<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 8
Statement of Operations.......................... 9
Statement of Changes in Net Assets............... 10
Financial Highlights............................. 11
Notes to Financial Statements.................... 12
Report of Independent Accountants................ 15
Dividend Reinvestment Plan....................... 16
</TABLE>
VOV ANR 12/97
<PAGE> 2
LETTER TO SHAREHOLDERS
December 4, 1997
Dear Shareholder,
In the past year, we have been
participants in and witnesses to two
mergers that we believe have positioned
our company at the forefront of the
financial industry's evolution. Our
latest announcement continues our [PHOTO]
forward progress. I am pleased to
announce that Philip N. Duff, formerly
the chief financial officer of Morgan
Stanley, has joined Van Kampen American
Capital as president and chief DENNIS J. MCDONNELL AND DON G. POWELL
executive officer. I will continue as
chairman of the firm. Together, we will continue to work to the benefit of our
fund shareholders as Van Kampen American Capital advances toward the next
century.
ECONOMIC REVIEW
The last quarter of 1996 brought renewed strength and rumblings of
inflation, which continued to feed investors' uncertainties about the direction
of interest rates. This was reflected in the volatility of taxable yields, with
the 30-year Treasury ranging from a high of 6.70 percent to a low of 6.35
percent, and ending the period at 6.64 percent.
The bond market advanced in price during the first 10 months of 1997, but
its ascension was not a smooth ride. Bond prices fell early in the period as
economic growth soared, fueling concerns about rising inflation and a potential
interest rate hike by the Federal Reserve Board. When the Fed did raise interest
rates by a modest 0.25 percent in late March, bond prices fell further, sending
the yield of the 30-year U.S. Treasury bond above 7.0 percent for the first time
in six months. By mid-April, however, the market's mood had changed, reflecting
few signs of price pressures despite the economy's strength. Bonds also
benefited from continued heavy purchases by foreign investors and concerns that
the stock market rally was nearing an end. The 7.0 percent slump in the Dow
Jones Industrial Average on October 27 reinforced the benefit of owning bonds
for diversification. By the end of October, the yield on the 30-year Treasury
bond was near its lowest level in 20 months, at 6.15 percent.
Throughout 1997, municipal bond prices moved in the same direction as the
Treasury bond market, but gained less when Treasury prices rallied and lost less
when Treasuries fell. Between December 31, 1996 and October 31, 1997, the yield
on the long-term municipal revenue bond index fell 36 basis points as the yield
on the 30-year Treasury bond fell 48 basis points. Because yields move in the
opposite direction of prices, the smaller yield decline of municipal bonds
indicates that their prices did not rise as much as Treasuries.
Continued on page two
1
<PAGE> 3
In Ohio, the economy continued to grow at a moderate pace, led by growth in
the retail and services sectors. The state's growth rate, however, lagged the
national average. During the state's prolonged recovery, budget reserves have
been replenished as a result of higher tax revenues coupled with spending
restraint. A recent decision by the Ohio Supreme Court ordering the state to
change its funding system for public school districts could boost state
financing of poorer districts. This, in turn, could create an increased supply
of securities.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality*
As of October 31, 1997
<TABLE>
<S> <C>
AAA.................... 68.1%
AA..................... 8.4%
A...................... 10.3%
BBB.................... 10.7%
Non-Rated.............. 2.5%
</TABLE>
*As a Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's.
TRUST STRATEGY
In managing the Trust, we used the following strategies:
We maintained a portfolio heavily weighted toward high-quality bonds. The
high concentration in AAA-rated securities reflects the proliferation of insured
bonds, which currently comprise well over half of new issues in the municipal
bond market. Bonds rated AAA are extremely liquid and carry minimal credit risk.
When interest rates fall, as they did for most of the second half of the fiscal
year, these bonds tend to outperform lower-rated securities. Bonds rated BBB,
the lowest investment-grade credit rating assigned by Standard & Poor's, and
below BBB tend to perform better when rates are rising, and have the potential
to provide additional income.
