<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Portfolio of Investments............... 4
Statement of Assets and Liabilities.... 7
Statement of Operations................ 8
Statement of Changes in Net Assets..... 9
Financial Highlights................... 10
Notes to Financial Statements.......... 11
Independent Auditors' Report........... 14
Dividend Reinvestment Plan............. 15
</TABLE>
Page 1
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
October 12, 1995
[PHOTO]
Dennis J. McDonnell and Don G. Powell
Dear Shareholder:
The first eight months of 1995 have been very positive for most investors.
Both the fixed-income and stock markets have made considerable gains for the
period ended August 31, 1995.
This year serves as a reminder of just how quickly markets can move and how
difficult it can be to predict the timing of those movements. Moreover, this
year reinforces the importance of maintaining a long-term perspective and
reaffirms the principle that it is time---not timing---that leads to
investment success.
Economic Overview
Due in large part to the Federal Reserve Board's efforts to tighten monetary
supply in 1994, the economy has slowed significantly this year. Evidence of
this guided slowdown was reflected in gross domestic product for the second
quarter, which grew at an annual rate of 1.3 percent, substantially lower than
its first quarter rate of 2.7 percent and fourth quarter 1994 rate of 5.1
percent. While other key economic data, including unemployment rates
and housing starts, have shown mixed signs during recent months, the general
trends for the year continue to support a "soft landing" scenario.
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed its trend of raising interest rates and lowered short-term rates by
0.25 percent on July 6. Financial markets, perceiving the Fed's monetary
initiatives had taken hold without driving the economy into a recession, rallied
through much of the year. With slowing growth, interest rates declined and the
value of many fixed-income investments rose (bond yields and prices move in the
opposite direction). For example, the yield on 30-year Treasury securities fell
from 7.88 percent at the end of December to 6.66 percent at the end of August,
while its price rose more than 14 percent. Likewise, the yield on the Bond
Buyer's Municipal Bond Index fell from 7.28 percent at the end of December to
6.30 percent at the end of August. Although municipal bond yields have
declined, they are still offering competitive yields, particularly to those
investors in higher tax brackets.
Performance Summary
The Trust produced a tax-exempt distribution rate of 6.20 percent<F3>,
based on the closing stock price of $15.875 per common share on August 31,
1995. Since income from the Trust is exempt from federal and state income
tax, it is also important to compare the Trust's distribution
(Continued on page two)
Page 2
rate to an equivalent taxable rate. For example, for Ohio residents in the
combined marginal tax bracket of 40.8 percent, the Trust's distribution rate
represents a yield equivalent to a taxable investment earning 10.47
percent<F4>. Additionally, for the one-year period ended August 31, 1995,
the Trust generated a total return at market price of 7.34 percent<F1>,
which includes reinvestment of dividends.
One element influencing the performance of the municipal market this year has
been the ongoing debate over tax reform. While there has been varied speculation
about the impact of reform, no one is certain about what will happen.
Consequently, the municipal market may continue to experience short-term market
fluctuations as various proposals come to the forefront. We will keep a close
watch over any new developments and evaluate the potential impact they may have
on your investment in the Trust.
Outlook
We believe the Fed will move cautiously before it continues to lower
short-term rates, waiting for further signs that the economy has settled into a
slow growth pattern. We anticipate the economy will grow at an annual rate
between 2 and 3 percent in the second half of the year, and that inflation will
run at an annualized rate between 3.1 and 3.3 percent. Based upon a generally
modest growth and low inflation outlook, we believe fixed-income
markets---including municipal bonds---will continue to make positive gains.
As interest rates continue to fall in response to further easing by the Fed,
we believe yields on short-term municipal bonds will continue to move
significantly lower than long-term municipal bonds. Lower short-term rates
typically translate into lower leveraging costs for the Trust, which provides
increased opportunities for higher earnings over time. We believe the Trust's
portfolio is well positioned to take advantage of a declining and
sustained short-term interest rate environment.
Once again, it is important to remember that financial markets will inevitably
experience highs and lows, but by maintaining a long-term investment
perspective, you may ride the ups and downs of the markets more easily as you
pursue your investment goals.
Thank you for your continued confidence in your investment with Van Kampen
American Capital and for the privilege of working with you in seeking to reach
your financial goals.
