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Previous: VAN KAMPEN MERRITT MUNICIPAL INCOME TRUST, NSAR-B, 1995-08-29 |
Next: VAN KAMPEN MERRITT SERIES TRUST, NSAR-A, 1995-08-29 |
Van Kampen Merritt Series Trust Quality Income Portfolio
For the 6-month period ended 6/30/95
Letter to Contract Owners
Following seven consecutive increases in short-term
interest rates, the Federal Reserve reversed that trend by
lowering the Federal Funds rate by 0.25% to 5.75%
shortly after quarter-end. This relatively small move by
the Fed reflects the virtual halt in economic growth in the
second quarter and the Federal Office Management
Committee's confidence that the outlook for inflation has
improved. However, two days after the Fed's action, the
June employment report served as a reminder that the
economy probably is not on the verge of another reces-
sion and will likely resume moderate growth during the
last six months of 1995.
The corporate sector continued its strong 1995 perfor-
mance in the second quarter with robust corporate earn-
ings and improving credit quality being the primary
reasons for the sector's superior performance. Increased
supply towards quarter end led to a small rise in spreads,
but this was not enough to derail overall performance.
Moreover, positive earnings surprises continued to add to
the corporate sector's strength. Looking ahead, a weaken-
ing economy may reduce second quarter earnings and
profits for the balance of the year. Since spreads have
remained fairly tight this year, reduced economic activity
may lead to upward pressure on spreads. We believe that
upgrading credit quality remains an attractive investment
choice. We anticipate remaining underweighted in the
corporate sector. However, we will look for oppor-
tunities to add corporates in order to add diversity and
convexity to the portfolio.
The mortgage backed sector exhibited weak relative
performance during most of the second quarter in the
wake of the Treasury rally. For the quarter, the Mortgage-
Backed Securities (MBS) sector underperformed the
government sector by nearly one percent. After adjusting
for the duration difference of the two indices, however,
the performance of the MBS sector was virtually identical
to the government sector. Currently, we find the MBS
sector attractively priced and have recently increased our
weighting in the overall sector. In particular. we have
overweighted modest premium pass-throughs current
coupon 10-year PACs (planned amortization classes), and
15-year pass throughs. A review of these sectors across
interest rate scenarios of plus-minus 1.50% reveals
strong relative performance versus the three, five and
ten-year Treasury maturities.
The Treasury yield curve made a dramatic shift lower
and took on a steeper slope during the second quarter.
Volatility across the curve has been extreme and the short
end of the yield curve reacted in hyper-fashion to each
piece of news that produced a repetitive pattern of pricing
in a Fed easing, particularly during June. At quarter end,
Treasury yields out to 5-year maturities were below the
Fed Funds target of 6%. Even after the quarter-point cut
in early July, Treasury yields out to five years traded
below the new 5.75% Fed Funds target. This configuration
and volatility have important implications for yield curve
posturing and strategy. First, focusing on duration plays
is more imprudent than ever because of the uncertainties
that abound. Second, cash and cash-like securities offer
the best value when coupled with longer maturity
securities to achieve duration neutrality.
Much has been made of the fact that no Federal Reserve
easing has ever been completed after an initial 0.25%
reduction in the Fed Funds rate. In the post World War II era,
0.75% has been the smallest move toward more accom-
modation. With uncertainty about the underlying strength
of the economy, inflation and the Fed so pervasive, it is
even more important to search for relative value along the
yield curve across sectors and among securities rather
than depending on market timing to add value.
Robert J. Hickey
Portfolio Manager
Van Kampen American CapitalInvestment Advisory Corp.
Van Kampen Merritt Series Trust Quality Income Portfolio
[PIE CHART]
Distribution by Moody's Rating
As of 6/30/95
Aaa - 48.7%
A2 - 14.8%
A3 - 8.3%
Baa1 - 5.3%
A1 - 4.7%
Baa2 - 4.3%
Aa2 - 4.2%
Baa3 - 4.2%
Other - 3.3%
Aa3 - 2.2%
[This is a pie chart]
<TABLE>
Portfolio of Investments
June 30, 1995 (Unaudited)
<CAPTION>
Par
Amount
($000) Description Coupon Maturity Market Value
<S> <C> <C> <C> <C>
Asset-Backed Securities 4.1%
l,000 American Express Master Trust Ser 93-1A 5.375% 07/15/01 $ 957,619
500 Signet Master Trust Ser 94-4A 6.800 12/15/00 508,049
500 Standard Credit Card Master Trust 92-2A 5.875 07/07/95 500,610
-------------
1,966,278
-------------
Bonds 44.2%
2,000 Allegheny Generating Co. 6.875 09/01/23 1,852,070
1,110 American Airlines Ser94-A2 6.870 11/26/95 1,114,671
1,000 American Stores Co. 7.400 05/15/05 1,025,688
1,000 AMR Corp. (Var. Rate Cpn.) 7.125 11/15/95 1,001,423
100 Anheuser BuschInc. 8.750 12/01/99 109,439
500 Baxter International Inc. 7.500 05/01/97 511,602
2,000 Canada (Govt. of) 6.500 05/30/00 2,026,878
1,500 Colgate Palmolive Co. 7.600 05/19/25 1,559,781
1,500 CRA Finance USA Ltd. 6.500 12/01/03 1,467,857
2,000 Florida Gas Transmission Co. 7.750 11/01/97 2,046,872
1,000 General Electric Capital Corp. 5.800 04/01/08 1,053,154
630 Greyhound Financial Corp. 8.500 02/15/99 667,729
250 Guaranteed Export Trust 95-A 6.280 06/15/04 248,821
1,928 Jet Equipment Trust Ser A3 8.160 12/15/96 1,969,010
2,000 Korea Development Bank 8.090 10/06/04 2,160,414
1,000 Meridian Bancorp Inc. 6.625 06/15/00 998,605
1,500 New York Telephone Co. 7.250 02/15/24 1,434,375
150 Philip Morris 8.875 07/01/96 153,732
-------------
21,402,121
-------------
Medium-Term Securities 13.4%
2,000 AT & T Capital Corp. 5.650 05/30/97 1,982,812
1,000 Associates Corp. 7.250 09/01/99 1,029,584
100 Beneficial Corp. 8.930 12/16/96 103,767
750 General Motors Acceptance Corp. 7.800 04/05/97 767,534
500 General Motors Acceptance Corp. 6.000 12/30/98 491,200
1,700 Sears Roebuck & Co. 10.000 02/03/12 2,101,208
-------------
6,476,105
-------------
Mortgage-Backed Securities 9.9%
626 AFC Mortgage #93-4B2A1 (Var. Rate Cpn.) 7.731 03/25/25 635,659
1,814 Citicorp Mortgage Securities Inc. #94-11A2 6.250 08/25/24 1,801,201
814 FHLB 4.140 06/04/98 770,111
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Quality Income Portfolio
Portfolio of Investments (continued)
<CAPTION>
June 30, 1995 (Unaudited)
Par
Amount
($000) Description Coupon Maturity Market Value
<S> <C> <C> <C> <C>
Mortgage-Backed Securities (Continued)
80 FHLMC 8.000% 09/01/08 $ 81,310
97 FNMA 8.000 09/01/03 100,180
81 FNMA 8.500 07/01/19 83,916
100 FNMA REMIC #89-94G PAC 7.500 12/25/19 101,795
185 GNMA 9.000 01/15/20 194,655
441 GNMA (Var. Rate Cpn.) 6.500 05/20/23 446,635
600 Prudential Home Mortgage Securities Co. #93-28A7 7.375 08/25/23 591,000
-------------
4,806,462
-------------
U.S. Treasury Securities 27.5%
1,650 US T-Bonds 6.250 08/15/23 1,558,475
1,000 US T-Bonds 7.500 11/15/24 1,106,750
500 US T-Notes 8.500 08/15/95 501,660
9,250 US T-Notes 6.875 03/31/00 9,573,842
500 US T-Notes 7.500 02/15/05 544,575
-------------
13,285,302
-------------
Total Long-Term Investments 99.1%
(Cost $47,022,629) <F1> 47,936,268
Other Assets In Excess of Liabilities 0.9% 442,493
-------------
Net Assets 100% $ 48,378,761
-------------
<FN>
<F1> At June 30,1995, cost for federal income tax purposes is $47,022,629; the
aggregate gross unrealized appreciation is $1,186,581 and the aggregate gross
unrealized depreciation is $272,942 resulting in net unrealized appreciation of
$913,639.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Composition by Credit Quality
------------------------------------------------------
<S> <C>
U.S. Govt. and Agency Obligations 31.2%
AAA 17.5
AA 11.1
A 23.1
BBB 13.8
NR 3.3
------
100.0%
------
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST QUALITY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30,1995 (Unaudited)
<CAPTION>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $47,022,629) (Note 1) $ 47,936,268
Cash 328,729
Interest Receivable 663,555
------------------
Total Assets 48,928,552
------------------
LIABILITIES:
Payables:
Investments Purchased 500,062
Fund Shares Repurchased 19,723
Investment Advisory Fee (Note 2) 16,709
Accrued Expenses 13,297
------------------
Total Liabilities 549,791
------------------
NET ASSETS $ 48,378,761
==================
NET ASSETS CONSIST OF:
Paid In Surplus (Note 3) $ 49,404,168
Net Unrealized Appreciation on Investments 913,639
Accumulated Net Realized Loss on Investments (1,939,046)
------------------
NET ASSETS $ 48,378,761
------------------
NET ASSET VALUE PER SHARE
($48,378,761 divided by 4,572,751 shares outstanding; an unlimited
number of shares without par value are authorized) (Note 3) $10.58
=================
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST QUALITY INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30,1995 (Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,279,977
----------------
EXPENSES:
Investment Advisory Fee (Note 2) 88,169
Custody 11,937
Trustees Fees and Expenses (Note 2) 10,511
Audit 9,561
Legal (Note 2) 4,300
Other 1,971
----------------
Total Expenses 126,449
Less Expenses Reimbursed by Cova Life 16,196
----------------
Net Expenses 110,253
----------------
NET INVESTMENT INCOME $ 1,169,724
================
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales $ 12,127,861
Cost of Securities Sold (12,308,063)
----------------
Net Realized Loss on Investments (180,202)
----------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period (1,792,274)
End of the Period 913,639
----------------
Net Unrealized Appreciation on Investments During the Period 2,705,913
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 2,525,711
================
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,695,435
================
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST QUALITY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 and the
Year Ended December 31,1994 (Unaudited)
<CAPTION>
Six Months Ended Year Ended
June 30,1995 December 31, 1994
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 1,169,724 $ 2,355,865
Net Realized Loss on Investments (180,202) (1,758,844)
Net Unreaiized Appreciation/Depreciation on
Investments During the Period 2,705,913 (2,283,981)
---------------- ----------------
Change in Net Assets from Operations 3,695,435 (1,686,960)
Distributions from Net Investment Income (1,169,724) (2,355,865)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES 2,525,711 (4,042,825)
---------------- ----------------
FROM CAPITAL TRANSACTIONS (Note 3):
Proceeds from Shares Sold 20,938,907 40,415,842
Net Asset Value of Shares Issued Through
Dividend Reinvestment 1,169,724 2,355,865
Cost of Shares Repurchased (10,191,998) (55,910,839)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 11,916,633 (13,139,132)
---------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS 14,442,344 (17,181,957)
NET ASSETS:
Beginning of the Period 33,936,417 51,118,374
---------------- ----------------
End of the Period $ 48,378,761 $ 33,936,417
================ ================
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Quality Income Portfolio
Financial Highlights
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated (Unaudited)
<CAPTION>
December 11,1989
(Commencement of
Six Months Investment
Ended Year Ended December 31 Operations) to
June 30,1995 1994 1993 1992 1991 1990 December31, 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.815 $10.886 $10.699 $10.618 $ 9.969 $ 9.930 $10.000
Net Investment Income .324 .603 .641 .696 .753 .713 .043
Net Realized and Unrealized Gain/Loss on
Investments .765 (1.071) .518 .081 .649 .039 (.070)
------- -------- ------- ------- ------- ------- --------
Total from Investment Operations 1.089 (.468) 1.159 .777 1.402 .752 (.027)
------- -------- ------- ------- ------- ------- --------
Less:
Distributions from Net Investment Income .324 .603 .641 .696 .753 .713 .043
Distributions from Net Realized Gain on
Investments .000 .000 .331 .000 .000 .000 .000
------- -------- ------- ------- ------- ------- --------
Total Distributions .324 .603 .972 .696 .753 .713 .043
------- -------- ------- ------- ------- ------- --------
Net Asset Value, End of Period $10.580 $9.815 $10.855 $10.699 $10.618 $9.969 $ 9.930
------- -------- ------- ------- ------- ------- --------
Total Return (Non-Annualized) 11.21% (4.33%) 11.04% 7.61% 14.71% 7.99% (.27%)
NetAssets at End of Period (In millions) $48.4 $33.9 $51.1 $24.1 $6.8 $6.1 $2.5
Ratio of Expenses to Average Net Assets*
(Annualized) .60% .59% .60% .60% .60% .74% .70%
Ratio of Net Investment Income to
Average Net Assets* (Annualized) 6.35% 5.69% 5.82% 6.87% 7.45% 7.64% 7.83%
Portfolio Turnover 34.81% 177.63% 318.40% 231.91% 12.86% 59.25% .00%
*If certain expenses had not been assumed
by Cova Life, total return would have been
lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets
(Annualized) .69% .68% .70% .88% 1.10% 1.53% 9.15%
Ratio of Net Investment Income to Average
Net Assets (Annualized) 6.26% 5.60% 5.73% 6.59% 6.96% 6.85% NA
NA - Not Applicable
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT
SERIES TRUST QUALITY INCOME PORTFOLIO
Notes to Financial Statements
June 30,1995 (Unaudited)
1. Significant Accounting Policies
Van Kampen Merritt Series Trust (the "Trust"), under which
the Quality Income Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end
management investment company under the Investment
Company Act of 1940, as amended. The Trust and Fund
commenced investment operations on December 11, 1989.
The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation
of its financial statements.
A. Security Valuation - Investments are stated at value
using market quotations, or if such valuations are not
available, 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 Fund 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 Fund 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. At June 30,1995, there were no when
issued or delayed delivery purchase commitments.
