<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Report of Independent Accountants................ 23
Dividend Reinvestment Plan....................... 24
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
November 19, 1999
Dear Shareholder:
As we approach the end of the century--and the millennium--it seems
appropriate to take a look back at the progress we've made over the last 100
years and how the world of investing has changed over the generations. Although
rapid advances in technology and science have dramatically altered the world
that we live in today, one of the greatest shifts we've seen this century is the
increasing importance of investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Those that have stood the test of time include:
- Investing for the long-term
- Basing investment decisions on sound research
- Building a diversified portfolio
- Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen, we believe that these
ideas will remain important tenets for investors well into the next century. As
we continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we enter the new
millennium.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Source: Investment Company Institute
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree over the past year, keeping the
economy growing at a healthy pace. High levels of consumer confidence fueled
this heavy retail activity, which pushed the personal savings rate to a record
low as spending rates outpaced income growth. Although the U.S. economy
experienced a slowdown during the second quarter of 1999, growth rebounded
toward the end of the reporting period.
EMPLOYMENT SITUATION
The strong job market helped support the strength of the economy. During the
reporting period, the unemployment rate reached its lowest level in almost 30
years, and wages continued to climb. The wage pressures were balanced somewhat
by productivity gains. However, these pressures ultimately pushed the cost of
labor higher in the second quarter, as the employment cost index recorded its
biggest gain in eight years before returning to a more moderate level in the
third quarter.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report. The Federal Reserve Board remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
its three interest rate cuts from the fall of 1998, raising rates in June,
August, and November 1999 to keep the economy from overheating.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Third Quarter 1999
[BAR GRAPH]
<TABLE>
<S> <C>
97Q3 4
97Q4 3.1
98Q1 6.7
98Q2 2.1
98Q3 3.8
98Q4 5.9
99Q1 3.7
99Q2 1.9
99Q3 5.5
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1999
VAN KAMPEN ADVANTAGE
PENNSYLVANIA MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VAP)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)........... (10.14%)
One-year total return based on NAV(2).................... (3.10%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 6.56%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 10.55%
SHARE VALUATIONS
Net asset value.......................................... $ 16.18
Closing common stock price............................... $ 14.625
One-year high common stock price (01/04/99).............. $17.5625
One-year low common stock price (10/27/99)............... $ 14.250
Preferred share rate(5).................................. 3.600%
</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 37.8%
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.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
We recently spoke with representatives of the adviser of the Van Kampen
Advantage Pennsylvania Municipal Income Trust, about the key events and economic
forces that shaped the markets during the past year. Dennis S. Pietrzak,
portfolio manager, has managed the Trust since August 1995 and worked in the
investment industry since 1968. He is joined by Peter W. Hegel, chief investment
officer for fixed-income investments. The following discussion reflects their
views on the Trust's performance during the 12 months ended October 31, 1999.
Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD?
A Bonds of all types experienced price declines during the past 12 months as
interest rates rose, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two
interest-rate increases during the summer, the bond market declined as the
nation's strong economic growth continued to spark inflation fears, leading to
concern about future rate hikes. Because of low institutional demand for
municipal bonds during the period, these conditions affected municipals more
than their taxable counterparts--corporate and Treasury bonds. The yields of
newly issued 30-year AAA municipal bonds rose more than a full percentage point
during the 12-month period, so the prices of existing bonds dropped
concurrently. The bonds in the Trust's portfolio were not spared by this market
movement and suffered price declines along with the rest of the municipal
market.
The interest-rate increases also suppressed municipal bond supply, bringing
overall nationwide issuance down more than 20 percent in the first ten months of
the year compared with 1998. Supply was down in almost every sector, with
electric-utility and health-care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50 percent for the year
through October. Many municipalities simply chose not to refinance outstanding
bonds because of the higher interest rates they would have to pay in the current
marketplace.
Q DID MUNICIPAL BONDS BENEFIT FROM THE STRONG ECONOMY?
A Yes. The effects of the healthy economy were reflected in the good credit
conditions in the municipal market, even though prices suffered. With the
exception of the health-care sector, overall credit quality remained high, and
we witnessed a number of credit upgrades as tax revenues kept municipal finances
strong.
4
<PAGE> 6
Q COULD YOU DESCRIBE PENNSYLVANIA'S ECONOMIC AND MUNICIPAL MARKET
ENVIRONMENT DURING THE YEAR?