Sincerely,
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Page 3
- --------------------------------------------------------------------------------
Performance Results for the Period Ended August 31, 1995
Van Kampen Merritt Ohio Quality Municipal Trust
(NYSE Ticker Symbol VOQ)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Total Returns
One-year total return based on market price<F1>......................................... 7.34%
One-year total return based on NAV<F2>.................................................. 8.74%
Distribution Rates
Distribution rate as a % of initial offer common stock price<F3>....................... 6.56%
Taxable-equivalent distribution rate as a % of initial offer common stock price<F4>.... 11.08%
Distribution rate as a % of closing common stock price<F3>............................. 6.20%
Taxable-equivalent distribution rate as a % of closing common stock price<F4>.......... 10.47%
Share Valuations
Net asset value........................................................................ $ 16.60
Closing common stock price............................................................. $15.875
One-year high common stock price (07/06/95)............................................ $16.625
One-year low common stock price (11/22/94)............................................. $13.875
Preferred share rate<F5>............................................................... 3.825%
<FN>
<F1> Total return based on market price assumes an investment at the market price at
the beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing stock price at the end of the period indicated.
<F2> Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
<F3> Distribution rate represents the monthly annualized distributions of the Trust
at the end of the period and not the earnings of the Trust.
<F4> The taxable-equivalent distribution rate is calculated assuming a 40.8%
combined federal and state tax bracket, which takes into consideration the
deductibility of individual state taxes paid.
<F5> See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
</TABLE>
Page 4
- --------------------------------------------------------------------------------
Portfolio of Investments
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds
Ohio 84.8%
$ 2,750 Akron, OH Wtrwrks Rev Mtg (AMBAC Insd) ............... 6.550% 03/01/12 $ 2,927,237
2,100 Alliance, OH Swr Sys Rev Rfdg (AMBAC Insd) ........... 6.000 10/15/10 2,184,546
500 Athens Cnty, OH Cmnty Mental Hlth Rev West Cent Proj
Ser 1 ................................................ 6.900 06/01/10 527,500
2,500 Carroll Cnty, OH Hosp Impt Rev Timken Mercy Med Cent
(Prerefunded @ 12/01/01) ............................. 7.125 12/01/18 2,887,250
3,250 Cincinnati & Hamilton Cnty, OH Port Auth Indl Dev Rev
Convention Garage Rfdg ............................... 7.450 06/01/10 3,390,497
4,000 Cincinnati & Hamilton Cnty, OH Port Auth Indl Dev Rev
Sixth Street Garage Rfdg ............................. 7.450 06/01/10 4,159,040
2,500 Cleveland, OH Arpt Sys Rev Ser A (MBIA Insd) ......... 7.375 01/01/10 2,755,500
500 Cleveland, OH Pub Pwr Sys Rev Impt 1st Mtg Ser A
(MBIA Insd) .......................................... 7.000 11/15/17 556,125
1,000 Cleveland, OH Pub Pwr Sys Rev Impt 1st Mtg Ser B Rfdg
(MBIA Insd) .......................................... 7.000 11/15/17 1,106,050
1,000 Colmbus, OH Wtr Sys Rev Rfdg ......................... 6.375 11/01/10 1,047,470
500 Cuyahoga Cnty, OH Hosp Rev Hlth Cleveland
Fairview Genl Hosp & Lutheran Med Cent ............... 6.300 08/15/15 498,855
1,000 Cuyahoga Cnty, OH Hosp Rev Meridia Hlth Sys .......... 7.000 08/15/09 1,057,950
3,000 Cuyahoga Cnty, OH Hosp Rev Meridia Hlth Sys <F3> ..... 7.000 08/15/23 3,148,800
1,000 Delaware, OH City Sch Dist (FGIC Insd) <F2> .......... 5.750 12/01/20 986,780
3,000 Erie Cnty, OH Hosp Impt Rev Firelands Cmnty Hosp Proj
Rfdg ................................................. 6.750 01/01/08 3,135,540
4,000 Erie Cnty, OH Hosp Impt Rev Firelands Cmnty Hosp Proj
Rfdg ................................................. 6.750 01/01/15 4,104,440
720 Fairfield, OH City Sch Dist (FGIC Insd) .............. 7.100 12/01/08 831,535
2,500 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev
Antic Bonds Rfdg (MBIA Insd) ......................... 5.800 12/01/13 2,501,500