C. Investment Income - Interest income is recorded on an
accrual basis. Bond premium and original issue discount
are amortized over the expected life of each applicable
security.
D. Federal Income Taxes - It is the Fund'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 Fund 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 Fund had an accumulated
capital loss carryforward for tax purposes of $1,758,844
which will expire on December 31, 2002.
E. Distribution of Income and Gains - The Fund declares
and pays dividends monthly from net investment income.
Net realized gains, if any, are distributed annually.
Distributions are automatically reinvested in Fund Shares.
Distributions from net realized gains for book purposes may
include short-term capital gains which are included in
ordinary income for tax purposes.
2. Investment Advisory Agreement and Other
Transactions with Affiliates
Under the terms of the Fund's Investment Advisory
Agreement, Van Kampen American Capital Investment
Advisory Corp. (the "Adviser") will provide investment advice
and facilities to the Fund for an annual fee payable monthly
as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
<S> <C>
First $500 million .50 of 1%
Over $500 million .45 of 1%
</TABLE>
Cova Variable Annuity Account One is a separate
investment account offered by Cova Financial Services Life
InsuranceCo. ("Cova Life"). At June 30,1995, Cova
Variable Annuity Account One owned all shares of beneficial
interest of the Fund.
Certain officers and trustees of the Fund are also
officers and directors of Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC"). The
Fund does not compensate its officers or trustees who are
officers of VKAC.
The Fund has implemented a retirement plan which
covers those trustees who are not officers of VKAC. The
Fund's liability under the retirement plan at June 30,1995,
was approximately $1,400.
For the year ended June 30, 1995, the Fund
recognized expenses of approximately $5,200, representing
VKAC's cost of providing accounting and legal services.
3. Capital Transactions
At June 30,1995 and December 31,1994, paid in surplus
aggregated $49,404,168 and $37,487,535, respectively.
Transactions in shares were as follows:
<TABLE>
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
---------- -----------
<CAPTION>
<S> <C> <C>
Beginning Shares 3,457,435 4,695,907
---------- -----------
SharesSold 1,989,544 3,968,977
Shares Issued through
Dividend Reinvestment 114,376 231,691
Shares Repurchased (988,604) (5,439,140)
Net Increase/Decrease in
Shares Outstanding 1,115,316 (1,238,472)
---------- -----------
Ending Shares 4,572,751 3,457,435
---------- -----------
</TABLE>
VAN KAMPEN MERRITT
SERIES TRUST QUALITY INCOME PORTFOLIO
Notes to Financial Statements (Continued)
June 30,1995 (Unaudited)
4. Investment Transactions
Aggregate purchases and cost of sales of investment
securities, excluding short-term notes, for the six months
ended June 30,1995, were $23,252,993 and $12,308,053,
respectively.
5. Mortgage and Asset Backed Securities
A Mortgage Backed Security (MBS) is a pass-through
security created by pooling mortgages and selling
participations in the principal and interest payments received
from borrowers. Most of these securities are guaranteed by
federally sponsored agencies - Government National
Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC) or Federal Home Loan Bank (FHLB).
A Collateralized Mortgage Obligation (CMO) is a bond
which is collateralized by a pool of MBS's. The Fund also
invests in REMIC's (Real Estate Mortgage Investment
Conduit) which are simply another form of CMO. These
MBS pools are divided into classes or tranches with each
class having its own characteristics. For instance, a PAC
(Planned Amortization Class) is a specific class of
mortgages with the most stable cash flows and the lowest
prepayment risk.
Asset Backed Securities are similar to MBS but made
up of pools of other assets, such as credit card receivables,
which are grouped together for investment purposes.
Payments of principal and interest on the securities are
made from the cash flows of the group of assets.
Van Kampen Merritt Series Trust High Yield Portfoiio
For the 6-month period ended 6/30/95
Letter to Contract Owners
During the first half of 1995, the high yield market posted
a solid total return. However, the gain lagged that of
Treasury bonds and stocks. This reflects the shorter
duration, or interest rate sensitivity, of high yield bonds
relative to these other asset classes. The underperfor-
mance also reflects increasing concerns about the overall
economy. High yield bonds are generally more at risk of
default in periods of weak economic growth and declining
corporate profits.
Technical conditions in the marketplace were strong to
begin the year. Due to the poor performance of the market
in 1994, the new issue calendar was relatively light during
the first quarter. At the same time, the rally in the fixed
income markets generally attracted new investors.
However, the sustained rally and lower interest rates
brought more corporations to the market in the second
quarter. This heavier supply of new bond issues was
more difficult for the market to absorb, causing it to
trade off slightly.
We have worked to improve the credit quality of the
Portfolio and this credit selection process provided good
results during the period. Certain sectors with heavy
weightings, such as casinos, performed well, while we
avoided problem credit situations, including Bradlee's
bankruptcy and Bibb's financial difficulties. However,
the portfolio's relative performance was hindered by a
high cash position. This was the result of a 20% increase
in the portfolio's assets during the first quarter. As the
market was rallying, it was difficult to invest the funds
quickly while maintaining quality and diversification
standards. Cash has been reduced dramatically from its
peak level and should not be a hindrance going forward.
<TABLE>
Top 10 Holdings by Market Value
As of 6/30/95
<CAPTION>
% of Portfolio
<S> <C>
Ornda Healthcorp 2.2%
Revlon Consumer Products Corp. 2.1
Rogers Communications Inc. 2.0
Silgan Holdings Inc. 2.0
Sequa Corp. 2.0
Insight Communications Co. L.P 2.0
Viacom InternationalInc. 2.0
Atlantis Group Inc. 2.0
Centennial Cellular Corp. 2.0
California Hotel Finance Corp. 2.0
</TABLE>
At the current time, we are cautiously optimistic about
the high yield market's prospects for the next year. We
are hopeful that the Fed's recent action to reduce short-
term interest rates will help the economy bounce back
from its weak second quarter performance. However, we
will continue to monitor economic data carefully. In any
case, we believe the portfolio is positioned to perform
relatively well unless the economy deteriorates further
than anticipated. Cyclical credits are underweighted, and
we will continue to emphasize quality in the credit selec-
tion process.
Anne Lorsung
Portfolio Manager
Van Kampen American Capital Investment Advisory Corp.
[PIE CHART]
Distribution by Moody's Rating
B2 - 30.5%
B3 - 23.3%
Ba3 - 17.2%
B1 - 13.8%
Other - 8.3%
Caa - 3.8%
Ba1 - 1.7%
Baa3 - 1.0%
Aaa - 0.4%
<TABLE>
Van Kampen Merritt Series Trust High Yield Portfolio
Portfolio of Investments
June 30, 1995 (Unaudited)
<CAPTION>
Par
Amount S&P Moody's
($000) Description Rating Rating Coupon Maturity Market Value
<S> <C> <C> <C> <C> <C> <C>
Corporate Bonds
Aerospace & Defense 1.7%
550 Sequa Corp B+ B3 9.375% 12/15/03 $ 511,500
-------------
Automobile 1.0%
300 Exide Corp, NR B1 10.000 04/15/05 309,000
-------------
Beverage, Food & Tobacco 2.4%
250 Fleming Cos. Inc. BB- Ba1 10.625 12/15/01 263,750
175 Fleming Cos. Inc. Var, Rate Cpn. BB- Ba1 8.313 12/15/01 170,625
300 Pilgrims Pride Corp. B- B3 10.875 08/01/03 283,500
-------------
717,875
-------------
Buildings & Real Estate 4.0%
100 American Standard Inc. B+ Ba3 10.875 05/15/99 108,500
400 American Standard Inc. B+ Ba3 11.375 05/15/04 438,000
250 Building Material Corp. <F2> BB B1 0/11.750 07/01/04 148,750
475 Walter Industries Inc. NR NR 12.190 03/15/00 479,750
-------------
1,175,000
-------------
Chemicals, Plastics & Rubber 3.5%
500 Atlantis Group Inc. B- B2 11.000 02/15/03 492,500
200 Foamex L.P. B B1 11.250 10/01/02 198,000
500 G I Holdings Inc. B+ Ba3 * 10/01/98 340,000
-------------
1,030,500
-------------
Containers, Packaging & Glass 9.2%
250 Anchor Glass Container Corp. B+ Ba3 10.250 06/30/02 251,250
250 Anchor Glass Container Corp. B B2 9.875 12/15/08 230,000
480 Indah Kiat International Finance Co. B V BB Ba3 11.875 06/15/02 487,200
400 Malette Inc. BB- Ba3 12.250 07/15/04 444,000
50 Owens Illinois Inc. B+ B2 10.250 04/01/99 51,500
300 Owens Illinois Inc. B+ B2 10.500 06/15/02 312,000
100 Owens Illinois Inc. BB Ba3 11.000 12/01/03 110,000
100 Repap New Brunswick Inc. BB- Ba3 9.875 07/15/00 101,000
563 Silgan HoldingsInc. <F2> B- B3 0/13.250 12/15/02 512,330
200 SD Warren Co. B+ B1 12.000 12/15/04 216,000
-------------
2,715,280
-------------
Diversified/Conglomerate Manufacturing 5.2%
400 Cabot Safely Acquisition Corp. <F3> NR B3 12.500 07/15/05 400,000
157 IMO Industries Inc. B- Caa 12.250 08/15/97 157,785
500 Jordan Industries Inc. B+ B3 10.375 08/01/03 460,000
200 Talley Industries Inc. <F2> B- B2 0/12.250 10/15/05 133,500
400 Talley Manufacturing & Technology Inc. B B2 10.750 10/15/03 392,000
-------------
1,543,285
-------------
</TABLE>
<TABLE>
Van Kampen Merritt Series Trust High Yield Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Par
Amount S&P Moody's
($000) Description Rating Rating Coupon Maturity Market Value
<S> <C> <C> <C> <C> <C> <C>
Diversified/Conglomerate Service 0.4%
100 Comdata Network Inc. B- B3 13.250% 12/15/02 $ 113,000
-------------
Ecological 1.5%
500 Envirosource Inc. B B3 9.750 06/15/03 447,50O
-------------
Farming & Agriculture 1.1%
350 Trans Resources Inc. B- B2 11.875 07/01/02 316,750
-------------
Government 4.0%
450 Argentina (Fed. Republic of) Var. Rate Cpn. BB- B2 5.000 03/31/23 216,000
400 Brazil (Fed. Republic of) NR NR 4.250 04/15/24 178,50O
450 Oleoducto Central South America NR NR 9.350 09/01/05 451,125
300 Poland (Govt of) Var. Rate Cpn. NR NR 7.125 10/27/24 229,875
100 U.S. Treasury Note NR Aaa 5.625 06/30/97 99,625
-------------
1,175,125
-------------
Grocery 2.9%
285 Pantry Inc. B+ B3 12.000 11/15/00 282,150
400 Pathmark Stores Inc. B B2 9.625 05/01/03 392,000
175 Purity Supreme Inc. CCC+ B3 11.750 08/01/99 188,125
-------------
862,275
-------------
Healthcare 4.8%
100 Columbia/HCA Healthcare Corp. NR NR 7.690 06/15/25 100,000
400 National Medical Enterprises Inc. B+ Ba3 10.125 03/01/05 424,000
500 Ordna Healthcorp B- B2 11.375 08/15/04 547,50O
350 Paracelsus Healthcare Corp. B B1 9.875 10/15/03 355,250
-------------
1,426,750
-------------
Hotel, Motel, Inns & Gaming 4.8%
100 Aztar Corp. B B2 11.000 10/01/02 100,000
200 Aztar Corp. B B2 13.750 10/01/04 226,000
475 Califomia Hotel Finance Corp. BB- B2 11.000 12/01/02 491,625
275 GB Property Funding Corp. B+ B2 10.875 01/15/04 236,500
100 HWCC Tunica Inc. NR NR 13.500 09/30/98 114,750
220 Trump Plaza Funding Inc. B+ B3 10.875 06/15/01 203,50O
58 Trump Taj Mahal Funding Inc. <F5> NR Caa 11.350 11/15/99 46,463
-------------
1,418,838
-------------
Insurance & Finance 2.7%
350 American Annuity Group Inc. B+ Ba3 11.125 02/01/03 365,750
275 Americo Life Inc. BB+ Baa3 9.250 06/01/05 254,375
200 Nacolah Holding Corp. BB- B1 9.500 12/01/03 189,000
-------------
809,125
-------------
</TABLE>
<TABLE>
Van Kampen Merritt Series Trust High Yield Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Par
Amount S&P Moody's
($000) Description Rating Rating Coupon Maturity Market Value
<S> <C> <C> <C> <C> <C> <C>
Leisure 3.3%
395 AMC Entertainment Inc. <F4> B B3 12.625% 08/01/O2 $ 434,500
450 Viacom International Inc. BB- B1 10.250 09/15/01 504,000
50 Viacom International Inc. BB- B1 8.000 07/07/06 48,500
-------------
987,000
-------------
Mining, Steel, iron & Non-Precious Metal 2.6%
100 Armco Inc. B B2 11.375 10/15/99 102,500
200 Carbide/Graphite Group Inc. B+ B3 11.500 09/01/03 211,000
450 Easco Corp. B B1 10.000 03/15/01 450,000
-------------
763,500
-------------
Oil & Gas 4.7%
275 Clark R & M Holdings Inc. B+ B1 * 02/15/00 171,875
350 Global Marine Inc. B+ B1 12.750 12/15/03 386,750
350 Petroleum Heat & Power Inc. B+ B2 12.250 02/01/05 376,250
200 Plains Resources Inc. B- B3 12.000 10/01/99 208,000
250 TransTexas Gas Corp. BB- B2 11.500 06/15/O2 256,250
-------------
1,399,125
-------------
Personal & Non-Durable 4.1%
250 Astrum International Corp. NR B3 11.500 06/08/03 262,500
460 Playtex Family Products Corp. B+ B3 9.000 12/15/03 432,400
535 Revlon Consumer Products Corp. B B2 9.375 04/01/01 518,950
-------------
1,213,850
-------------
Printing, Publishing & Broadcasting 12.7%
450 Century Communications Corp. BB- Ba3 9.750 02/15/O2 456,750
250 Comcast Corp. B+ B1 9.375 05/15/05 251,250
500 Insight Communications Co. L.P. <F2> B- Caa 8.25/11.250 03/01/00 507,500
300 International Cabletel Inc <F2> B- B3 0/12.750 04/15/05 178,500
200 K - III Communications Corp. BB- Ba3 10.625 05/01/O2 212,000
200 K - III Communications Corp. BB- Ba3 10.250 06/01/04 210,000
500 Rogers Communications Inc. BB- B2 10.875 04/15/04 515,000
115 SCI Television Inc. NR NR 7.500 06/30/98 113,454
400 SCI Television Inc. NR NR 11.000 06/30/05 418,000
250 Storer Communications Inc. B+ B1 10.000 05/15/03 250,000
460 Williamhouse Regency Delaware Inc. B- B2 11.500 06/15/05 464,600
175 Young Broadcasting Inc. B B2 11.750 11/15/04 192,500
50 Young Broadcasting Inc. B B2 10.125 02/15/05 50,500
-------------
3,820,054
-------------
Retail 2.2%
250 Hosiery Corp. America Inc. B- B3 13.750 08/01/02 248,750
400 Waban Inc. BB- Ba3 11.000 05/15/04 396,000
-------------
644,750
-------------
</TABLE>
<TABLE>
Van Kampen Merritt Series Trust High Yield Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Par
Amount S&P Moody's
($000) Description Rating Rating Coupon Maturity Market Value
<S> <C> <C> <C> <C> <C> <C>
Telecommunications 5.0%
500 Centennial Cellular Corp. B B2 10.125% 05/15/05 $ 492,500
350 Intermedia Communications B- B3 13.500 06/01/05 351,750
250 Mobile Telecommunication Technology BB- B2 13.500 12/15/02 267,500
200 Panamsat L.P. <F2> B- B3 0/11.375 08/01/03 143,000
300 Pricellular Wireless Corp. CCC+ Caa 14.000 11/15/01 241,500
-------------
1,496,250
-------------
Utilities 1.1%
300 Midland Funding Corp. II B- B2 11.750 07/23/05 313,500
-------------
Total Corporate Bonds 84.9% 25,209,832
-------------
Equities 0.7%
Casino America Inc. (653 common stock warrants) 1,958
Hosiery Corp. America Inc. (250 common stock warrants) 3,750
Panamsat Corp. (260 preferred shares) <F5> 209,090
-------------
Total Equities 214,798
-------------
Total Long-Term Investments 85.6%
(Cost $24,900,330) <F1> 25,424,630
Repurchase Agreement 14.9%
UBS Securities, U.S. T-Bond, $4,395,000 par, yielding
6.50% coupon, due 04/30/99, dated 06/30/95, to be sold on
07/03/95 at $4,418,245 4,416,000
Liabilities in Excess of Other Assets (0.5%) (150,482)
-------------
Net Assets 100% $ $29,690,148
=============
<FN>
*Zero coupon bond
<F1> At June 30,1995, cost for federal income tax purposes is $24,900,330; the aggregate gross unrealized appreciation is
$655,706 and the aggregate gross unrealized depreciation is $131,406, resulting in net unrealized appreciation of $524,300.
