended December 31, 1994 (Unaudited)
Six Months Ended Year Ended June 30, 1995 December 31, 1994 Operations: Net Investment Income ........................................... $ 6,610,703 $ 13,734,793 Net Realized Loss on Investments ................................ (420,667) (3,897,998) Net Unrealized Appreciation/Depreciation on Investments During the Period .............................................. 6,505,407 (9,473,638) --------------- --------------- Change in Net Assets from Operations .......................... 12,695,443 363,157 --------------- --------------- Distributions from Net Investment Income: Common Shares .................................................. (4,812,338) (13,079,738) Preferred Shares ............................................... (1,748,366) (2,540,673) --------------- --------------- Total Distributions ............................................ (6,560,704) (15,620,411) --------------- --------------- Net Change in Net Assets from Investment Activities ............ 6,134,739 (15,257,254) Net Assets: Beginning of the Period ........................................ 135,890,291 151,147,545 --------------- --------------- End of the Period (Including undistributed net investment income of $488,911 and $438,912, respectively) ........................ $ 142,025,030 $ 135,890,291 --------------- --------------- 11 See Notes to Financial Statements
From Investment Activities: Page: 13 Financial Highlights The following schedule presents financial highlights for one common share of the Trust outstanding throughout the periods indicated. (Unaudited)
Six Months Ended June 30, 1995 1994 Net Asset Value, Beginning of Period .................... $ 5.623 $ 6.735 -------------- ---------- Net Investment Income ....................... .482 1.002 Net Realized and Unrealized Gain/Loss on Investments ..................... .444 (.975) -------------- ---------- Total from Investment Operations ............ .926 .027 -------------- ---------- Less Distributions from Net Investment Income: Paid to Common Shareholders ................. .351 .954 Common Share Equivalent of Distributions Paid to Preferred Shareholders ...................... .128 .185 -------------- ---------- Total Distributions ......................... .479 1.139 -------------- ---------- Net Asset Value, End of Period ............... $ 6.070 $ 5.623 -------------- ---------- Market Price Per Share at End of Period ............................... $ 6.625 $ 5.500 Total Investment Return at Market Price (Non-Annualized) ........................ 27.36% (23.22%) Total Return at Net Asset Value (Non-Annualized) ........................ 14.59% (2.54%) Net Assets at End of Period (In millions) ............................... $ 142.0 $ 135.9 Ratio of Expenses to Average Net Assets Applicable to Common Shares (Annualized) .................. 1.89% 1.96% Ratio of Expenses to Average Net Assets (Annualized) ...................... 1.09% 1.16% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (Annualized) (d) ............ 12.09% 13.31% Portfolio Turnover .......................... 75.48% 110.41% Net asset value at January 26, 1989 of $9.300 is adjusted for common and preferred share offering costs of $.198 per share. Total investment return at market price reflects the change in market value of the common shares for the period indicated with reinvestment of dividends in accordance with the Trust's dividend reinvestment plan. Total return at net asset value (NAV) reflects the change in value of the Trust's assets with reinvestment of dividends based on NAV. Net investment income is adjusted for the common share equivalent of distributions paid to preferred shareholders.
N/A=Not Applicable 12
January 26, 1989 (Commencement of Investment Year Ended December 31 Operations) to 1993 1992 1991 1990 December 31, 1989 $ 6.228 $ 5.924 $ 4.603 $ 7.488 $ 9.102 ---------- ------- ------- --------- ------------ 1.109 1.206 1.150 1.566 1.387 .526 .174 1.282 (2.866) (1.653) ---------- ------- ------- --------- ------------ 1.635 1.380 2.432 (1.300) (.266) ---------- ------- ------- --------- ------------ .990 .908 .840 1.083 1.020 .138 .168 .271 .502 .328 ---------- ------- ------- --------- ------------ 1.128 1.076 1.111 1.585 1.348 ---------- ------- ------- --------- ------------ $ 6.735 $ 6.228 $ 5.924 $ 4.603 $ 7.488 ---------- ------- ------- --------- ------------ $ 8.125 $ 7.250 $ 6.875 $ 4.125 $ 7.375 26.12% 18.67% 92.24% (32.91%) (17.27%) 25.46% 21.36% 48.77% (26.20%) (15.58%) $ 151.1 $ 144.2 $ 140.0 $ 121.9 $ 187.7 1.72% 1.87% 2.51% 2.10% 1.56% 1.04% 1.11% 1.42% 1.90% N/A 14.66% 16.48% 15.86% 17.24% 13.20% 99.34% 109.38% 78.37% 57.49% 33.12%
See Notes to Financial Statements 13 Notes to Financial Statements June 30, 1995 (Unaudited) 1. Significant Accounting Policies Van Kampen Merritt Intermediate Term High Income Trust (the "Trust") is registered as a diversified closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust commenced investment operations on January 26, 1989. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. A. Security Valuation---Investments are stated at value using market quotations, prices provided by market makers or estimates obtained from yield data relating to instruments or securities with similar characteristics in accordance with procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of less than 60 days are valued at amortized cost. B. Security Transactions---Security transactions are recorded on a trade date basis.Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will maintain, in a segregated account with its custodian, assets having an aggregate value at least equal to the amount of the when issued or delayed delivery purchase commitments until payment is made. C. Investment Income---Interest income is recorded on an accrual basis. Bond discount is amortized over the expected life of each applicable security. D. Federal Income Taxes---It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income taxes is required. The Trust intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At December 31, 1994, the Trust had an accumulated capital loss carryforward for tax purposes of $43,724,983. Of this amount $22,627,301, $19,572,883 and $1,524,799 will expire on December 31, 1998, 1999 and 2002, respectively. Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of post October 31 losses which are not recognized for tax purposes until the first day of the following fiscal year. 14 Notes to Financial Statements (Continued) June 30, 1995 (Unaudited) E. Distribution of Income and Gains---The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually to common shareholders. 2. Investment Advisory Agreement and Other Transactions with Affiliates Under the terms of the Trust's Investment Advisory Agreement, Van Kampen American Capital Investment Advisory Corp. (the "Adviser") will provide investment advice and facilities to the Trust for an annual fee payable monthly of .75% of the average net assets of the Trust. Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom, counsel to the Trust, of which a trustee of the Trust is an affiliated person. For the six months ended June 30, 1995, the Trust recognized expenses of approximately $12,200 representing Van Kampen American Capital Distributors, Inc.'s or its affiliates' (collectively "VKAC") cost of providing accounting, legal and certain shareholder services to the Trust. Certain officers and trustees of the Trust are also officers and directors of VKAC. The Trust does not compensate its officers or trustees who are officers of VKAC. The Trust has implemented deferred compensation and retirement plans for its trustees. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation to a later date. The retirement plan covers those trustees who are not officers of VKAC. The Trust's liability under the deferred compensation and retirement plans at June 30, 1995, was approximately $15,700. 3. Investment Transactions Aggregate purchases and cost of sales of investment securities, excluding short-term notes, for the six months ended June 30, 1995, were $97,203,220 and $93,094,808, respectively. 4. Auction Market Preferred Shares The Trust has outstanding 588 shares of Auction Market Preferred Shares ("AMPS") at a liquidation value of $100,000 per share. Dividends are cumulative and the rate is currently reset through an auction process every 28 days. The rate in effect on June 30, 1995, was 5.830%. During the six months ended June 30, 1995, the rates ranged from 5.550% to 6.360%. The Trust pays annual fees equivalent to .25% of the preferred share liquidation value for the remarketing efforts associated with the preferred auctions. These fees are included as a component of Preferred Share Maintenance expense. The AMPS are redeemable at the option of the Trust in whole or in part at a price of $100,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests, and the AMPS are subject to mandatory redemption if the tests are not met. 15 Funds Distributed by Van Kampen American Capital GLOBAL AND INTERNATIONAL Global Equity Fund Global Government Securities Fund Global Managed Assets Fund Short-Term Global Income Fund Strategic Income Fund EQUITY Growth Emerging Growth Fund Enterprise Fund Pace Fund Growth & Income Balanced Fund Comstock Fund Equity Income Fund Growth and Income Fund Harbor Fund Real Estate Securities Fund Utility Fund FIXED INCOME Corporate Bond Fund Government Securities Fund High Income Corporate Bond Fund High Yield Fund Limited Maturity Government Fund Prime Rate Income Trust Reserve Fund U.S. Government Fund U.S. Government Trust for Income TAX-FREE California Insured Tax Free Fund Florida Insured Tax Free Income Fund High Yield Municipal Fund Insured Tax Free Income Fund Limited Term Municipal Income Fund Municipal Income Fund New Jersey Tax Free Income Fund New York Tax Free Income Fund Pennsylvania Tax Free Income Fund Tax Free High Income Fund Tax Free Money Fund Texas Tax Free Income Fund THE GOVETT FUNDS Emerging Markets Fund Global Income Fund International Equity Fund Latin America Fund Pacific Strategy Fund Smaller Companies Fund Ask your investment representative for a prospectus containing more complete information, including sales charges and expenses. Please read it carefully before you invest or send money. Or call us direct at 1-800-421-5666 weekdays from 7:00 a.m. to 7:00 p.m. Central time. 16 Van Kampen Merritt Intermediate Term High Income Trust Officers and Trustees Don G. Powell* Chairman and Trustee Dennis J. McDonnell* President and Trustee David C. Arch Trustee Rod Dammeyer Trustee Howard J Kerr Trustee Theodore A. Myers Trustee Hugo F. Sonnenschein Trustee Wayne W. Whalen* Trustee Peter W. Hegel* Vice President Ronald A. Nyberg* Vice President and Secretary Edward C. Wood, III* Vice President and Treasurer Scott E. Martin* Assistant Secretary Weston B. Wetherell* Assistant Secretary Nicholas Dalmaso* Assistant Secretary John L. Sullivan* Controller Steven M. Hill* Assistant Treasurer Investment Adviser Van Kampen American Capital Investment Advisory Corp. One Parkview Plaza Oakbrook Terrace, Illinois 60181 Custodian and Transfer Agent State Street Bank and Trust Company 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02105 Legal Counsel Skadden, Arps, Slate, Meagher & Flom 333 West Wacker Drive Chicago, Illinois 60606 Independent Auditors KPMG Peat Marwick LLP Peat Marwick Plaza 303 East Wacker Drive Chicago, Illinois 60601 *"Interested'' persons of the Trust, as defined in the Investment Company Act of 1940. (C)Van Kampen American Capital Distributors, Inc., 1995 All rights reserved. SM denotes a service mark of Van Kampen American Capital Distributors, Inc. 17 -----END PRIVACY-ENHANCED MESSAGE-----