7,500 Gateway Econ Dev Corp Gtr Cleveland, OH Excise Tax
Rev Sr Lien Ser A (FSA Insd) ......................... 6.875 09/01/05 8,254,725
3,000 Hamilton Cnty, OH Hlth Sys Rev Providence Hosp
Franciscan Rfdg ...................................... 6.875 07/01/15 3,006,480
2,500 Hamilton Cnty, OH Swr Sys Rev & Impt Ser A Rfdg (FGIC
Insd) ................................................ 5.500 12/01/17 2,406,675
2,000 Lorain, OH Hosp Impt Rev Lakeland Cmnty Hosp Inc ..... 6.500 11/15/12 2,035,740
1,400 Mahoning Cnty, OH Hosp Fac Rev YHA Inc Proj Ser A
Rfdg (MBIA Insd) ..................................... 7.000 10/15/08 1,561,602
</TABLE>
See Notes to Financial Statements
Page 5
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Ohio (Continued)
$ 3,650 Ohio Hsg Fin Agy Mtg Rev Residential Ser A2 (GNMA
Collateralized) ...................................... 6.625% 03/01/26 $ 3,737,016
1,735 Ohio Hsg Fin Agy Single Family Mtg Rev Ser A (GNMA
Collateralized) ...................................... 7.650 03/01/29 1,810,993
5,550 Ohio Hsg Fin Agy Single Family Mtg Rev ............... * 01/15/15 1,759,073
5,850 Ohio Hsg Fin Agy Single Family Mtg Rev (Prerefunded @
7/15/14) ............................................. * 01/15/15 1,833,566
995 Ohio Hsg Fin Agy Single Family Mtg Rev Ser B (GNMA
Collateralized) ...................................... 8.100 12/15/08 1,050,262
2,350 Ohio St Air Quality Dev Auth Rev Ashland Oil Inc Proj
Rfdg ................................................. 6.850 04/01/10 2,422,521
3,500 Ohio St Bldg Auth St Fac Adult Correctional Ser A
(MBIA Insd) .......................................... 5.950 10/01/14 3,565,205
2,000 Ohio St Bldg Auth St Fac James Rhodes Ser A Rfdg ..... 6.250 06/01/11 2,055,320
1,230 Ohio St Dept Tran Ctfs Partn Panhandle Rail Line Proj
(Cap Guar Insd) ...................................... 6.500 04/15/12 1,301,340
645 Ohio St Econ Dev Rev OH Enterprise Brd Fd Ser 9 ...... 7.625 12/01/11 694,646
3,000 Ohio St Univ Rev Genl Rcpts
(Prerefunded @ 12/01/98) ............................. 7.150 12/01/09 3,325,650
1,500 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev Wtr Ctl Ln
Fd St Match (MBIA Insd) .............................. 6.000 12/01/11 1,538,055
1,650 Toledo-Lucas Cnty, OH Port Auth Port Rev Fac Cargill
Inc Proj Rfdg ........................................ 7.250 03/01/22 1,805,480
3,000 University Cincinnati, OH Genl Rcpts Ser II
(Prerefunded @ 06/01/99) ............................. 7.100 06/01/10 3,343,350
3,000 Westerville, OH Minerva Park & Blendon Jt Twp Hosp
Dist Rev Saint Anns Hosp Ser B Rfdg (AMBAC Insd) ..... 6.800 09/15/06 3,347,910
------------
88,662,224
------------
Guam 1.0%
1,000 Guam Arpt Auth Rev Ser B ............................. 6.700 10/01/23 1,010,860
------------
Puerto Rico 11.4%
5,000 Puerto Rico Comwlth Pub Impt Rfdg .................... 3.000 07/01/06 3,989,650
1,815 Puerto Rico Elec Pwr Auth Pwr Rev Ser P .............. 7.000 07/01/11 1,974,593
4,500 Puerto Rico Elec Pwr Auth Pwr Rev Ser P .............. 7.000 07/01/21 4,933,530
1,000 Puerto Rico Elec Pwr Auth Pwr Rev Ser T .............. 6.375 07/01/24 1,028,650
------------
11,926,423
------------
</TABLE>
See Notes to Financial Statements
Page 6
- --------------------------------------------------------------------------------
Portfolio of Investments (Continued)
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Par
Amount Market
(000) Description Coupon Maturity Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Virgin Islands 2.0%
$ 2,000 Virgin Islands Pub Fin Auth Rev Matching
Fd Ln Nts Ser A Rfdg .................................. 7.250% 10/01/18 $ 2,114,160
------------
Total Long-Term Investments 99.2%
(Cost $96,956,030) <F1>........................................................... 103,713,667
Other Assets in Excess of Liabilities 0.8%......................................... 881,204
------------
Net Assets 100%.................................................................... $104,594,871
------------
------------
*Zero coupon bond
<FN>
<F1> At August 31, 1995, cost for federal income tax purposes is $96,956,030;
the aggregate gross unrealized appreciation is $6,757,637 and the
aggregate gross unrealized depreciation is $0, resulting in net unrealized
appreciation of $6,757,637.