<F2> Security is a "Step-up" bond where the coupon increases or steps up at a predetermined date.
<F3> Securities purchased on a when issued or delayed delivery basis.
<F4> Assets segregated as collateral for when issued or delayed delivery purchase commitments.
<F5> Payment-in-kind security.
</FN>
</TABLE>
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST HIGH YIELD PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<CAPTION>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $24,900,330) (Note 1) $ 25,424,630
Repurchase Agreement (Note 1) 4,416,000
Cash 227
Receivables:
Investments Sold 799,507
Interest 540,323
Fund Shares Sold 20,685
----------------
Total Assets 31,201,372
----------------
LIABILITIES:
Payables:
Investments Purchased 1,486,527
Investment Advisory Fee (Note 2) 18,165
Accrued Expenses 6,532
----------------
Total Liabilities 1,511,224
----------------
NET ASSETS $ 29,690,148
----------------
NET ASSETS CONSIST OF:
Paid In Surplus (Note 3) $ 31,004,372
Net Unrealized Appreciation on Investments 524,300
Accumulated Net Realized Loss on Investments (1,838,524)
----------------
NET ASSETS $ 29,690,148
----------------
NET ASSET VALUE PER SHARE
($29,690,148 divided by 2,892,631 shares outstanding; an
unlimited number of shares without par value are authorized) (Note 3) $10.26
----------------
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30,1995 (Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,275,940
Dividends 6,150
Other 15,299
---------------
Total Income 1,297,389
---------------
EXPENSES:
Investment Advisory Fee (Note 2) 95,700
Custody 26,505
Trustees Fees and Expenses (Note 2) 8,419
Audit 7,561
Legal (Note 2) 3,691
Other 2,936
---------------
Total Expenses 144,812
Less Expenses Reimbursed by Cova Life 36,351
---------------
Net Expenses 108,461
---------------
NET INVESTMENT INCOME $ 1,188,928
---------------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales $ 14,880,150
Cost of Securities Sold (15,063,874)
----------------
Net Realized Loss on Investments (Including realized loss on expired option
transactions of $3,163) (183,724)
----------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period (779,999)
End of the Period 524,300
---------------
Net Unrealized Appreciation on Investments During the Period 1,304,299
---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 1,120,575
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,309,503
---------------
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST HIGH YIELD PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 and the
Year Ended December 31, 1994 (Unaudited)
<CAPTION>
Six Months Ended Year Ended
June 30,1995 December 31,1994
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 1,188,928 $ 1,901,381
Net Realized Loss on Investments (183,724) (1,654,800)
Net Unrealized Appreciation/Depreciation on
Investments During the Period 1,304,299 (1,233,657)
Change in Net Assets from Operations 2,309,503 (987,076)
Distributions from Net Investment Income (1,188,928) (1,901,381)
-------------- ---------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES 1,120,575 (2,888,457)
-------------- ---------------
FROM CAPITAL TRANSACTIONS (Note 3):
Proceeds from Shares Sold 8,961,367 10,939,186
Net Asset Value of Shares Issued Through
Dividend Reinvestment 1,188,928 1,901,381
Cost of Shares Repurchased (1,236,306) (9,145,332)
-------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 8,913,989 3,695,235
-------------- ----------------
TOTAL INCREASE IN NET ASSETS 10,034,564 806,778
NET ASSETS:
Beginning of the Period 19,655,584 18,848,806
-------------- ----------------
End of the Period $ 29,690,148 $ 19,655,584
------------- ---------------
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust High Yield Portfolio
Financial Highlights (Unaudited)
The following schedule presents financial highlights for one share of the
Fund outstanding throughout the periods indicated.
<CAPTION>
December 11,1989
(Commencement
Six Months of Investment
Ended Year Ended December 31 Operations) to
June 30,1995 1994 1993 1992 1991 1990 December 31,1989
<S> <S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.823 $11.287 $10.445 $10.410 $9.073 $9.974 $10.000
Net Investment Income 0.460 .978 1.028 1.250 1.124 1.085 .053
Net Realized and Unrealized Gain/Loss
on Investments .441 (1.464) 1.170 .658 1.337 (.901) (.026)
-------------------------------------------------------------------------
Total from Investment Operations .901 (.486) 2.198 1.908 2.461 .184 .027
-------------------------------------------------------------------------
Less.
Distributions from Net Investment Income .460 .978 1.028 1.250 1.124 1.085 .053
Distributions from Net Realized Gain
on Investments .000 .000 .328 .623 .000 .000 .000
Total Distributions .460 .978 1.356 1.873 1.124 1.085 .053
------------------------------------------------------------------------
Net Asset Value, End of Period $10.264 $9.823 $11.287 $10.445 $10.410 $9.073 $9.974
------------------------------------------------------------------------
Total Return *(Non-Annualized) 9.33% (4.52%) 21.98% 19.12% 28.31% 1.86% .23%
Net Assets at End of Period (In millions) $29.7 $19.7 $18.8 $5.4 $3.8 $2.9 $2.5
Ratio of Expenses to Average Net Assets*
(Annualized) .86% .86% .84% .87% .86% 1.01% .95%
Ratio of Net Investment Income to Average
Net Assets* (Annualized) 9.38% 9.48% 8.97% 11.67% 11.31% 11.43% 9.67%
Portfolio Turnover 74.69% 200.06% 213.09% 157.42% 147.57% 28.32% .00%
*If certain expenses had not been assumed
by Cova Life, total return would have been
lower and the ratios would have been as
follows:
Ratio of Expenses to Average Net Assets
(Annualized) 1.14% 1.16% 1.38% 1.79% 1.91% 2.42% 9.42%
Ratio of Net Investment Income to Average
Net Assets (Annualized) 9.10% 9.18% 8.43% 10.75% 10.25% 10.01% 1.19%
</TABLE>
VAN KAMPEN MERRITT
SERIES TRUST HIGH YIELD PORTFOLIO
Notes to Financial Statements
June 30,1995 (Unaudited)
1. Significant Accounting Policies
Van Kampen Merritt Series Trust (the "Trust"), under which
the High Yield Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end
management investment company under the Investment
Company Act of 1940, as amended. The Trust and Fund
commenced investment operations on December 11,
1989.
The following is a summary of significant accounting
policies consistently followed by the Fund in the
preparation of its financial statements.
A. Security Valuation - Investments are stated at value
using market quotations, or if such valuations are not
available, 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 Fund 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 Fund 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. Dividend income is recorded on the
ex-dividend date. Bond discount is amortized over the
expected life of each applicable security.
D. Federal Income Taxes - It is the Fund'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 Fund 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 Fund had an
accumulated capital loss carryforward for tax purposes of
$1,654,800 which will expire on December 31, 2002.
E. Distribution of Income and Gains - The Fund
declares and pays dividends monthly from net investment
income. Net realized gains, if any, are distributed annually.
All distributions are automatically reinvested in Fund
shares. Distributions from net realized gains for book
purposes may include short-term capital gains, which are
included as ordinary income for tax purposes.
2. Investment Advisory Agreement and Other
Transactions with Affiliates
Under the terms of the Fund's Investment Advisory
Agreement, Van Kampen American Capital Investment
Advisory Corp. (the "Adviser") will provide investment
advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
------------------ -----------
<S> <C>
First $500 million .75 of 1%
Over $500 million .65 of 1%
</TABLE>
Cova Variable Annuity Account One is a separate
investment account offered by Cova Financial Services
Life InsuranceCo. ("Cova Life"). At June 30,1995, Cova
Variable Annuity Account One owned all shares of the
Fund.
Certain officers and trustees of the Fund are also
officers and directors of Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC"). The
Fund does not compensate its officers or trustees who are
officers of VKAC.
The Fund has implemented a retirement plan which
covers those trustees who are not officers of VKAC. The
Fund's liability under the retirement plan at June 30, 1995.
was approximately $1,400.
For the year ended June 30,1995, the Fund
recognized expenses of approximately $4,500 representing
VKAC's cost of providing accounting and legal services.
3. Capital Transactions
At June 30,1995 and December 31,1994, paid in surplus
aggregated $31,004,372 and $22,090,383, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
--------- -------------
<S> <C> <C>
Beginning Shares 2,000,944 1,669,943
--------- ------------
Shares Sold 898,251 1,006,022
Shares Issued Through
Dividend Reinvestment 117,585 182,215
Shares Repurchased (124,149) (857,236)
---------- ------------
Net Increase in Shares
Outstanding 891,687 331,001
---------- ------------
Ending Shares 2,892,631 2,000,944
---------- ------------
</TABLE>
4. Investment Transactions
Aggregate purchases and cost of sales of investment
securities, excluding short-term notes, for the six months
ended June 30,1995, were $22,644,156 and $15,063,874.
respectively.
VAN KAMPEN MERRITT
SERIES TRUST HIGH YIELD PORTFOLIO
Notes to Financial Statements (Continued)
June 30,1995 (Unaudited)
5. Derivative Financial Instruments
A derivative financial instrument in very general terms
refers to a security whose value is "derived" from the value
of an underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative
instruments, such as to attempt to protect the Fund
against possible changes in the market value of its
portfolio, manage the portfolio's effective yield, maturity
and duration or to generate potential gain. All of the Fund's
portfolio holdings, including derivative instruments, are
marked to market each day with the change in value
reflected in the unrealized appreciation/depreciation on
investments. Upon disposition, a realized gain or loss is
recognized accordingly, except for exercised option
contracts where the recognition of gain or loss is
postponed until the disposal of the security underlying the
option contract.
Summarized below are the specific types of derivative
financial instruments used by the Fund.
A. Option Contracts - An option contract gives the buyer
the right but not the obligation, to buy (call) or sell (put) an
underlying item at a fixed exercise price during a specified
Period. These contracts are generally used by the Fund to
manage the portfolio's effective maturity and duration.
Transactions in options for the six months ended
June 30,1995, were as follows:
<TABLE>
<CAPTION>
Contracts Premium
--------- ---------
<S> <C> <C>
Outstanding at June 30,1994 0 $ 0
Options Written (Net) 115 (3,162)
Options Expired (Net) (115) 3,162
--------- ---------
Outstanding at June 30,1995 0 $ 0
--------- ---------
</TABLE>
Van Kampen Merritt Series Trust Money Market Portfolio
Letter to Contract Owners
For the 6-month period ended 6/30/95
At the beginning of the year, it appeared that the Fed would continue
enforcing a restrictive monetary policy as they did in 1994. On February 1,
the Fed did increase the cost of capital one more time by raising the Federal
Funds rate from 5.50% to 6.0%. With the Fed apparently still concerned about
an overheating economy, we maintained a defensive posture during much of the
first quarter of this year. As the year progressed, new economic data began
to show that last year's rate increases were having the intended effect of
slowing down the economy. With each new piece of data, further rate increases
by the Fed seemed unlikely.
In response, we restructured the portfolio by locking in higher yields on
longer maturing investments. This will help fulfill the portfolio objective
of providing the highest possible current yield. For most of this year, the
portfolio's yield has been around 6.00%, which is above the peer group
average. Further more, the portfolio's yield continues to be complemented by
top rated securities that have a high level of liquidity.
Looking ahead, we believe the Fed's July 6 move to lower rates is the first in
what will be a series of rate cuts. To capitalize on this forecast, our
strategy is to selectively invest in the same types of top rated securities
while maintaining a structure consistent with our outlook for lower interest
rates.