Portfolio turnover during the fiscal year was minimal due to a lack of
opportunities to add value to existing holdings. The average yield of bonds in
the Trust's portfolio was higher than average market yields. As a result, there
was little incentive to replace bonds in the portfolio, because such trades
would most likely have reduced the Trust's income-earning ability. In addition,
spreads between high-quality and low-quality bonds were tight during the period.
These spreads have compressed to historically narrow levels due to the
increasing number of insured bonds in the municipal market. In this environment,
it was difficult to justify purchasing lower-rated securities and assuming the
additional credit risk.
Acquisitions focused on enhancing the Trust's potential for price
appreciation and its call protection. In other words, we hoped to limit the
number of bonds that could be "called" at any one time. Acquisitions included
housing bonds, priced at par and paying relatively high yields, as well as
long-term discount bonds.
Continued on page three
2
<PAGE> 4
When searching for new securities for the Trust's portfolio, we try to
identify bonds that we believe will outperform within a particular sector and
that can be purchased at an attractive price. We believe this "bottom-up"
approach, supported by our research, provides significant added value to the
portfolio.
During the period, we continued to concentrate the Trust's holdings in the
health-care and public education sectors. The health-care sector continues to
improve financially due to industry consolidation and efforts to control
operating expenses. The public education sector will likely benefit from the new
Ohio Supreme Court ruling changing the state's method of funding public schools.
We believe the Trust is well-positioned to handle any stresses in the education
sector, because most of our education bonds are insured. Of course, their value
may vary, which would cause the price of shares to fluctuate.
During the second half of the fiscal year, the duration of the portfolio
declined slightly, comparable to that of its market benchmark. Duration, which
is expressed in years, is a measure of a portfolio's sensitivity to interest
rate movements. Portfolios with long durations tend to perform better when
interest rates are falling, while portfolios with short durations tend to do
better when rates are rising. As of October 31, the duration of the Trust's bond
portfolio stood at 6.89 years, compared to 7.34 years for the Lehman Brothers
Municipal Bond Index. Because of the longer-term nature of the Trust, the
calculation of this index's duration has been adjusted to eliminate bonds with
maturities of five years or less.
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF OCTOBER 31, 1997*
Health Care....................... 18.8%
Public Education.................. 14.7%
Water & Sewer..................... 11.6%
Transportation..................... 9.9%
Public Building.................... 8.9%
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the one-year period ended October 31, 1997, the Van Kampen American
Capital Ohio Value Municipal Income Trust generated a total return at market
price of 16.19 percent(1). The Trust offered a tax-exempt distribution rate of
5.15 percent(3), based on the closing common stock price of $12.9375 per share
on October 31, 1997. Because income from the Trust is exempt from federal and
Ohio income taxes, this distribution rate represents a yield equivalent to a
taxable investment earning 8.67 percent(4) (for investors in the combined
federal and state income tax bracket of 40.6 percent). At the end of the
reporting period, the closing share price of the Trust traded at $12.9375, a
14.66 percent discount to its net asset value of $15.16.
As a result of the Trust's improved earnings, the Board of Trustees approved
a slight increase in its monthly dividend from $0.0525 to $0.0555 per common
share, payable December 31, 1996.
Continued on page four
3
<PAGE> 5
Twelve-month Dividend History
For the Period Ended October 31, 1997
Distributions per Common Share
<TABLE>
<CAPTION>
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends $0.0525 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555 $0.0555
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
OUTLOOK
We expect the economy to remain strong in the coming months, although the
growth rate might slow to a more moderate pace. The weakness in the Far East,
which was the impetus for the recent volatility in world stock markets, will
most likely reduce U.S. exports to the region. In turn, this could trim U.S.
economic growth as well as the earnings of many U.S. companies. As a result, we
believe there is little chance that the Fed will raise interest rates in the
coming months. A rate hike reemerges as a possibility if inflation picks up, or
if growth continues at its current brisk pace.