<F2> Securities purchased on a when issued or delayed delivery basis.
<F3> Assets segregated as collateral for when issued or delayed delivery
purchase commitments.
The following table summarizes the portfolio composition at August 31, 1995,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.
</TABLE>
<TABLE>
<CAPTION>
Portfolio Composition by Credit Quality
<S> <C>
AAA........... 47.2%
AA............ 4.7
A............. 27.6
BBB........... 6.2
Non-Rated..... 14.3
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements
Page 7
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments, at Market Value (Cost $96,956,030) (Note 1).................................... $ 103,713,667
Cash........................................................................................ 329,357
Receivables:
Interest................................................................................. 1,863,743
Investments Sold......................................................................... 10,202
Unamortized Organizational Expenses (Note 1)................................................ 6,437
---------------
Total Assets........................................................................... 105,923,406
---------------
Liabilities:
Payables:
Investments Purchased.................................................................... 957,264
Income Distributions - Common and Preferred Shares....................................... 154,483
Investment Advisory Fee (Note 2)......................................................... 61,461
Administrative Fee (Note 2).............................................................. 17,560
Accrued Expenses............................................................................ 137,767
---------------
Total Liabilities...................................................................... 1,328,535
---------------
Net Assets.................................................................................. $ 104,594,871
---------------
---------------
Net Assets Consist of:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 700 issued with
liquidation preference of $50,000 per share) (Note 5).................................... $ 35,000,000
---------------
Common Shares ($.01 par value with an unlimited number of shares authorized,
4,192,971 shares issued and outstanding) (Note 3)........................................ 41,930
Paid in Surplus ............................................................................ 61,851,572
Net Unrealized Appreciation on Investments.................................................. 6,757,637
Accumulated Undistributed Net Investment Income............................................. 971,043
Accumulated Net Realized Loss on Investments................................................ (27,311)
---------------
Net Assets Applicable to Common Shares................................................. 69,594,871
---------------
Net Assets.................................................................................. $ 104,594,871
---------------
---------------
Net Asset Value Per Common Share ($69,594,871 divided by 4,192,971 shares outstanding)...... $ 16.60
---------------
---------------
</TABLE>
See Notes to Financial Statements
Page 8
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest........................................................ $ 6,581,837
---------------
Expenses:
Investment Advisory Fee (Note 2)................................ 709,571
Administrative Fee (Note 2)..................................... 202,734
Preferred Share Maintenance (Note 5)............................ 98,987
Trustees Fees and Expenses (Note 2)............................. 19,802
Legal (Note 2).................................................. 9,820
Amortization of Organizational Expenses (Note 1)................ 5,993
Other........................................................... 158,388
---------------
Total Expenses............................................. 1,205,295
---------------
Net Investment Income........................................... $ 5,376,542
---------------
---------------
Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales.......................................... $ 24,081,084
Cost of Securities Sold...................................... (24,061,623)
---------------
Net Realized Gain on Investments ............................... 19,461
---------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period...................................... 5,103,793
End of the Period............................................ 6,757,637
---------------
Net Unrealized Appreciation on Investments During the Period.... 1,653,844
---------------
Net Realized and Unrealized Gain on Investments................. $ 1,673,305
---------------
---------------
Net Increase in Net Assets from Operations...................... $ 7,049,847
---------------
---------------
</TABLE>
See Notes to Financial Statements
Page 9
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
For the Years Ended August 31, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1995 August 31, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................................. $ 5,376,542 $ 5,403,893
Net Realized Gain/Loss on Investments.............................. 19,461 (46,774)
Net Unrealized Appreciation/Depreciation on Investments