Todd Larson
Portfolio Manager
Van Kampen American Capital Investment Advisory Corp.
[PIE CHART]
Portfolio by Sector
As of 6/30/95
Commercial Paper 61.7%
Government/Agency 19.9%
Variable Rate Demand Obligations 12.5%
Bankers Acceptances 5.1%
Repurchase Agreements 0.8%
1
Portfolio of Investments
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Security Description Date Purchase Cost
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Agency 19.7%
$ 381 Small Business Administration 07/01/95 7.000% $ 381,331
220 Student Loan Marketing Assn. 07/11/95 6.050 220,765
325 Federal Home Loan Bank <F2> 01/17/96 5.930 314,293
5,000 Federal Farm Credit Bank 02/23/96 6.050 4,800,854
2,000 Federal Farm Credit Bank 04/01/96 6.500 1,999,528
---------
Total Agency 7,716,771
---------
Bankers Acceptances 5.1%
2,000 NationsBank Corp. 07/10/95 6.050 1,996,975
---------
Commercial Paper 61.2%
2,000 Norwest Financial Inc. 07/06/95 6.122 2,000,000
2,000 Michigan Underground Storage Tank Financial Assurance 07/10/95 6.120 1,996,940
Authority
2,000 IBM Credit Corp. 07/12/95 6.040 1,996,308
2,000 Philip Morris Cos. Inc. 07/17/95 5.930 1,994,729
2,000 Merrill Lynch & Co. Inc. 07/24/95 6.030 1,992,295
2,000 Associates Corp. 07/25/95 5.978 2,000,000
2,000 Ford Motor Credit Corp. 07/25/95 6.083 2,000,000
2,000 CIT Group Holdings Inc. 07/27/95 5.984 2,000,000
2,000 State Street Bank Boston 07/31/95 6.000 1,990,000
2,000 Credit Suisse First Boston Inc. 08/02/95 6.007 1,989,387
2,000 General Electric Credit Capital Service of Puerto Rico 08/08/95 5.880 1,987,587
2,000 Heller Financial Inc. 08/17/95 6.030 1,984,255
---------
Total Commercial Paper 23,931,501
---------
Variable Rate Demand Obligations 12.4%
2,150 Catholic Healthcare West (Gtd: Toronto Dominion Bank) 07/05/95 6.050 2,150,000
300 Health Insurance Plan Greater New York (L.O.C. Morgan Gty) 07/05/95 6.150 300,000
800 Mississippi Business Finance Corp. 07/05/95 6.100 800,000
1,600 Virginia State Housing Development Authority 07/05/95 6.150 1,600,000
---------
Total Variable Rate Demand Obligations 4,850,000
---------
Repurchase Agreement 0.8%
UBS Securities, U.S. T-Note, $300,000 par, 4.25%
coupon, due 12/31/95, dated 06/30/95, to be sold on
07/03/95 at $291,148 291,000
---------
</TABLE>
See Notes to Financial Statements
2
Portfolio of Investments (Continued)
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Security Description Date Purchase Cost
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Investments - 99.2%<F1> 38,786,247
Other Assets in Excess of Liabilities 0.8% 316,532
-----------
Net Assets - 100.0% $ 39,102,779
-----------
<FN>
<F1>At June 30, 1995, cost is identical for both book and
federal income tax purposes.
<F2>This is a Mortgage Backed Security (MBS) which is a
pass-through instrument created by pooling mortgages and
selling participations in the principal and interest
payments received from borrowers. This security is
guaranteed by Federal Home Loan Mortgage Corporation
(FHLMC) a federally sponsored agency.
</TABLE>
See Notes to Financial Statements
3
VAN KAMPEN MERRITT SERIES TRUST MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at Amortized Cost Which Approximates Market (Note 1) $ 38,786,247
Cash 732
Receivables:
Fund Shares Sold 250,603
Interest 122,438
Investments Sold 572
------------
Total Assets 39,160,592
------------
LIABILITIES:
Payable for Fund Shares Repurchased 26,476
Accrued Expenses 31,337
------------
Total Liabilities 57,813
------------
NET ASSETS $ 39,102,779
------------
NET ASSETS CONSIST OF:
Paid In Surplus $ 39,196,383
Accumulated Realized Loss on Investments (93,604)
------------
NET ASSETS
(Equivalent to $1.00 per share on 39,196,383 shares outstanding;
an unlimited number of shares without par value are authorized) (Note 3) $ 39,102,779
------------
</TABLE>
See Notes to Financial Statements
4
VAN KAMPEN MERRITT SERIES TRUST MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,081,172
------------------
EXPENSES:
Investment Advisory Fee (Note 2) 171,887
Custody 15,616
Trustees Fees and Expenses (Note 2) 10,500
Legal (Note 2) 6,250
Other 12,177
------------------
Total Expenses 216,430
Less Fees Deferred by the Adviser and Expenses Reimbursed by Cova Life ($171,887 and
$8,948, respectively) 180,835
------------------
Net Expenses 35,595
------------------
NET INVESTMENT INCOME $ 2,045,577
------------------
Realized Gain/Loss on Investments:
Proceeds from Sales $ 14,368,108
Cost of Securities Sold (14,351,809)
------------------
NET REALIZED GAIN ON INVESTMENTS 16,299
------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,061,876
------------------
</TABLE>
See Notes to Financial Statements
5
VAN KAMPEN MERRITT SERIES TRUST MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 and
the Year Ended December 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
-------------------- -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 2,045,577 $ 2,528,826
Net Realized Gain/Loss on Investments 16,299 (77,617)
--------------- --------------
Change in Net Assets from Operations 2,061,876 2,451,209
Distributions from Net Investment Income (2,045,577) (2,528,826)
--------------- ----------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES 16,299 (77,617)
--------------- ----------------
FROM CAPITAL TRANSACTIONS (Note 3):
Proceeds from Shares Sold 4,248,963 127,080,727
Net Asset Value of Shares Issued
through Dividend Reinvestment 2,045,577 2,528,826
Cost of Shares Repurchased (43,094,581) (60,198,925)
--------------- ----------------
NET CHANGE IN NET ASSETS FROM
CAPITAL TRANSACTIONS (36,800,041) 69,410,628
--------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS (36,783,742) 69,333,011
NET ASSETS:
Beginning of the Period 75,886,521 6,553,510
--------------- ----------------
End of the Period $ 39,102,779 $ 75,886,521
--------------- ----------------
</TABLE>
See Notes to Financial Statements
Van Kampen Merritt Series Trust Money Market Portfolio
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
<TABLE>
<CAPTION>
July 1, 1991
(Commencement of
Six Months Investment
Ended Year Ended December 31, Operations) to
June 30, 1995 1994 1993 1992 December 31, 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
Net Investment Income .030 .041 .032 .038 .027
Less Distributions from Net Investment Income .030 .041 .032 .038 .027
---- ---- ---- ---- ----
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
Total Return *(Non-Annualized) 3.00% 4.23% 3.24% 3.88% 2.75%
Net Assets at End of Period (In millions) $39.1 $75.9 $6.6 $4.0 $5.4
Ratio of Expenses to Average Net Assets *(Annualized) .10% .10% .10% .10% .09%
Ratio of Net Investment Income to Average Net Assets
*(Annualized) 5.98% 4.37% 3.23% 3.63% 5.11%
*If certain expenses had not been assumed by the Adviser
and Cova Life, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets (Annualized) .63% .68% .86% 1.30% 1.11%
Ratio of Net Investment Income to Average Net Assets
(Annualized) 5.45% 3.79% 2.47% 2.43% 4.10%
</TABLE>
See Notes to Financial Statements
6
Van Kampen Merritt
Series Trust Money Market Portfolio
Notes to Financial Statements
June 30, 1995 (Unaudited)
1. Significant Accounting Policies
Van Kampen Merritt Series Trust (the "Trust"), under which the Money Market
Portfolio (the "Fund") is organized as a separate sub-trust, is registered as
a diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Trust commenced investment operations on
December 11, 1989 and the Fund commenced investment operations on July 1,
1991.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation - Investments are valued at amortized cost, which
approximates market. Under this valuation method, a portfolio instrument is
valued at cost and any discount or premium is amortized on a straight line
basis to the maturity of the instrument.
B. Security Transactions - Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
Interest income is recorded on an accrual basis.
C. Distribution of Income and Gains - The Fund declares dividends from net
investment income daily and automatically reinvests such dividends daily. Net
realized gains, if any, are distributed annually.
D. Federal Income Taxes - It is the Fund'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 Fund intends to utilize the 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 Fund had an accumulated
capital loss carryforward of $109,903, of which $32,286 and $77,617 will
expire on December 31, 2001 and 2002, respectively.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- --------------------- ------------
<S> <C>
First $500 million .500 of 1%
Over $500 million .400 of 1%
</TABLE>
Cova Variable Annuity Account One is a separate investment account offered
by Cova Financial Services Life Insurance Co. ("Cova Life"). At June 30,
1995, Cova Variable Annuity Account One owned all shares of beneficial
interest of the Fund.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen American Capital Distributors, Inc. or its affiliates
(collectively "VKAC"). The Fund does not compensate its officers or trustees
who are officers of VKAC. The Fund has implemented a retirement plan which
covers those trustees who are not officers of VKAC. The Fund's liability
under the retirement plan at June 30, 1995, was approximately $1,200.
For the six months ended June 30, 1995, the Fund recognized expenses of
approximately $5,900, representing VKAC's cost of providing accounting and
legal services.
3. Capital Transactions
At June 30, 1995 and December 31, 1994, paid in surplus aggregated $39,196,383
and $75,996,424, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year
Six Months Ended
Ended December 31,
June 30, 1995 1994
------------- -------------
<S> <C> <C>
Beginning Shares 75,996,424 6,585,796
------------- -------------
Shares Sold 4,248,963 127,080,727
Shares Issued Through
Dividend Reinvestment 2,045,577 2,528,826
Shares Repurchased (43,094,581) (60,198,925)
------------- -------------
Net Increase
in Shares Outstanding (36,800,041) 69,410,628
------------- -------------
Ending Shares 39,196,383 75,996,424
------------- -------------
</TABLE>
7
Van Kampen Merritt Series Trust Stock Index Portfolio
For the 6-month period ended 6/30/95
Letter to Contract Owners
During the second quarter, the stock market provided
investors with an encore performance of the first three
months of the year by posting equally robust returns.
This year's +20.21% year-to-date total return for the
S&P 500 makes it one of the best periods for equities
since the post Gulf War period of 1991. In terms of
worldwide markets, U.S. equities continued to stand out
by providing the best returns among the G-7 countries on
a quarterly and year-to-date basis. The following table
provides a summary of market returns as measured by the
various equity indices.
<TABLE>
<CAPTION>
Total Return
2nd Quarter YTD
<S> <C> <C>
Dow Jones Industrial Average (Dow) +10.29% +20.42%
S&P 500 StockPriceIndex (S&P 500) +9.55 +20.21
S&P 400 Mid cap Index (S&P 500) +8.73 +17.65
NASDAQ OTC composite Index (OTC)* +14.48 +24.68
Dow JonesUtilityAverage +9.46 +15.10
S&P Utility Index* +7.44 +14.88
Dow JonesTransportation Average +4.05 +19.88
Morgan Stanley Europe/Australia/Far East
Index (EAFE) +0.70 +2.60
</TABLE>
*Total return is in U.S. dollars adjusted for exchange rate fluctuations.
Many investors have been caught off guard by the strong
advance in both the stock and bond markets in l995.
While many continue to wait for a pause in the market's
stubborn climb. each hesitation has been cut short by
more catch-up money pouring in, making the S&P 500 a
difficult benchmark to beat this year. A remarkable aspect
of this rally, which started last December, is the fact that
the worst correction during the period was a drop of 1.7%
between May 16th and May 19th. While there have been
other instances when the market has gained considerably
more ground in six months than it has in this period, it is
difficult to recall a time when the corrections have been
so shallow and ended so quickly.
Despite the apparent smooth sailing, investors have had
plenty of worries including: the flagging U.S. dollar, poor
market breadth, a slowing economy, trade disputes with
Japan, and domestic terrorism, none of which have given
the market much pause. The result of this resilience is a
significant improvement in market psychology from the
cautious mood that existed in the fourth quarter last year.
Going forward, this increase in investor optimism makes
the market more vulnerable because many participants
have already increased their commitment to equities.
However, it doesn't mean that a painful tumble is immi-
nent given that a new liquidity squeeze is unlikely in the
near term, although it does increase the potential for
some rough spots ahead. Upcoming hurdles for the stock
market include a likely increase in the number of earnings
shortfalls and/or downward earnings revisions, and the
probability that the bond market gets ruffled from a suffi-
cient increase in the level of economic activity in the
second half.
Given the risks facing us in the next few quarters, port-
folios should include quality companies and be well
diversified over different industries. Therefore, the Stock
Index Portfolio, in attempting to approximate the perfor-
mance of the S&P 500, appears to be a good choice for
the upcoming period.
Dan Smith
Portfolio Manager
Van Kampen American CapitalinvestmentAdvisory Corp.
<TABLE>
Top 10 Holdings by Market Value
As of 6/30/95
<CAPTION>
% of Portfolio
<S> <S>
General Electric Co. 2.5%
Exxon Corp. 2.3
AT&T Corp. 2.1
Coca Cola Co. 2.1
Royal Dutch Petroleum Co. 1.7
Wal Mart Stores Inc. 1.6
Philip Morris Cos. Inc. 1.6
Merck&Co.Inc. 1.5
InternationalBusinessMachines 1.4
Intel Corp. 1.3
</TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Letter to Contract Owners
For the 6-Month Period ended 6/30/95
During the second quarter, the stock market provided investors
with an encore performance of the first three months of the
year by posting equally robust returns. This year's +20.21%
year-to-date total return for the S&P 500 makes it one of the
best periods for equities since the post gulf War period of
1991. In terms of worldwide markets, U.S. equities continued
to stand out by providing the best returns among the G-7
countries on a quarterly and year-to-date basis. The following
table provides a summary of market returns as measured by the
various equity indices.