As a result of this outlook, we expect that the yield on the 30-year
Treasury bond will trade within a range of 5.75 percent and 6.50 percent for the
next six months, possibly falling further in mid-1998. A decline in rates would
not only boost the prices of long-term investments in the portfolio, but could
also positively affect the Trust as a result of its leveraged structure. That
structure, which involves borrowing short-term funds to purchase long-term
municipal bonds, provides common shareholders with above-market levels of
dividend income. It should be noted, however, that if short-term rates rise,
borrowing costs would increase; this would negatively impact the income and
performance of common shares.
We will continue to seek a balance between the Trust's total return and its
dividend income, and to add value through our investment strategies and bond
selection. Thank you for your continued confidence in Van Kampen American
Capital and your Trust's portfolio manager.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1997
VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
(AMEX TICKER SYMBOL--VOV)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
One-year total return based on market price(1)............ 16.19%
One-year total return based on NAV(2)..................... 9.51%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 5.15%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 8.67%
SHARE VALUATIONS
Net asset value........................................... $ 15.16
Closing common stock price................................ $12.9375
One-year high common stock price (10/24/97)............... $13.1250
One-year low common stock price (04/14/97)................ $11.3750
Preferred share rate(5)................................... 2.900%
</TABLE>
(1) 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 common stock price at the end of the period
indicated.
(2) 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.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 40.6%
combined federal and state income tax bracket, which takes into consideration
the deductibility of individual state taxes paid.
(5) See "Notes to Financial Statements" footnote #4, 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.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 98.6%
OHIO 91.2%
$1,000 Akron, OH Ctfs Partn Akron Muni Baseball Stadium
Proj(d).......................................... 0/6.900% 12/01/16 $ 844,870
1,000 Akron, OH Wtrwrks Rev Mtg (Prerefunded @
03/01/01) (AMBAC Insd)........................... 6.550 03/01/12 1,092,190
2,000 Alliance, OH Wtrwrks Rev (FGIC Insd)............. 6.650 10/15/17 2,193,840
1,000 Brecksville Broadview Heights, OH City Sch Dist
(FGIC Insd)...................................... 5.250 12/01/21 989,170
1,500 Butler Cnty, OH Trans Impt Dist Ser A (FSA
Insd)(a)......................................... 5.125 04/01/17 1,468,335
1,000 Clermont Cnty, OH Wtrwks Rev (Prerefunded @
12/01/01) (AMBAC Insd)........................... 6.625 12/01/13 1,109,150
1,500 Cleveland, OH Arpt Sys Rev Ser A (FGIC
Insd)(b)......................................... 5.700 01/01/06 1,598,040
1,250 Cleveland, OH Pub Pwr Sys Rev 1st Mtg Ser A
(Prerefunded @ 11/15/04) (MBIA Insd)............. 7.000 11/15/24 1,463,688
1,000 Cuyahoga Cnty, OH Multi-Family Rev Dalebridge
Apts (GNMA Collateralized)....................... 6.500 10/20/20 1,063,310
400 Cuyahoga Cnty, OH Multi-Family Rev Hsg GNMA Wtr
Str Assoc (GNMA Collateralized).................. 6.150 12/20/26 420,552
250 Delaware Cnty, OH Swr Impt....................... 5.250 12/01/15 250,345
1,225 Fairfield, OH City Sch Dist (FGIC Insd).......... 7.200 12/01/12 1,453,254
1,000 Franklin Cnty, OH Rev Mtg Seton Square North
Proj............................................. 6.150 10/01/18 1,045,990
250 Gateway Econ Dev Corp Gtr Cleveland, OH Excise