During the Period............................................... 1,653,844 (4,959,268)
--------------- ---------------
Change in Net Assets from Operations .............................. 7,049,847 397,851
--------------- ---------------
Distributions from Net Investment Income:
Common Shares................................................... (4,158,197) (4,120,921)
Preferred Shares................................................ (1,379,213) (871,172)
--------------- ---------------
(5,537,410) (4,992,093)
--------------- ---------------
Distributions from Net Realized Gain on Investments:
Common Shares................................................... -0- (379,854)
Preferred Shares................................................ -0- (76,319)
--------------- ---------------
-0- (456,173)
--------------- ---------------
Total Distributions................................................ (5,537,410) (5,448,266)
--------------- ---------------
Net Change in Net Assets from Investment Activities................ 1,512,437 (5,050,415)
From Capital Transactions (Note 3):
Value of Common Shares Issued Through Dividend Reinvestment......... 74,619 -0-
--------------- ---------------
Total Increase/Decrease in Net Assets.............................. 1,587,056 (5,050,415)
Net Assets:
Beginning of the Period............................................ 103,007,815 108,058,230
--------------- ---------------
End of the Period (Including undistributed net investment income
of $971,043 and $1,131,911, respectively)....................... $ 104,594,871 $ 103,007,815
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Financial Statements
Page 10
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 27, 1991
(Commencement
Year Ended August 31 of Investment
----------------------------- Operations) to
1995 1994 1993 August 31, 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period <F1>........ $ 16.239 $ 17.445 $ 15.988 $ 14.748
---------- ----------- ---------- ----------
Net Investment Income............... 1.275 1.290 1.291 1.006
Net Realized and Unrealized
Gain/Loss on Investments......... .397 (1.195) 1.442 1.175
---------- ----------- ---------- ----------
Total from Investment Operations....... 1.672 .095 2.733 2.181
---------- ----------- ---------- ----------
Less:
Distributions from Net
Investment Income:
Paid to Common Shareholders....... .984 .984 .983 .731
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.......... .329 .208 .201 .210
Distributions from Net Realized
Gain on Investments:
Paid to Common Shareholders....... -0- .091 .072 -0
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.......... -0- .018 .020 -0
---------- ----------- ---------- ----------
Total Distributions.................... 1.313 1.301 1.276 .941
---------- ----------- ---------- ----------
Net Asset Value, End of the Period..... $ 16.598 $ 16.239 $ 17.445 $ 15.988
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Market Price Per Share
at End of the Period................ $ 15.875 $ 15.750 $ 17.250 $ 16.250
Total Investment Return at Market
Price (Non-Annualized) <F2>......... 7.34% (2.54%) 13.17% 13.59%
Total Return at Net Asset
Value (Non-Annualized) <F3>......... 8.74% (0.79%) 16.26% 11.78%
Net Assets at End of the Period
(In millions)....................... $ 104.6 $ 103.0 $ 108.1 $ 101.8
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares (Annualized).......... 1.81% 1.82% 1.72% 1.79%
Ratio of Expenses to Average
Net Assets (Annualized)............. 1.19% 1.22% 1.14% 1.22%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (Annualized) <F4>..... 6.00% 6.39% 6.61% 5.83%
Portfolio Turnover..................... 24.17% 0.27% 18.41% 42.70%
<FN>
<F1> Net asset value at September 27, 1991, is adjusted for common
and preferred share offering costs of $.252 per common share.
<F2> Total investment return at market price reflects the change in market
value of the common shares for the period indicated with reinvestment of
dividends in accordance with the Trust's dividend reinvestment plan.
<F3> Total return at net asset value (NAV) reflects the change in the value of
the Trust's asset with reinvestment of dividends based upon NAV.
<F4> Net investment income is adjusted for common share equivalent of
distributions paid to preferred shareholders.
</TABLE>
See Notes to Financial Statements
Page 11
- --------------------------------------------------------------------------------
Notes to Financial Statements
August 31, 1995
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen Merritt Ohio Quality Municipal Trust (the "Trust") is registered as a
non-diversified closed-end management investment company under the Investment
Company Act of 1940, as amended. The Trust commenced investment operations on
September 27, 1991.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements.
A. Security Valuation---Investments are stated at value using market quotations
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 Trust may purchase and sell securities on a "when issued" or
"delayed delivery" basis, with settlement to occur at a later date. The value
of the security so purchased is subject to market fluctuations during this
period. The Trust will maintain, in a segregated account with its custodian,
assets having an aggregate value at least equal to the amount of the when
issued or delayed delivery purchase commitments until payment is made.