<TABLE>
<CAPTION>
Total Return
2nd Quarter YTD
<S> <C> <C>
Dow Jones Industrial Average (Dow) +10.29% +20.42%
S&P 500 Stock Price Index (S&P 500) +9.55% +20.21%
S&P 400 Mid Cap Index (S&P 400) +8.73% +17.65%
NASDAQ OTC Composite Index (OTC)* +14.48% +24.68%
Dow Jones Utility Average +9.46% +15.10%
S&P Utility Index* +7.44% +14.88%
Dow Jones Transportation Average +4.05% +19.88%
Morgan Stanley Europe/Austrailia/Far EastIndex (EAFE) +0.70% +2.60%
</TABLE>
*Total return is in U.S. dollars adjusted for exchange rate fluctuations.
Many investors have been caught off guard by the strong advance
in both the stock and bond markets in 1995. While many continue
to wait for a pause in the market's stubborn climb, cash
hesitation has been cut short by more catch-up money pouring in,
making the S&P 500 a difficult benchmark to beat this year. A
remarkable aspect of this rally, which started last December,
is the fact that the worst correction during the period was a
drop of 1.7% between May 16th and May 19th. While there have
been other instances when the market has gained considerably
more ground in six months than it has in this period, it is
difficult to recall a time when the corrections have been so
shallow and ended so quickly.
Despite the apparent smooth sailing, investors have had plenty
of worries including: the flagging U.S. dollar, , poor market
breadth, a slowing economy, trade disputes with Japan, and
domestic terrorism, none of which have given the market much
pause. The result of this residencies a significant improvement
in market psychology from the cautious mood that existed in the
fourth quarter last year.
Going forward, this increase in investor optimism makes the
market more vulnerable because many participants have already
increased their commitment to equities. However, it doesn't
mean that a painful tumble is imminent given that a new
iquidity squeeze is unlikely in the near term, although it
does increase the potential for some rough spots ahead.
Upcoming hurdles for the stock market include a likely
increase in the number of earnings shortfalls and/or downward
earnings revisions, and the probability that the bond market
gets ruffled from a sufficient increase in the level of
economic activity in the second half.
Given the risks facing us in the next few quarters, portfolios
should include quality companies and be well diversified over
different industries. Therefore, the Stock Index portfolio, in
attempting to approximate the performance of the S&P 500,
appears to be a good choice for the upcoming period.
Dan Smith
Portfolio Manager
Van Kampen American Capital Investment Advisory Corp.
<TABLE>
Top 10 Holdings by Market Value
As of 6/30/95
<CAPTION>
<S> <C>
General Electric Co. 2.5%
ExxonCorp. 2.3
AT&T Corp. 2.1
Coca Cola Co. 2.1
Royal Dutch Petroleum Co. 1.7
Wal Mart Stores Inc. 1.6
Philip Morris Cos. Inc. 1.6
Merck & Co. Inc. 1.5
International Business Machines 1.4
Intel Corp. 1.3
</TABLE>
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common and Preferred Stocks
Basic Industries 6.4%
Air Products & Chemicals Inc. 1,600 $ 89,200
Alcan Aluminum Ltd. 3,900 117,975
Allied Signal Inc. 3,700 164,650
Aluminum Company America 2,800 140,350
Avery Dennison Corp. 900 36,000
Barrick Gold Corp. 4,500 113,625
Crown Cork & Seal Inc. <F3> 1,200 60,150
Cyprus Amax Minerals Co. 1,400 39,900
Dow Chemical Co. 3,400 244,375
Du Pont (E. I.) De Nemours Co. <F2> 6,900 474,375
Eastman Chemical Co. 1,100 65,450
Eaton Corp. 1,100 63,938
FMC Corp. <F3> 600 40,350
Genuine Parts Co. 1,900 71,963
Georgia Pacific Corp. 1,300 112,775
Grace, W. R. & Co. 1,300 79,787
Grainger Inc. 700 41,125
Hercules Inc. 1,500 73,125
Homestake Mining Co. 2,400 39,600
Illinois Tool Works Inc. 1,600 88,000
IncoLtd. 1,800 50,850
Ingersoll Rand Co. 1,500 57,375
International Paper Co. 1,800 154,350
Kimberly Clark Corp. 2,100 125,737
Louisiana Pacific Corp. 1,500 39,375
Monsanto Co. 1,500 135,187
Morton International Inc. 2,100 61,425
Nalco Chemical Co. 1,000 36,375
Newmont Mining Corp. 1,800 75,375
Nucor Corp. 1,100 58,850
Pall Corp. 1,500 33,375
Phelps Dodge Corp. 1,300 76,700
Pioneer Hi Bred International Inc. 1,100 46,200
Placer Dome Inc. 3,200 83,600
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PPG Inds Inc. 2,900 124,700
Reynolds Metals Co. 1,100 56,925
Scott Paper Co. 1,900 94,050
Temple Inland Inc. 800 38,100
Basic Industries (Continued)
Union Camp Corp. 1,100 $ 63,663
Union Carbide Corp. 2,100 70,088
USX U.S. Steel 1,000 34,375
Wachovia Corp. 2,200 78,650
Westvaco Corp. 900 39,825
Weyerhaeuser Co. 2,800 131,950
-----------
3,923,813
-----------
Capital Goods 5.2%
Boeing Co. 4,300 269,287
Browning Ferris Inds Inc. 2,600 93,925
Brunswick Corp. 1,500 25,500
Caterpillar Inc. 2,600 167,050
Champion International Corp. 1,300 67,763
Cooper Inds Inc. 1,500 59,250
Dana Corp. 1,500 42,938
Deere & Co. 1,100 94,187
Dover Corp. 900 65,475
Emerson Electric Co. 3,000 214,500
Engelhard Corp. 1,200 51,450
General Dynamics Corp. 900 39,938
General Electric Co. 21,000 1,183,875
Johnson Controls Inc. 700 39,550
Lockheed Martin Corp. 2,800 176,750
Parker Hannifin Corp. 1,200 43,500
Pitney Bowes Inc. 2,200 84,425
Praxair Inc. 2,000 50,000
Raytheon Co. 1,600 124,200
Rockwell International Corp. 2,800 128,100
Textron Inc. 1,200 69,750
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30,1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tyco Interest Limited 1,000 54,000
-----------
3,145,413
-----------
Consumer Durables 2.2%
Black & Decker Corp. 1,200 37,050
Chrysler Corp. 4,700 225,013
Ford Motor Co. 11,800 351,050
General Motors Corp. 9,300 435,937
Consumer Durables (Continued)
Goodyear Tire & Rubber Co. 2,000 $ 82,500
Masco Corp. 2,100 56,700
Newell Co. 2,300 56,350
Westinghouse Electric Corp. 4,600 67,275
Whirlpool Corp. 1,000 55,000
-----------
1,366,875
-----------
Consumer Non-Durables 10.7%
American Brands Inc. 2,500 99,375
American Stores Co. 2,200 61,875
Anheuser Busch Cos. Inc. 3,200 182,000
Archer Daniels Midland Co. 6,500 121,062
Avon Products Inc. 1,000 67,000
Campbell Soup Co. 3,200 156,800
CloroxCo. 800 52,200
Coca Cola Co. <F2> 15,700 1,000,875
Colgate Palmolive Co. 1,600 117,000
ConAgra Inc. 3,100 108,113
Conrail Inc. 1,200 66,750
CPC International Inc. 1,800 111,150
CUC International Inc. <F3> 1,400 58,800
DeLuxe Corp. 1,100 36,438
Eastman Kodak Co. 4,200 254,625
General Mills Inc. 2,000 102,750
Gillette Co. 5,600 249,900
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Pofflolio
Portfolio of Investments (Continued)
June 30,1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hasbrolnc. 1,200 38,100
Heinz, H. J. & Co. 2,900 128,687
Hershey Foods Corp. 1,200 66,300
International Flavours 1,400 69,650
Kellogg Co. 2,700 192,712
Mattel Inc. 3,000 78,000
Mead Corp. 900 53,438
Melville Corp. 1,400 47,950
Hike Inc. 1,000 84,000
Pepsico Inc. 9,600 438,000
Philip Morris Cos. Inc. 10,300 766,062
Premark International Inc. 800 41,500
Procter & Gamble Co. 8,300 596,562
Consumer Non-Durables (Continued)
Quaker Oats Co. 1,700 $ 55,888
Ralston Purina Co. 1,200 61,200
Reebok International Ltd. 1,100 37,400
Rubbermaid Inc. 2,100 58,275
Sara Lee Corp. 5,700 162,450
Seagram Ltd. 4,900 169,662
Sherwin Williams Co. 1,200 42,750
Unilever 2,000 260,250
UST Inc. 2,400 71,400
V.F.Corp. 900 48,375
Winn Dixie Stores Inc. 1,000 57,750
Wrigley Wm Junior Co. 1,500 69,563
-----------
6,542,637
-----------
Consumer Services 8.9%
Albertsons Inc. 3,300 98,175
Automatic Data Processing Inc. 2,100 132,037
Block H & R Inc. 1,500 61,687
Capital CitieslABC Inc. 2,000 216,000
CBS Inc. 800 53,600
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Circuit City Stores Inc. 1,200 37,950
Comcast Corp. 2,500 46,406
Computer Sciences Corp. <F3> 900 51,188
Darden Restaurants Inc. <F3> 2,000 21,750
Dayton Hudson Corp. 1,000 71,750
Dillard Department Stores Inc. 1,500 44,063
Donnelley R.R. & Sons Co. 2,100 75,600
Dow Jones & Co. Inc. 1,300 47,938
Dun & Bradstreet Corp. 2,400 126,000
Federal Express Corp. <F3> 700 42,525
Gannett Inc. 2,000 108,500
Gap Inc. 1,900 66,262
Harcourt General Inc. 900 38,250
Hilton Hotels Corp. 700 49,175
Home Depot Inc. 5,700 231,562
Interpublic Group Cos. Inc. 1,000 37,500
Kmart Corp. 5,400 78,975
Knight Ridder Inc. 800 45,500
Consumer Services (Continued)
Kroger Co. <F3> 1,700 $ 45,688
Limited Inc. 4,400 96,800
Lowes Cos. Inc. 2,000 59,750
Marriot International Inc. 1,600 57,400
May Department Stores Co. 3,300 137,362
McDonalds Corp. 8,600 336,475
MCl Communications Corp. 8,400 184,800
Moore Corp. Ltd. 1,600 35,400
Nordstrom Inc. 1,100 45,513
Penney, J.C. Inc. 3,000 144,000
Price Costco Inc. <F3> 2,500 40,625
Promus Cos. Inc. <F3> 1,300 50,700
Sears Roebuck & Co. 4,700 281,412
Service Corp. International 1,500 47,438
Tele Communications Inc. <F3> 4,500 105,469
Time Warner Inc. 4,800 197,400
Toys R Us Inc. <F3> 3,400 99,450
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tribune Co. 900 55,238
TRW Inc. 1,000 79,875
Viacom Inc. <F3> 3,500 162,312
Wal-Mart Stores Inc. 28,900 773,075
Walgreen Co. 1,500 75,187
Walt Disney Co. 6,400 356,000
WMX Technologies Inc. 6,000 170,250
-----------
5,420,012
-----------
Energy 8.0%
Amerada Hess Corp. 1,200 58,650
Amoco Corp. 6,200 413,075
Ashland Inc. 1,000 35,125
Atlantic Richfield Co. 2,000 219,500
Baker Hughes Inc. 2,100 43,050
Burlington Resources Inc. 1,600 59,000
Chevron Corp. 8,100 377,662
Coastal Corp. 1,500 45,563
Dresser Inds Inc. 2,900 64,525
Enron Corp. 3,200 112,400
Exxon Corp. <F2> 15,300 1,080,562
Halliburton Co. 1,500 53,625
Energy (Continued)
Kerr McGee Corp. 700 $ 37,538
Mobil Corp. 4,900 470,400
Occidental Petroleum Corp. 4,000 91,500
Phillips Petroleum Co. 3,300 110,137
Royal Dutch Petroleum Co. 6,700 816,562
Schlumberger Ltd. 3,600 223,650
Sonat Inc. 1,200 36,600
Sun Inc. 1,500 41,063
Texaco Inc. 3,500 229,687
Unocal Corp. 3,400 93,925
USX Marathon Group 3,500 69,125
Western Atlas Inc. <F3> 700 31,063
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Williams Cos. Inc. 1,300 45,338
-----------
4,859,325
-----------
Financial Services 9.1%
Aetna Life & Casualty Co. 1,500 94,312
Ahmanson H.F. & Co. 1,600 35,200
American Express Co. 6,100 214,262
American General Corp. 2,500 84,375
American International Group Inc. 3,800 433,200
BancOne Corp. 4,700 151,575
Bank New York Inc. 2,300 92,862
Bank of Boston Corp. 1,300 48,750
Bankamerica Corp. 4,600 242,075
Bankers Trust NY Corp. 1,000 62,000
Barnett Banks Inc. 1,300 66,625
Beneficial Corp. 900 39,600
Boatmens Bancshares Inc. 1,600 56,400
Chase Manhattan Corp. 1,600 75,200
Chemical Banking Corp. 3,000 141,750
Chubb Corp. 1,100 88,137
Cigna Corp. 1,000 77,625
Citicorp 4,100 237,287
Corestates Financial Corp. 1,900 66,263
Dean Witter Discover & Co. 2,100 98,700
Federal Home Loan Mortgage Corp. 2,300 158,125
Federal National Mortgage Assn. 3,400 320,875
Financial Services (Continued)
First Chicago Corp. 1,100 $ 65,863
First Fidelity Bancorp 1,100 64,900
First Interstate Bancorp 1,000 80,250
First Union Corp. 2,100 95,025
Fleet Financial Group Inc. 1,900 70,537
General Reinsurance Corp. 1,000 133,875
Golden West Financial Corp. Delaware 700 32,988
Great Western Financial Corp. 1,700 35,063
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30,1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Household International Inc. 1,200 59,400
Jefferson Pilot Corp. 600 32,850
Keycorp 3,100 97,262
Lincoln National Corp. Inc. 1,300 56,875
Loews Corp. 800 96,800
Marsh & Mclennan Co. Inc. 1,000 81,125
MBNA Corp. 1,800 60,750
McGraw Hill Inc. 700 53,113
Mellon Bank Corp. 1,800 74,925
Merrill Lynch & Co. Inc. 2,400 126,000
Morgan, J.P. & Co. Inc. 2,300 161,287
National City Corp. 2,200 64,625
NationsBank Corp. 2,800 150,150
NBD Bancorp Inc. 2,200 70,400
Norwest Corp. 3,700 106,375
PNC Bank Corp. 2,800 73,850
Providian Corp. 1,200 43,500
Safeco Corp. 800 45,950
Salomon Inc. 1,300 52,163
Shawmut National Corp. 1,500 47,813
St. Paul Cos. Inc. 1,100 54,175
SunTrust Banks Inc. 1,500 87,375
Torchmark Inc. 900 33,975
Transamerica Corp. 1,000 58,250
Travelers Inc. 3,800 166,250
Unum Corp. 900 42,188
Wells Fargo & Co. 600 108,150
-----------
5,569,275
-----------
Healthcare 7.3%
Abbott Labs 9,700 $ 392,850
Alco Standard Corp. 800 63,900
American Home Products Corp. 3,800 294,025
Amgen Inc. <F3> 1,600 128,700
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30,1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Baxter International Inc. 3,600 130,950
Becton Dickinson & Co. 900 52,425
Boston Scientific Corp. <F3> 1,900 60,563
Bristol Myers Squibb Co. <F2> <F3> 6,400 436,000