Tax Rev Sr Lien Ser A (FSA Insd)................. 6.875 09/01/05 273,960
1,000 Guernsey Cnty, OH Pub Impt (AMBAC Insd).......... 6.200 12/01/11 1,077,210
250 Hamilton Cnty, OH Hlth Care Sys Sisters Charity
Hlth (MBIA Insd)................................. 5.250 05/15/13 251,190
1,300 Hilliard, OH Sch Dist Ser A (FGIC Insd).......... 5.000 12/01/20 1,260,129
1,000 Lakota, OH Loc Sch Dist (AMBAC Insd)............. 7.000 12/01/09 1,206,040
900 Logan Cnty, OH................................... 6.250 12/01/14 973,998
1,000 Lorain Cnty, OH Hosp Rev Catholic Hlthcare
Partners Rfdg Ser B (MBIA Insd).................. 5.625 09/01/15 1,034,450
1,000 Lorain Cnty, OH Hosp Rev EMH Regl Med Cent Rfdg
(AMBAC Insd)..................................... 7.750 11/01/13 1,199,600
1,000 Lucas Cnty, OH Hosp Rev Impt Saint Vincent Med
Cent (MBIA Insd)................................. 6.625 08/15/22 1,101,240
750 Marion Cnty, OH Hosp Impt Rev Cmnty Hosp Rfdg.... 6.375 05/15/11 790,890
1,000 Miami Cnty, OH Hosp Fac Rev Rfdg & Impt Upper Vly
Med Cent Ser C................................... 6.250 05/15/13 1,044,710
1,000 Miami Cnty, OH Hosp Fac Rev Upper Vly Med Cent
Proj Ser A (MBIA Insd)........................... 6.500 05/01/21 1,077,160
1,000 Montgomery Cnty, OH Hosp Rev Dayton Osteopathic
Hosp Proj Rfdg................................... 6.000 12/01/12 1,013,850
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OHIO (CONTINUED)
$1,000 Ohio Hsg Fin Agy Single Family Mtg Rev
(Prerefunded @ 01/15/14)......................... * 01/15/15 $ 385,510
1,000 Ohio St Air Quality Dev Auth Rev Owens Corning
Fiberglass Proj Rfdg............................. 6.250% 06/01/04 1,056,310
1,500 Ohio St Bldg Auth St Fac Adult Correctional Bldg
Fund Ser A (MBIA Insd)........................... 6.000 10/01/08 1,632,180
1,000 Ohio St Bldg Auth St Fac Adult Correctional Bldg
Fund Ser A (MBIA Insd)........................... 5.900 10/01/12 1,059,980
500 Ohio St Econ Dev Rev ABS Ind Inc Proj............ 6.000 06/01/04 541,120
1,000 Ohio St Wtr Dev Auth Solid Waste Disp Rev........ 6.300 09/01/20 1,074,990
1,800 Student Ln Funding Corp Cincinnati, OH Student Ln
Rev Sr Subser A.................................. 6.150 08/01/10 1,855,044
875 Sylvania, OH..................................... 7.450 12/01/10 968,030
1,000 University Cincinnati OH Genl Rcpts Ser E1
(Prerefunded @ 06/01/99)......................... 7.300 06/01/09 1,051,430
-----------
36,921,755
-----------
PUERTO RICO 7.4%
700 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser V
Rfdg............................................. 6.375 07/01/08 752,745
1,500 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser Y
Rfdg (Embedded Cap) (FSA Insd)(c)................ 5.730 07/01/21 1,723,050
500 Puerto Rico Elec Pwr Auth Pwr Rev Ser T.......... 6.125 07/01/09 543,770
-----------
3,019,565
-----------
TOTAL LONG-TERM INVESTMENTS 98.6%
(Cost $37,317,151)......................................................... 39,941,320
SHORT-TERM INVESTMENTS 0.3%
(Cost $100,000)............................................................ 100,000
-----------
TOTAL INVESTMENTS 98.9%
(Cost $37,417,151)......................................................... 40,041,320
OTHER ASSETS IN EXCESS OF LIABILITIES 1.1%.................................. 455,038
-----------
NET ASSETS 100.0%........................................................... $40,496,358
===========
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments
(c) An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. The Trust invests in these instruments as a hedge against a rise
in the short-term interest rates which it pays on its preferred shares.
These 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.
(d) Currently is a zero coupon bond which will convert to a coupon paying bond
at a predetermined date.