C. Investment Income---Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. Organizational Expenses---The Trust has reimbursed Van Kampen American
Capital Distributors, Inc. or its affiliates (collectively "VKAC") for costs
incurred in connection with the Trust's organization and initial registration
the amount of $30,000. These costs are being amortized on a straight line
basis over the 60-month period ending September 26, 1996. Van Kampen American
Capital Investment Advisory Corp. (the "Adviser") has agreed that in the event
any of the initial shares of the Trust originally purchased by VKAC are
redeemed during the amortization period, the Trust will be reimbursed for any
unamortized organizational expenses in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
E. Federal Income Taxes---It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substan-
Page 12
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
August 31, 1995
- --------------------------------------------------------------------------------
tially all of its taxable income to its shareholders. Therefore, no provision
for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At August 31, 1995, the Trust had an accumulated capital loss
carry forward for tax purposes of $27,311, which will expire on August 31, 2003.
Net realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of post October 31 losses which may not be recognized for
tax purposes until the first day of the following fiscal year.
F. Distribution of Income and Gains---The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. 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 Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .70% of the average net assets of the Trust. In addition, the Trust
will pay a monthly administrative fee to VKAC, the Trust's Administrator, at an
annual rate of .20% of the average net assets of the Trust. The administrative
services provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the year ended August 31, 1995, the Trust recognized expenses of
approximately $14,400 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors of
the Adviser and VKAC. The Trust does not compensate its officers or trustees who
are officers of the Adviser or VKAC.
Page 13
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Notes to Financial Statements (Continued)
August 31, 1995
- --------------------------------------------------------------------------------
The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. The Trust's liability under the
deferred compensation and retirement plans at August 31, 1995, was approximately
$22,800.
At August 31, 1995, VKAC owned 6,700 common shares of the Trust.
3. Capital Transactions
At August 31, 1995 and 1994, paid in surplus related to common shares aggregated
$61,851,572 and $61,777,003, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1995 August 31, 1994
- ----------------------------------------------------------
<S> <C> <C>
Beginning Shares........ 4,188,021 4,188,021
Shares Issued Through
Dividend Reinvestment... 4,950 -0
--------------- ---------------
Ending Shares........... 4,192,971 4,188,021
--------------- ---------------
--------------- ---------------
</TABLE>
4. Investment Transactions
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended August 31, 1995, were $25,284,988 and
$24,061,623, respectively.
5. Preferred Shares
The Trust has outstanding 700 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every 28 days through an
auction process. The rate in effect on August 31, 1995 was 3.825%. During the
year ended August 31, 1995, the rates ranged from 2.96% to 5.00%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests, and the APS are subject to
mandatory redemption if the tests are not met.
Page 14
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Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Van Kampen Merritt Ohio Quality Municipal Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Ohio Quality Municipal Trust (the "Trust"), including the
portfolio of investments, as of August 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Merritt Ohio Quality Municipal Trust as of August 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
October 11, 1995
Page 15
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Dividend Reinvestment Plan
- --------------------------------------------------------------------------------
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust Company,
as your Plan Agent, will automatically invest your dividends and capital gains
distributions in Common Shares of the Trust for your account.
How to Participate
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
How the Plan Works
Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
Costs of the Plan
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for
reinvesting dividends or capital gains distributions, except for certain
brokerage commissions, as described above.
Tax Implications
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of divi-
dends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
Right to Withdraw
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
One Parkview Plaza, Oakbrook Terrace, IL 60181
Attn: Closed-End Funds
Page 16
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Funds Distributed by Van Kampen American Capital
- --------------------------------------------------------------------------------
GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund
THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.
Page 17
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Van Kampen Merritt Ohio Quality Municipal Trust
- --------------------------------------------------------------------------------
Officers and Trustees
Don G. Powell*
Chairman and Trustee
Dennis J. McDonnell*
President and Trustee
David C. Arch
Trustee
Rod Dammeyer
Trustee
Howard J Kerr
Trustee
Theodore A. Myers
Trustee
Hugo F. Sonnenschein
Trustee
Wayne W. Whalen*
Trustee
Peter W. Hegel*
Vice President
Ronald A. Nyberg*
Vice President and Secretary
Edward C. Wood, III*
Vice President and Treasurer
Scott E. Martin*
Assistant Secretary
Weston B. Wetherell*
Assistant Secretary
Nicholas Dalmaso*
Assistant Secretary
John L. Sullivan*
Controller
Steven M. Hill*
Assistant Treasurer
Investment Adviser
Van Kampen American Capital
Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Custodian and
Transfer Agent
State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Independent Auditors
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
*"Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen American Capital Distributors, Inc., 1995 All rights reserved.
SM denotes a service mark of Van Kampen American Capital Distributors, Inc.