Columbia' HCA Healthcare Corp. 5,600 242,200
Eli Lilly & Co. 3,600 282,600
Johnson & Johnson 7,900 534,237
Mallinckrodt Group Inc. 1,000 35,500
Medtronic Inc. 1,400 107,975
Merck & Co. Inc. 15,100 739,900
Pfizer Inc. 3,800 351,025
Schering-Plough Corp. 4,600 202,975
Tenet Healthcare Corp. <F3. 2,600 37,375
U.S. Healthcare Inc. 2,000 61,250
United Healthcare Corp. 2,200 91,025
Upjohn Co. 2,200 83,325
Warner Lambert Co. 1,700 146,837
----------
4,475,637
-----------
Public Utilities 6.9%
American Electric Power Inc. 2,200 77,275
Ameritech Corp. 6,600 290,400
Baltimore Gas & Electric Co. 2,000 50,000
Bell Atlantic Corp. 5,200 291,200
Bellsouth Corp. 5,900 374,650
Carolina Power & Light Co. 2,000 60,500
Central & South West Corp. 2,200 57,750
Cinergy Corp. 1,300 34,125
Consolidated Edison Co. 2,800 82,600
Consolidated Natural Gas Co. 1,200 45,300
Detroit Edison Co. 1,900 56,050
Dominion Resources Inc. 2,300 83,950
Duke Power Co. 2,600 107,900
Entergy Corp. 2,700 65,138
Public Utilities (Continued)
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FPL Group Inc. 2,400 $ 92,700
General Public Utilities Corp. 1,500 44,625
GTE Corp. 10,500 358,312
Houston Inds. Inc. 1,600 67,400
Northern STS Power Co. 900 41,513
Nynex Corp. 5,100 205,275
Ohio Edison Co. 1,900 42,988
Pacific Gas & Electric Co. 5,300 153,700
Pacific Telesis Group 5,100 136,425
Pacificorp 3,600 67,500
Panhandle Eastern Corp. 1,800 43,875
Peco Energy Co. 2,700 74,587
Public Service Enterprise Group 3,000 83,250
SCE Corp. 5,300 90,762
Southern Co. 8,000 179,000
Sprint Corp. 4,200 141,225
Tenneco Inc. 2,500 115,000
Texas Utilities Co. 2,700 92,812
U.S. West Inc. 5,600 233,100
Unicom Corp. 2,700 71,888
Union Electric Co. 1,300 48,425
United Technologies Corp. 1,700 132,812
-----------
4,194,012
-----------
Technology 12.0%
Advanced Micro Devices Inc. <F3> 1,300 47,288
Airtouch Communications Inc. <F3> 6,300 179,550
AMP Inc. 2,800 118,300
Apple Computer 1,500 69,656
Applied Materials Inc. <F3> 1,100 95,288
AT & T Corp. <F2> 19,100 1,014,687
Cisco Systems Inc. <F3> 3,300 166,856
Compaq Computer Corp. <F3> 3,200 145,200
Computer Associates International Inc. 2,000 135,500
Corning Inc. 2,900 94,975
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Digital Equipment Corp. <F3> 1,900 77,425
DSC Communications Corp. <F3> 1,400 65,100
First Data Corp. 1,600 91,000
Technology (Continued)
Fluor Corp. 1,200 $ 62,400
Great Lakes Chemical Corp. 900 54,225
Hewlett Packard Co. 6,400 476,800
Honeywell Inc. 1,700 73,313
Intel Corp. 10,200 645,787
International Business Machines 7,100 681,600
ITT Corp. 1,300 152,750
Loral Corp. 1,100 56,925
McDonnell Douglas Corp. 1,400 107,450
Micron Technology Inc. 2,600 142,675
Microsoft Corp. <F3> 7,100 641,662
Minnesota Mining & Manufacturing Co. 5,300 303,425
Motorola Inc. 7,400 496,725
National Semiconductor Corp. <F3> 1,700 47,175
Northern Telecom Ltd. 3,100 113,150
Northrop Corp. 800 41,700
Novell Inc. <F3> 4,700 93,706
Oracle Systems Corp. <F3> 5,400 208,575
Rohm & Haas Co. 900 49,388
Silicon Graphics Inc. <F3. 1,800 71,775
Sun Microsystems Inc. <F3> 1,200 58,200
Sysco Corp. 2,300 67,850
Tandy Corp. 1,000 51,875
Texas Instruments Inc. 1,200 160,650
Xerox Corp. 1,400 164,150
-----------
7,324,756
-----------
Telecommunications 0.7%
Alltel Corp. 2,500 63,438
SBC Communications Inc. 7,400 352,425
-----------
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Portfolio of Investments (Continued)
June 30, 1995 (Unaudited)
<CAPTION>
Security
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
415,863
-------------
Transportation 1.2%
AMR Corp. <F3> 1,100 82,088
Burlington Northern Inc. 1,400 88,725
CSX Corp. 1,600 120,200
Delta Air Lines Inc. 700 51,625
Nortolk Southern Corp. 1,900 128,012
Transportation (Continued)
Santa Fe Pacific Corp. 1,900 $ 48,450
Southwest Airlines Co. 1,900 45,363
Union Pacific Corp. 2,600 143,975
708,438
Total Long-Term Investments 78.6%
(Cost $41,756,020) <F1> 47,946,056
Repurchase Agreement 21.3%
UBS Securities, U.S. T-Note, $11,900,000 par,
coupon 9.125%, due 06/18/99, dated 06/30/95,
to be sold on 07/03/95 at $13,011,611. 13,005,000
Other Assets in Excess of Liabilities 0.1% 35,835
---------------
Net Assets 100% $ 60,986,891
---------------
---------------
<FN>
<F1> At June 30,1995, cost for federal income tax purposes is $41,756,020; the aggregate gross
unrealized appreciation is $7,013,982 and the aggregate gross unrealized depreciation is
$592,927, resulting in net unrealized appreciation including open option and futures transactions
of $6,421,055.
<F2> Assets segregated for open option and futures contracts.
<F3> Non-income producing security as this stock currently does not declare dividends.
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST STOCK INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30,1995 (Unaudited)
<CAPTION>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $41,756,020) (Note 1) $ 47,946,056
Repurchase Agreements (Note 1) 13,005,000
Cash 654
Receivables:
Dividends 110,066
Interest 2,204
Options at Market Value (Net premiums paid of $1,556) (Note 5) 2,175
----------
Total Assets 61,066,155
----------
LIABILITIES:
Payables:
Margin on Futures (Note 5) 30,550
Investment Advisory Fee (Note 2) 23,579
Fund Shares Repurchased 3,534
Accrued Expenses 21,601
----------
Total Liabilities 79,264
----------
NET ASSETS $ 60,986,891
-----------
-----------
NET ASSETS CONSIST OF:
Paid In Surplus (Note 3) $ 54,355,063
Net Unrealized Appreciation on Investments 6,421,055
Accumulated Net Realized Gain on Investments 210,773
-----------
NET ASSETS $ 60,986,891
-----------
-----------
NET ASSET VALUE PER SHARE
($60,986,891 divided by 4,848,761 shares outstanding; an unlimited
number of shares without par value are authorized) (Note 3) $12.58
-----------
-----------
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST STOCK INDEX PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended June 30,1995 (Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $4,485) $ 528,525
Interest 88,526
----------
Total Income 617,051
----------
EXPENSES:
Investment Advisory Fee (Note 2) 103,935
Custody 35,317
Trustees Fees and Expenses (Note 2) 10,539
Audit 9,561
Legal (Note 2) 6,054
Other 3,765
----------
Total Expenses 169,171
Less Expenses Reimbursed by Cova Life 43,233
----------
Net Expenses 125,938
----------
NET INVESTMENT INCOME $ 491,113
-----------
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales $ 1,644,810
Cost of Securities Sold (1,454,993)
-------------
Net Realized Gain on Investments (Including realized gain on closed option
and futures transactions of $30,159 and $79,382, respectively) 189,817
-------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period (363,126)
End of the Period (Including unrealized appreciation on open option
and futures transactions of $619 and $230,400, respectively) 6,421,055
-------------
Net Unrealized Appreciation on Investments During the Period 6,784,181
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 6,973,998
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 7,465,111
-------------
-------------
</TABLE>
See Notes to Financial Statements
<TABLE>
VAN KAMPEN MERRITT SERIES TRUST STOCK INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30,1995
and the Year Ended December 31,1994 (Unaudited)
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
---------------- -----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 491,113 $ 1,218,783
Net Realized Gain on Investments 189,817 311,001
Net Unrealized Appreciation/Depreciation
on Investments During the Period 6,784,181 (2,393,977)
----------- ------------
Change in Net Assets from Operations 7,465,111 (864,193)
----------- ------------
Distributions from Net Investment Income (491,113) (1,218,783)
Distributions from Net Realized Gain on Investments 0 (623,624)
Return of Capital Distribution 0 (20,956)
----------- -------------
Total Distributions (491,113) (1,863,363)
----------- -------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES 6,973,998 (2,727,556)
----------- -------------
FROM CAPITAL TRANSACTIONS (Note 3):
Proceeds from Shares Sold 20,668,020 14,386,901
Net Asset Value of Shares Issued
through Dividend Reinvestment 491,113 1,863,363
Cost of Shares Repurchased (3,957,163) (67,994,792)
------------ -------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 17,201,970 (51,744,528)
------------ -------------
TOTAL INCREASE/DECREASE IN NET ASSETS 24,175,968 (54,472,084)
NET ASSETS:
Beginning of the Period 36,810,923 91,283,007
------------ -------------
End of the Period $ 60,986,891 $ 36,810,923
------------ -------------
------------ -------------
</TABLE>
See Notes to Financial Statements
<TABLE>
Van Kampen Merritt Series Trust Stock Index Portfolio
Financial Highlights (Unaudited)
<CAPTION>
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
November 1,1991
(Commencement of
Six Months Investment
Ended Operations) to
June 30, Year Ended December 31, December 31,1991
1995 1994 1993 1992
-------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.587 $ 11.115 $ 10.552 $ 10.572 $ 10.000
------- ------- ------- ------- -------
Net Investment Income .102 .311 .205 .172 .038
Net Realized and Unrealized Gain/Loss on
Investments 1.991 (.337) .726 .477 .534
------- ------- ------- ------- -------
Total from Investment Operations 2.093 (.026) .931 .649 .572
------- ------- ------- ------- -------
Less:
Distributions from Net Investment Income .102 .311 .205 .210 .000
Distributions from Net Realized Gain on
Investments .000 .185 .163 .459 .000
Return of Capital Distributions .000 .006 .000 .000 .000
------- ------- ------- ------- -------
Total Distributions .102 .502 .368 .669 .000
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 12.578 $ 10.587 $ 11.115 $ 10.552 $ 10.572
------- ------- ------- ------- -------
Total Return *(Non-Annualized) 19.76% (.11%) 8.84% 6.22% 5.70%
Net Assets at End of Period (In millions) $ 61.0 $ 36.8 $ 91.3 $ 35.0 $ 6.8
Ratio of Expenses to Average Net Assets
*(Annualized) .60% .58% .60% .59% .40%
Ratio of Net Investment Income to Average Net
Assets *(Annualized) 2.31% 2.23% 2.29% 2.54% 3.02%
Portfolio Turnover 3.69% 47.05% 44.09% 85.73% .00%
*If certain expenses had not been assumed
by Cova Life, total return would have been lower
and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets
(Annualized) .80% .80% .74% 1.21% 1.84%
Ratio of Net Investment Income to Average
Net Assets
(Annualized) 2.11% 2.01% 2.15% 1.92% 1.58%
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT
SERIES TRUST STOCK INDEX PORTFOLIO
Notes to Financial Statements
June 30,1995 (Unaudited)
1. Significant Accounting Policies
Van Kampen Merritt Series Trust (the "Trust"), under which
the Stock Index Portfolio (the "Fund") is organized as a
separate sub-trust, is registered as a diversified open-end
management investment company under the Investment
Company Act of 1940, as amended. The Trust commenced
investment operations on December 11,1989. The Fund
commenced investment operations on November 1, 1991.
The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation
of its financial statements.
A. Security Valuation - Investments in securities listed on a
securities exchange are valued at their sale price as of the
close of such securities exchange. Investments in securities
not listed on a securities exchange are valued based on their
last quoted bid price or, if not available, their fair value as
determined 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.
C. Dividend and Interest Income - Dividend income is
recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
D. Federal Income Taxes - It is the Fund'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.
E. Distribution of Income and Gains - The Fund declares
and pays dividends semi-annually from net investment
income. Net realized gains, if any, are distributed annually.
Distributions from net realized gains for book purposes may
include short-term capital gains and gains on option and
futures transactions. All short-term capital gains and a
portion of option and futures gains are included in ordinary
income for tax purposes. Distributions are automatically
reinvested in Fund shares.
2. Investment Advisory Agreement and Other
Transactions with Affiliates
Under the terms of the Fund's Investment Advisory
Agreement, Van Kampen American Capital Investment
Advisory Corp. (the "Adviser") will provide investment advice
and facilities to the Fund for an annual fee payable monthly
of .50% of the average net assets of the Fund.