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $37,417,151)........................ $40,041,320
Receivables:
Investments Sold.......................................... 1,472,816
Interest.................................................. 689,006
Unamortized Organizational Costs............................ 2,466
Other....................................................... 159
-----------
Total Assets.......................................... 42,205,767
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,463,434
Custodian Bank............................................ 28,096
Investment Advisory Fee................................... 22,250
Income Distributions--Common and Preferred Shares......... 12,358
Administrative Fee........................................ 6,846
Affiliates................................................ 5,262
Accrued Expenses............................................ 100,771
Trustees' Deferred Compensation and Retirement Plans........ 70,392
-----------
Total Liabilities..................................... 1,709,409
-----------
NET ASSETS.................................................. $40,496,358
===========
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 300 issued with liquidation preference of $50,000
per share)................................................ $15,000,000
-----------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 1,681,438 shares issued and
outstanding).............................................. 16,814
Paid in Surplus............................................. 24,466,994
Net Unrealized Appreciation................................. 2,624,169
Accumulated Undistributed Net Investment Income............. 215,139
Accumulated Net Realized Loss............................... (1,826,758)
-----------
Net Assets Applicable to Common Shares................ 25,496,358
-----------
NET ASSETS.................................................. $40,496,358
===========
NET ASSET VALUE PER COMMON SHARE ($25,496,358 divided
by 1,681,438 shares outstanding).......................... $ 15.16
===========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 2,217,409
-----------
EXPENSES:
Investment Advisory Fee..................................... 257,885
Administrative Fee.......................................... 79,349
Preferred Share Maintenance................................. 55,850
Audit....................................................... 37,540
Accounting.................................................. 34,147
Trustees' Fees and Expenses................................. 30,254
Amortization of Organizational Costs........................ 4,997
Legal....................................................... 4,269
Custody..................................................... 4,202
Other....................................................... 42,490
-----------
Total Expenses.......................................... 550,983
-----------
NET INVESTMENT INCOME....................................... $ 1,666,426
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 127,957
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 1,664,204
End of the Period......................................... 2,624,169
-----------
Net Unrealized Appreciation During the Period............... 959,965
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 1,087,922
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 2,754,348
===========
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 1,666,426 $ 1,680,250
Net Realized Gain................................. 127,957 166,139
Net Unrealized Appreciation/Depreciation During
the Period...................................... 959,965 (5,770)
----------- -----------
Change in Net Assets from Operations.............. 2,754,348 1,840,619
----------- -----------
Distributions from Net Investment Income:
Common Shares................................... (1,114,726) (1,076,074)
Preferred Shares................................ (485,796) (494,777)
----------- -----------
Total Distributions............................... (1,600,522) (1,570,851)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... 1,153,826 269,768
NET ASSETS:
Beginning of the Period........................... 39,342,532 39,072,764
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of $215,139
and $149,235, respectively)..................... $40,496,358 $39,342,532
=========== ===========
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, 1993
(Commencement
Year Ended October 31, of Investment
--------------------------------------- Operations) to
1997 1996 1995 1994 October 31, 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)..... $14.477 $14.317 $12.359 $15.598 $14.583
------- ------- ------- ------- -------
Net Investment Income........... .991 .999 .985 1.015 .377
Net Realized and Unrealized
Gain/Loss..................... .647 .095 2.016 (3.250) .955
------- ------- ------- ------- -------
Total from Investment
Operations...................... 1.638 1.094 3.001 (2.235) 1.332
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income:
Paid to Common Shareholders... .663 .640 .714 .768 .256
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... .289 .294 .329 .225 .061
Distributions from Net Realized
Gain:
Paid to Common Shareholders... -0- -0- -0- .009 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders...... -0- -0- -0- .002 -0-
------- ------- ------- ------- -------
Total Distributions............... .952 .934 1.043 1.004 .317
------- ------- ------- ------- -------
Net Asset Value, End of the
Period.......................... $ 15.163 $ 14.477 $14.317 $12.359 $15.598
======= ======= ======= ======= =======
Market Price Per Share at End of
the Period...................... $12.9375 $ 11.750 $11.750 $11.125 $14.875
Total Investment Return at Market
Price (b)....................... 16.19% 5.55% 12.04% (20.59%) .89*
Total Return at Net Asset Value
(c)............................. 9.51% 5.74% 22.18% (16.26%) 5.75%*
Net Assets at End of the Period
(In millions)................... $40.5 $39.3 $39.1 $35.8 $41.2
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares.......................... 2.23% 2.29% 2.39% 2.20% 2.13%
Ratio of Expenses to Average Net
Assets.......................... 1.39% 1.41% 1.44% 1.35% 1.60%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)............... 4.78% 4.95% 4.89% 5.57% 4.19%
Portfolio Turnover................ 17% 41% 45% 56% 17%*
</TABLE>
(a) Net Asset Value at April 30, 1993, is adjusted for common and preferred
share offering costs of $.417 per common share.