Cova Variable Annuity Account One is a separate
investment account offered by Cova Financial Services Life
Insurance Co. ("Cova Life"). At June 30,1995, Cova
Variable Annuity Account One owned all shares of the Fund.
Certain officers and trustees of the Fund are also
officers and directors of Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC"). The
Fund does not compensate its officers or trustees who are
officers of VKAC.
The Fund has implemented a retirement plan which
covers those trustees who are not officers of VKAC. The
Fund's liability under the retirement plan at June 30,1995,
was approximately $4,000.
For the six months ended June 30,1995, the Fund
recognized expenses of approximately $7,400 representing
VKAC's cost of providing accounting and legal services.
3. Capital Transactions
At June 30, 1995, and December 31, 1994, paid in surplus
aggregated $54,355,063 and $37,153,093, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
---------- -----------
<S> <C> <C>
Beginning Shares 3,477,141 8,212,885
----------- -----------
Shares Sold 1,689,685 1,323,458
Shares Issued through
Dividend Reinvestment 39,039 176,442
Shares Repurchased (357,104) (6,235,644)
----------- ------------
Net Increase/Decrease
in Shares Outstanding 1,371,620 (4,735,744)
----------- ------------
Ending Shares 4,848,761 3,477,141
----------- ------------
----------- ------------
</TABLE>
4. Investment Transactions
Aggregate purchases and cost of sales of investment
securities, excluding short-term notes, for the six months
ended June 30,1995, were $8,727,868 and $1,454,993,
respectively.
5. Derivative Financial Instruments
VAN KAMPEN MERRITT
SERIES TRUST STOCK INDEX PORTFOLIO
Notes to Financial Statements
June 30,1995 (Unaudited)
A derivative financial instrument in very general terms refers
to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative
instruments, such as to attempt to protect the Fund against
possible changes in the market value of its portfolio or
generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each
day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition,
a realized gain or loss is recognized accordingly, except for
exercised option contracts where the recognition of gain or
loss is postponed until the disposal of the security underlying
the option contract.
Summarized below are the specific types of derivative
financial instruments used by the Fund.
A. Option Contracts - An option contract gives the buyer
the right, but not the obligation to buy (call) or sell (put) an
underlying item at a fixed exercise price during a specified
period. These contracts are generally used by the Fund to
provide the return of an index without purchasing all of the
securities underlying the index or as a substitute for
purchasing or selling specific securities.
Transactions in options for the six months ended June
30,1995, were as follows:
<TABLE>
<CAPTION>
Contracts Premium
---------- ---------
<S> <C> <C>
Outstanding at
December 31,1994 6 $169
Options Written
and Purchased (Net) 52 (13,922)
Options Terminated
in Closing
Transactions (Net) (56) 12,197
--------- ---------
Outstanding at
June 30,1995 2 ($1,556)
--------- ----------
--------- ----------
</TABLE>
The related futures contracts of the options outstanding at
June 30,1995, and their descriptions and market values are
as follows:
<TABLE>
<CAPTION>
Expiration
Month/ Market
Exercise Value
Contracts Price of Options
--------- --------- -----------
<S> <C> <C> <C>
S&P 500
Index Futures
Written Puts 1 Sept/525 $ (463)
Purchased Calls 1 Sept/525 2,638
--------- -----------
2 $ 2,175
--------- -----------
--------- -----------
</TABLE>
B. Futures Contracts - A futures contract is an agreement
involving the delivery of a particular asset on a specified
future date at an agreed upon price. The Fund generally
invests in futures on the S&P 500 Index and typically closes
the contract prior to the delivery date. These contracts are
generally used to provide the return of an index without
purchasing or selling all of the securities underlying the
index.
The fluctuation in market value of the contracts is
settled daily through a cash margin account. Realized gains
and losses are recognized when the contracts are closed or
expire.
Transactions in futures contracts for the six months
ended June 30,1995, were as follows:
<TABLE>
<CAPTION>
Contracts
----------
<S> <C>
Outstanding at
December 31,1994 11
Futures Opened 87
Futures Closed (51)
-----------
Outstanding at
June 30,1995 47
------------
------------
</TABLE>
The futures contracts outstanding at June 30,1995, and the
description and unrealized appreciation is as follows:
<TABLE>
<CAPTION>
Unrealized
Contracts Appreciation
---------- ------------
<S> <C> <C>
S&P 500 Index Futures
Sept 1995 - Buys to Open 47 $ 230,400
---------- ------------
---------- ------------
</TABLE>
Van Kampen Merritt Series Trust Growth and Income Portfolio
Letter to Contract Owners
For the 6-month period ended 6/30/95
The Dow Jones Industrial Average (DJIA) eclipsed the 4500 barrier with little
pause in the second quarter, propelled by lower interest rates and undisturbed
by the possibility of an earnings shortfall resulting from a weaker than
expected economic environment. Not unlike the first quarter, the stock market
drew support from a considerable decline in interest rates, the magnitude of
which took many by surprise. Yet despite the persistence of weak economic
data and some mention of recession in the media, projections of corporate
earnings have not been negatively impacted. This created an exceptionally
supportive environment for U. S. equities and resulted in solid price
performance. Additionally, a steady flow of money into the equity market via
mutual funds, merger activity, and corporate stock repurchase programs further
buoyed stock prices. The Portfolio participated in the market rally, offering
up a respectable return for the past six-month period.
The market's momentum was fueled primarily by the technology sector.
Commensurate with the Portfolio's objective of providing long-term growth of
both capital and income, the Portfolio's holdings of the high-flying
technology stocks stood at about 17%,* which is similar to the weighting of
tech-stocks in the S&P 500. Yet unlike the S&P 500, the Portfolio primarily
seeks those stocks which pay dividends. While the Portfolio may have enhanced
performance by increasing exposure in technology issues, a heavier exposure
would have also placed shareholder's money at greater risk. Further, many of
the highly touted tech-stocks do not provide dividends and therefore do not
qualify for the Portfolio. More importantly, the inherent volatility and zero
dividend yield associated with many of these stocks are not characteristic of
the objective to which our shareholders have pledged their
investment.
In addition to technology, banks and related financial services businesses
have produced consistently above market returns since the beginning of the
year when interest rates began their rapid decline. We are happy to report
favorable returns from this sector of the Portfolio as well, with Citicorp
adding 40% and the Bank of Boston showing a 45% gain. Other impressive gains,
surpassing those of the Dow and S&P 500 are American Airlines with a 40% gain,
Case Corp. returning 38%, James River registering a 36% gain, Triton Energy up
36% and Federated Department Stores increasing 34%.
A particular challenge for the Portfolio and for all portfolio managers this
year has been the fickle sector rotation that has plagued the market.
Historically, investors have put money in good companies that are backed by
solid fundamentals. More recently, however, participants have been quick to
change their loyalties with any announcement by the Fed or a weekly
unemployment report despite the fact that nothing may have changed at the
company. In particular, during the second quarter oil exploration &
production, manufactured housing, and health care (HMOs and nursing homes)
were dumped by investors after having been among the previous quarter's top
performing groups. To meet this challenge, the Portfolio is well diversified,
with a balanced representation of sector weightings across the
board.
Looking ahead, we will remain true to the Portfolio's objective and invest in
companies with long-term growth and income potential. Given the current
environment, it is best to continue pursuing a careful, selective stock
picking strategy. This means the Portfolio will include the stocks of large
established companies diversified over many industries. We believe this
strategy should produce a competitive return while providing our investors
with a smoother ride than the market in general.
Dan Smith
Portfolio Manager
Van Kampen American Capital Investment Advisory Corp.
<TABLE>
<CAPTION>
Top 10 Holdings by Market Value
As of 6/30/95
% of Portfolio
<S> <C>
Eastman Kodak Co. 2.09
Thermo Electron Corp. 1.94
AT&T Corp. 1.93
United Technologies Corp. 1.92
Automatic Data Processing Inc. 1.81
Triton Energy Corp. 1.72
James River Corp. 1.67
Procter & Gamble Co. 1.63
Merck & Co. Inc. 1.61
Federated Department Stores Inc. 1.58
</TABLE>
*Percentage based upon those stocks included in the Portfolio that are
classified as technology stocks by S&P.
Van Kampen Merritt Series Trust Growth and Income Portfolio
Portfolio of Investments
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Security
Description Shares Market Value
<S> <C> <C>
Common and Preferred Stock 93.5%
Aerospace & Defense 0.9%
Northrop Corp. 2,350 $ 122,494
----------
Automobile 2.6%
Borg Warner Automotive Inc. <F3> 5,300 151,050
Echlin Inc. 1,400 48,650
Exide Corp. 1,950 83,850
Lear Seating Corp. <F2> 750 17,156
Stewart & Stevenson Services Inc. 1,000 36,375
----------
337,081
----------
Banking 3.0%
BancOne Corp. 3,900 125,775
Bank of Boston Corp. 250 9,375
Bankamerica Corp. 2,975 156,559
Crestar Financial Corp. 2,000 98,000
----------
389,709
----------
Beverage, Food & Tobacco 6.7%
Coca Cola Co. 1,200 76,500
CPC International Inc. 1,000 61,750
Dean Foods Co. 3,300 92,400
McDonalds Corp. 2,600 101,725
Pepsico Inc. <F3> 400 18,250
Philip Morris Cos. Inc. 1,925 143,172
Ralston Purina Co. 3,100 158,100
Sara Lee Corp. 6,150 175,275
Sysco Corp. 1,500 44,250
----------
871,422
----------
Buildings & Materials 0.4%
Owens Corning Fiberglass Corp. <F2> 1,525 56,234
----------
Chemical 2.3%
Air Products & Chemicals Inc. 2,255 125,716
Praxair Inc. 2,600 65,000
Witco Corp. 3,450 111,263
----------
301,979
----------
Consumer Non-Durables 4.9%
Colgate Palmolive Co. 450 32,906
Eastman Kodak Co. 4,275 259,172
Gillette Co. 1,500 66,937
Nike Inc. 980 82,320
Procter & Gamble Co. 2,810 201,969
----------
643,304
----------
Diversified/Conglomerate Manufacturing 7.1%
Alumax Inc. <F2> 1,100 34,238
American Standard Cos. Inc. <F2> 4,600 125,925
Case Equipment Corp. 200 5,950
Corning Inc. 1,075 35,206
General Electric Co. 3,275 184,628
Illinois Tool Works Inc. 1,000 55,000
Service Corp. International 5,310 167,929
Thermo Electron Corp. <F2> 5,970 240,292
Trinity Industries Inc. 2,395 79,634
----------
928,802
----------
Diversified/Conglomerate Service 2.3%
Automatic Data Processing Inc. 3,580 225,093
PHH Corp. 1,650 73,425
----------
298,518
----------
Ecological 1.7%
Wheelabrator Technologies Inc. 5,400 83,025
WMX Technologies Inc. <F3> 4,635 131,518
----------
214,543
----------
Electronics 1.1%
Avnet Inc. 1,100 53,212
Litton Industries Inc. <F2> 1,650 60,844
National Semiconductor Corp. <F2> 850 23,588
----------
137,644
----------
Financial Services 10.0%
Capital One Financial Corp. 7,925 154,538
Citicorp 2,150 124,431
Debartolo Realty Corp. 3,000 43,875
Federal Home Loan Mortgage Corp. 2,460 169,125
General Reinsurance Corp. 800 107,100
Health & Retirement Property Trust 9,100 136,500
Healthcare Realty Trust Inc. 8,600 174,150
J.P. Morgan & Co. Inc. 2,200 154,275
TIG Holdings Inc. 3,500 80,500
Transamerica Corp. 2,000 116,500
Vornado Realty Trust 1,200 41,850
----------
1,302,844
----------
Grocery 0.7%
Fleming Cos. Inc. 1,350 35,775
Vons Cos. Inc. 3,000 60,375
----------
96,150
----------
Healthcare 3.6%
Baxter International Inc. 2,375 86,390
Lincare Holdings Inc. 2,300 61,094
Merck & Co. Inc. 4,080 199,920
Nellcor Inc. <F2> 1,200 54,000
Sybron International Corp. <F2> 200 7,975
Tenet Healthcare Corp. 3,850 55,344
----------
464,723
----------
Insurance 1.8%
ITT Corp. 1,145 134,537
Mid Ocean Ltd. <F3> 500 15,813
Reliance Group Holdings Inc. 11,900 77,350
----------
227,700
----------
Leisure 2.0%
Carnival Corp. 5,850 136,744
Hasbro Inc. 2,000 63,500
Mattel Inc. 350 9,100
Walt Disney Co. 900 50,062
----------
259,406
----------
Mining 1.1%
Cyprus Amax Minerals Co. 4,775 136,088
----------
Oil & Gas 7.1%
Amoco Corp. 2,520 167,895
Baker Hughes Inc. 3,900 79,950
Exxon Corp. 2,450 173,031
Mobil Corp. 1,750 168,000
Panhandle Eastern Corp. 3,850 93,844
Sonat Inc. 1,065 32,482
Triton Energy Corp. <F2> 4,600 213,325
----------
928,527
----------
Packaging & Container 0.5%
Bemis Inc. 2,400 62,400
----------
Paper 2.8%
Champion International Corp. 1,175 61,247
Fort Howard Corp. <F2> 6,325 89,341
James River Corp. 7,500 207,187
----------
357,775
----------
Pharmaceuticals 0.7%
Amgen Inc. <F2> 1,100 88,481
----------
Printing, Publishing & Broadcasting 2.3%
Omnicom Group 1,100 66,687
Time Warner Inc. 4,190 172,314
Tribune Co. 1,050 64,444
----------
303,445
----------
Retail 2.9%
Federated Department Stores Inc. 7,600 195,700
Nine West Group Inc. <F2> 1,450 52,925
Wal-Mart Stores Inc. <F3> 4,880 130,540
----------
379,165
----------
Technology 4.4%
Compaq Computer Corp. <F2> 1,900 86,212
International Business Machines 1,825 175,200
Microsoft Corp. 1,200 108,450
Motorola Inc. 1,950 130,894
Xerox Corp. 650 76,213
----------
576,969
----------
Telecommunications 10.0%
Airtouch Communications Inc. <F2> 2,250 64,125
Ameritech Corp. 2,900 127,600
AT & T Corp. 4,500 239,062
Cox Communications Inc. <F2> 3,750 72,656
DSC Communications Corp. <F2> 2,350 109,275
Frontier Corp. 2,625 63,000
MCI Communications Corp. 6,380 140,360
Nynex Corp. 3,050 122,763
Tele Communications Inc. <F2> 7,900 185,156
Viacom Inc. <F2> 3,900 180,863
----------
1,304,860
----------
Textiles 0.3%
Westpoint Stevens Inc. <F2> 2,500 44,688
----------
Transportation 0.7%
AMR Corp. <F2> 250 18,656
Burlington Northern Inc. - Preferred 975 65,813
----------
84,469
----------
Utilities 4.0%
American Power Conversion Corp. <F2> 3,000 68,625
Central & South West Corp. 3,840 100,800
DPL Inc. 3,350 74,119
Duke Power Co. 900 37,350
New England Electric Systems 1,770 61,065
Nipsco Inc. 2,400 81,600
Peco Energy Co. 3,550 98,068
----------
521,627
----------
Foreign 5.6%
Alcatel Alsthom Compagnie Generale d' Electricite
ADR (France) 6,200 112,375
Ericsson L M Telephone Co. - ADR (Sweden) 1,600 32,000
Hafslund Nycomed - ADR (Norway) 5,935 137,247
National Power PLC - ADR (UK) 4,800 59,400
News Corp. Ltd. - ADR (Australia) 2,800 63,350
Nokia Corp. - ADR (Finland) 1,500 89,437
Northern Telecom Ltd. (Canada) 3,242 118,333
Philips Electrics N.V. - ADR (Netherlands) 1,500 64,125
Powergen PLC - ADR (UK) 4,650 56,963
----------
733,230
----------
Total Common and Preferred Stock 12,174,277
Convertible Bonds 1.8%
United Technologies Corp. ($230,000 par, 0% coupon, 09/08/97
maturity, S&P rating NR) 238,050
----------
Total Long-Term Investments 95.3%
(Cost $12,017,593) <F1> 12,412,327
Repurchase Agreements 5.6%
UBS Securities, U.S. T-Note, $730,000 par, 5.625%
coupon, due 01/31/98, dated 06/30/95, to be sold on
07/03/95 at $726,369 726,000
Liabilities in Excess of Other Assets -0.9% (120,333)
----------
Net Assets 100% $ 13,017,994
----------
<FN>
<F1> At June 30, 1995, cost for federal income tax purposes is $12,017,593; the aggregate
gross unrealized appreciation is $676,913 and the aggregate gross unrealized depreciation
is $280,167, resulting in net unrealized appreciation including option transactions of
$396,746.
<F2> Non-income producing security as this stock currently does not declare dividends.
<F3> Assets segregated for open option transactions.
</FN>
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT SERIES TRUST GROWTH AND INCOME PORTFOLIO
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<CAPTION>
ASSETS:
<S> <C>
Investments, at Market Value (Cost $12,017,593) (Note 1) $ 12,412,327
Repurchase Agreements (Note 1) 726,000
Cash 287
Receivables:
Investments Sold 2,330,246
Dividends 34,288
Interest 123
Options at Market Value (Net premiums paid of $117,988) (Note 5) 120,000
Other 699
-----------------------
Total Assets 15,623,970
-----------------------
LIABILITIES:
Payables:
Investments Purchased 2,577,290
Fund Shares Repurchased 19,323
Investment Advisory Fee (Note 2) 6,275
Accrued Expenses 3,088
-----------------------
Total Liabilities 2,605,976
-----------------------
NET ASSETS $ 13,017,994
-----------------------
NET ASSETS CONSIST OF:
Paid In Surplus (Note 3) $ 11,960,135
Accumulated Net Realized Gain on Investments 661,113
Net Unrealized Appreciation on Investments 396,746
-----------------------
NET ASSETS $ 13,017,994
-----------------------
NET ASSET VALUE PER SHARE ($13,017,994 divided by 1,102,470 shares outstanding; an
unlimited number of shares without par value are authorized) (Note 3)
$ 11.81
-----------------------
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT SERIES TRUST GROWTH AND INCOME PORTFOLIO
<TABLE>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends (Net of foreign withholding taxes of $2,924) $ 143,560
Interest 19,916
---------------------
Total Income 163,476
---------------------
EXPENSES:
Investment Advisory Fee (Note 2) 34,966
Custody 20,192
Trustees Fees and Expenses (Note 2) 8,411
Audit 6,915
Legal (Note 2) 3,719
Other 1,287
---------------------
Total Expenses 75,490
Less Expenses Reimbursed by Cova Life 34,696
---------------------
Net Expenses 40,794
---------------------
NET INVESTMENT INCOME $ 122,682
---------------------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Realized Gain/Loss on Investments:
Proceeds from Sales $ 13,976,238
Cost of Securities Sold (12,996,783)
---------------------
Net Realized Gain on Investments (Including realized gain on closed and expired option
transactions of $114,995 and realized loss on futures transactions of $112,173)
979,455
---------------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period (224,826)
End of the Period (Including unrealized appreciation on open option transactions of
$2,012) 396,746
---------------------
Net Unrealized Appreciation on Investments During the Period 621,572
---------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS $ 1,601,027
---------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,723,709
---------------------
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT SERIES TRUST GROWTH AND INCOME PORTFOLIO
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1995 and
the Year Ended December 31, 1994 (Unaudited)
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
-------------------------- --------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income $ 122,682 $ 337,412
Net Realized Gain/Loss on Investments 979,455 (318,342)
Net Unrealized Appreciation/Depreciation
on Investments During the Period 621,572 (483,559)
-------------------------- --------------------------
Change in Net Assets from Operations 1,723,709 (464,489)
Distributions from Net Investment Income (131,094) (329,231)
Distributions from Net Realized Gain on Investments 0 (8,412)
-------------------------- --------------------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES 1,592,615 (802,132)
-------------------------- --------------------------
FROM CAPITAL TRANSACTIONS (Note 3):
Proceeds from Shares Sold 1,078,439 6,301,797
Net Asset Value of Shares Issued
Through Dividend Reinvestment 131,094 337,642
Cost of Shares Repurchased (726,090) (1,423,903)
-------------------------- --------------------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 483,443 5,215,536
-------------------------- --------------------------
TOTAL INCREASE IN NET ASSETS 2,076,058 4,413,404
NET ASSETS:
Beginning of the Period 10,941,936 6,528,532
-------------------------- --------------------------
End of the Period (Including undistributed net investment income
of $0 and $8,412, respectively) $ 13,017,994 $ 10,941,936
-------------------------- --------------------------
</TABLE>
See Notes to Financial Statements
Van Kampen Merritt Series Trust Growth and Income Portfolio
Financial Highlights
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated (Unaudited).
<TABLE>
<CAPTION>
May 1, 1992
Six Months (Commencement of
Ended Investment
June 30, Year Ended December 31, Operations) to
1995 1994 1993 December 31, 1992
---------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.307 $11.170 $10.282 $10.000
---------- --------- -------- ------------------
Net Investment Income .112 .331 .182 .125
Net Realized and Unrealized Gain/Loss on Investments 1.509 (.863) 1.371 .444
---------- --------- -------- ------------------
Total from Investment Operations 1.621 (.532) 1.553 .569
---------- --------- -------- ------------------
Less:
Distributions from Net Investment Income .120 .323 .182 .125
Distributions from Net Realized Gain on Investments .000 .008 .483 .162
---------- --------- -------- ------------------
Total Distributions .120 .331 .665 .287
---------- --------- -------- ------------------
Net Asset Value, End of Period $11.808 $10.307 $11.170 $10.282
---------- --------- -------- ------------------
Total Return* (Non-Annualized) 15.71% (4.54%) 15.01% 5.67%
Net Assets at End of Period (In millions) $13.0 $10.9 $6.5 $2.6
Ratio of Expenses to Average Net Assets*
(Annualized) .70% .70% .69% .70%
Ratio of Net Investment Income to Average Net Assets*
(Annualized) 2.08% 3.47% 1.84% 2.27%
Portfolio Turnover 114.76% 326.01% 135.92% 99.93%
*If certain expenses had not been assumed by Cova Life,
total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets (Annualized) 1.28% 1.49% 2.05% 3.69%
Ratio of Net Investment Income to Average Net Assets
(Annualized) 1.50% 2.68% .47% (.73%)
</TABLE>
See Notes to Financial Statements
VAN KAMPEN MERRITT
SERIES TRUST GROWTH AND INCOME PORTFOLIO
Notes of Financial Statements
June 30, 1995 (Unaudited)
1. Significant Accounting Policies
Van Kampen Merritt Series Trust (the "Trust"), under which the Growth and
Income Portfolio (the "Fund") is organized as a separate sub-trust, is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940, as amended. The Trust commenced operations on
December 11, 1989. The Fund commenced investment operations on May 1, 1992.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation - Investments in securities listed on a securities
exchange are valued at their sale price as of the close of such securities
exchange. Investments in securities not listed on a securities exchange are
valued based on their last quoted bid price or, if not available, their fair
value as determined by the Board of Trustees. Fixed income investments are
stated at values using market quotations or, if such valuations are not
available, 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.
C. Investment Income - Dividend income is recorded on the ex-dividend date
and interest income is recorded on an accrual basis.
D. Federal Income Taxes - It is the Fund'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 Fund 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 Fund had an accumulated capital loss
carryforward for tax purposes of $320,677 which will expire on December 31,
2002. Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of timing differences related to open option
and futures transactions at year end.
E. Distribution of Income and Gains - The Fund declares and pays dividends
semi-annually from net investment income. Net realized gains, if any, are
distributed annually. Distributions are automatically reinvested in Fund
shares. Distributions from net realized gains for book purposes may include
short-term capital gains and gains on option and futures transactions. All
short-term capital gains and a portion of option and futures gains are
included in ordinary income for tax purposes.
2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
Average Net Assets % Per Annum
- ------------------------------- ------------
<S> <C>
First $500 million .60 of 1%
Over $500 million .50 of 1%
</TABLE>
Cova Variable Annuity Account One is a separate investment account offered
by Cova Financial Services Life Insurance Co. ("Cova Life"). At June 30,
1995, Cova Variable Annuity Account One owned all shares of beneficial
interest of the Fund.
Certain officers and trustees of the Fund are also officers and directors
of Van Kampen American Capital Distributors, Inc. or its affiliates
(collectively "VKAC"). The Fund does not compensate its officers or trustees
who are officers of VKAC.
The Fund has implemented a retirement plan which covers those trustees who
are not officers of VKAC. Due to the current size of the Fund, the trustees
have waived their annual fee and therefore, the Fund has no liability under
the retirement plan.
For the six months ended June 30, 1995, the Fund recognized expenses of
approximately $4,300 representing VKAC's cost of providing accounting and
legal services.
3. Capital Transactions
At June 30, 1995, and December 31, 1994, paid in surplus aggregated
$11,960,135 and $11,476,692, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year
Six Months Ended
Ended December 31,
June 30, 1995 1994
-------------- ------------
<S> <C> <C>
Beginning Shares 1,061,698 584,482
-------------- ------------
Shares Sold 96,408 576,486
Shares Issued through
Dividend Reinvestment 11,100 32,783
Shares Repurchased (66,736) (132,053)
-------------- ------------
Net Increase in Shares
Outstanding 40,772 477,216
-------------- ------------
Ending Shares 1,102,470 1,061,698
-------------- ------------
</TABLE>
VAN KAMPEN MERRITT
SERIES TRUST GROWTH AND INCOME PORTFOLIO
Notes of Financial Statements
June 30, 1995 (Unaudited)
4. Investment Transactions
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the six months ended June 30, 1995, were $14,026,334 and
$12,996,783, respectively.
5. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as
to attempt to protect the Fund against possible changes in the market value of
its portfolio or generate potential gain. All of the Fund's portfolio
holdings, including derivative instruments, are marked to market each day with
the change in value reflected in the unrealized appreciaiton/depreciation on
investments. Upon disposition, a realized gain or loss is recognized
accordingly, except for exercised option contracts where the recognition of
gain or loss is postponed until the disposal of the security underlying the
option contract.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. Option Contracts - An option contract gives the buyer the right, but not
the obligation to buy (call) or sell (put) an underlying item at a fixed
exercise price during a specified period. These contracts are generally used
by the Fund to provide the return of an index without purchasing all of the
securities underlying the index or as a substitute for purchasing or selling
specific securities.
Transactions in options for the six months ended
June 30, 1995, were as follows:
<TABLE>
<CAPTION>
Contracts Premium
---------- ----------
<S> <C> <C>
Outstanding at
December 31, 1994 4,000 $ 491,415
Options Written and
Purchased (Net) 1,060 (155,288)
Options Terminated in Closing
Transactions (Net) (46) 20,938
Options Expired (Net) (2,000) (89,235)
Options Exercised (Net) (2,054) (385,818)
---------- ----------
Outstanding at
June 30, 1995 960 ($117,988)
---------- ----------
</TABLE>
The related futures contracts of the outstanding option transactions as of
June 30, 1995, and the descriptions and market values are as follows:
<TABLE>
<CAPTION>
Expiration
Month/ Market
Exercise Value
Contracts Price of Options
--------- ----------- ------------
<S> <C> <C> <C>
S&P 500
Index Futures
Purchased Call 240 Dec/545 $ 504,000
Purchased Put 240 Dec/550 405,000
Written Call 240 Dec/550 (432,000)
Written Put 240 Dec/545 (357,000)
--------- ------------
960 $120,000
--------- ------------
</TABLE>
B. Futures Contracts - A futures contract is an agreement involving
the delivery of a particular asset on a specified future date at an
agreed upon price. The Fund generally invests in financial and stock
index futures. These contracts are generally used to provide the
return of an index without purchasing all of the securities
underlying the index or as a substitute for purchasing or selling
specific securities.
The fluctuation in market value of the contracts is settled
daily through a cash margin account.
Transactions in futures contracts for the six months ended
June 30, 1995, were as follows:
<TABLE>
<CAPTION>
Contracts
---------
<S> <C>
Outstanding at
December 31, 1994 0
Futures Opened 2,061
Futures Closed (2,061)
---------
Outstanding at
June 30, 1995 0
---------
</TABLE>
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