(b) 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.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
* Non-Annualized
See Notes to Financial Statements
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Ohio Value Municipal Income 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's investment objective
is to provide a high level of current income exempt from federal and Ohio income
taxes, consistent with preservation of capital. The Trust will invest
substantially all of its assets in Ohio municipal securities rated investment
grade at the time of investment. The Trust commenced investment operations on
April 30, 1993.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 60 days or less 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 COSTS--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 in the amount of $25,000. These costs
are being amortized on a
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
straight line basis over the 60 month period ending April 29, 1998. 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 costs 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 substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1997, the Trust had an accumulated capital loss
carryforward for tax purposes of $1,826,758 which will expire between October
31, 2002 and 2003.
At October 31, 1997, for federal income tax purposes cost of long-term and
short-term investments is $37,417,151, the aggregate gross unrealized
appreciation is $2,624,169 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation of $2,624,169.
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 as ordinary income for tax
purposes.
For the year ended October 31, 1997, 100.0% of the income distributions made
by the Trust were exempt from federal income taxes. In January, 1998, the Trust
will provide tax information to shareholders for the 1997 calendar year.
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 .65% 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
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
- --------------------------------------------------------------------------------
record keeping and reporting responsibilities with respect to the Trust's
portfolio and preferred shares and providing certain services to shareholders.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $700 representing legal services provided by Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the year ended October 31, 1997, the Trust recognized expenses of
approximately $39,900 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 VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
At October 31, 1997, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $6,792,570 and $6,704,082, respectively.
4. PREFERRED SHARES
The Trust has outstanding 300 Auction Preferred Shares ("APS"). Dividends are
cumulative and the dividend rate is currently reset every seven days through an
auction process. The rate in effect on October 31, 1997 was 2.900%. During the
year ended October 31, 1997, the rates ranged from 2.000% to 5.000%.
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.
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Ohio Value Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Ohio Value Municipal Income Trust (the "Trust"),
including the portfolio of investments, as of October 31, 1997, 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
October 31, 1997, 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 American Capital Ohio Value Municipal Income Trust as of October 31,
1997, 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
December 11, 1997
15
<PAGE> 17
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
dividends 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:
Van Kampen American Capital
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
16
<PAGE> 18
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
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
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
Intermediate Term Municipal Income Fund
Municipal Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Value Fund
Worldwide High Income 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 weekdays from 7:00 a.m. to 7:00
p.m. Central time at 1-800-341-2911 for Van Kampen American Capital funds or
Morgan Stanley funds.
17
<PAGE> 19
VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
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 (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
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., 1997 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
18
<PAGE> 20
RESULTS OF SHAREHOLDER VOTES
- -------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Trust was held on May 28, 1997,
where shareholders voted on a new investment advisory agreement, the election of
Trustees whose terms expired in 1997 and independent public accountants.
1) With regard to the approval of a new investment advisory agreement
between Van Kampen American Capital Investment Advisory Corp. and the Trust,
1,389,387 shares voted for the proposal, 55,155 shares voted against, 27,845
shares abstained and 0 shares represented broker non-votes.
2) With regard to the election of the following Trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
-----------------------
IN FAVOR WITHHELD
- ---------------------------------------------------------------------
<S> <C> <C>
David C. Arch 1,434,593 37,611
Howard J Kerr 1,434,593 37,611
Dennis J. McDonnell 1,434,593 37,611
</TABLE>
3) With regard to the ratification of KPMG Peat Marwick LLP as independent
public accountants for its current fiscal year, 1,429,213 shares voted for the
proposal, 32,134 shares voted against, 11,040 shares abstained, and 0 shares
represented broker non-votes.
19
<PAGE> 21
VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
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