A The Pennsylvania municipal market remained active and strong, as
greater-than-expected tax revenues continued to increase budget surpluses.
The health-care industry remained the one trouble spot in the
commonwealth's bright economic picture, with increasing numbers of Pennsylvania
hospitals and health systems experiencing financial pressures.
Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS?
A We were pleased with the portfolio's structure and holdings, so we did not
make many changes during the reporting period. The Trust currently holds a
large percentage of higher-yielding bonds that were purchased when
interest rates were much higher than they are today. We plan to hold these bonds
as long as possible to maintain the Trust's income stream. This strategy
benefited the Trust's total return because these higher-yielding bonds were less
affected by rising interest rates. In addition, as interest rates increased, we
faced fewer potential bond calls because it was no longer economically feasible
for the issuers to refinance the bonds at higher rates. This helped maintain the
income level of the Trust. However, we did have a few issues called from the
portfolio. We replaced these issues with AAA bonds whenever possible because we
believed they represented some of the best values in the marketplace. For
additional portfolio highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A Total return performance was disappointing because of the general downturn
in bond prices. In addition, the Trust's leverage component hurt
performance during the period. Although leverage helps the Trust provide
higher income levels to common shareholders, it made the portfolio more
sensitive to the interest-rate increases during the reporting period. However,
the Trust's total return was supported by its relatively short duration, which
is a measure of sensitivity to interest-rate changes. For the one-year period
ended October 31, 1999, the Trust returned -10.14 percent(1) based on market
price. This reflects a decrease in market price from $17.25 per share on October
31, 1998, to $14.625 per share on October 31, 1999.
In addition, the dividend remained unchanged during the past 12 months. The
monthly tax-exempt dividend of $0.08 per share translates to a distribution rate
of 6.56 percent(3) based on the Trust's closing market price on October 31,
1999. Because the Trust is exempt from federal and Pennsylvania income taxes,
this distribution rate is equivalent to a taxable yield of 10.55 percent(4) for
an investor in the 37.8 percent combined federal and state income-tax bracket.
Please refer to the chart and footnotes on page 3 for additional performance
results. Past performance does not guarantee future performance.
5
<PAGE> 7
Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A In the coming months, we will probably see a slowing economy, which may be
partly the result of year 2000 concerns. Wage increases will likely keep
inflation fears at the forefront, although increasing productivity should
be able to offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided, but we believe that market activity should
pick up early in 2000. In the meantime, we will continue to focus on finding
attractive-yielding bonds and protecting the Trust from bond calls as much as
possible. We will also use our extensive research capabilities to look for
attractive opportunities throughout the coming months.
[SIG.]
Dennis S. Pietrzak
Portfolio Manager
[SIG.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues and lower-quality issues. Normally, lower-quality
issues provide higher yields to compensate investors for the additional
credit risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has
more potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It is redeemed at maturity for
full face value.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
Health Care 24.40 25.60
General Purpose 22.20 22.60
Water & Sewer 11.40 11.40
Multi-Family Housing 11.10 11.00
Retail Elec/Gas/Teleph 10.60 10.90
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
SEPTEMBER 1992 THROUGH OCTOBER 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Sep 1992 14.92 14.92
Oct 1992 14.38 14.44
14.63 15.08
14.38 15.25
14.88 15.43
15.25 16.43
15.25 16.09
15.38 16.25
15.13 16.39
15.38 16.70
15.50 16.65
15.88 17.11
15.88 17.43
Oct 1993 16.13 17.33
15.38 17.05
15.50 17.47
15.75 17.68
15.13 16.86
14.25 15.64
14.00 15.57
14.00 15.79
14.00 15.45
13.88 15.89
13.63 15.82
13.00 15.28
Oct 1994 12.13 14.63
12.13 13.98
12.25 14.60
13.13 15.28
13.88 15.93
13.63 16.01
14.00 15.87
14.38 16.60
14.38 16.18
14.00 16.24
14.25 16.41
14.13 16.41
Oct 1995 14.00 16.69
14.75 17.07
15.38 17.23
15.13 17.25
15.00 17.02
14.88 16.46
15.00 16.24
14.88 16.19
14.63 16.27
14.75 16.40
15.00 16.35
15.13 16.55
Oct 1996 15.13 16.72
15.50 17.00
15.63 16.79
15.50 16.75
15.38 16.88
15.50 16.44
15.50 16.49
15.63 16.71
15.25 16.88
16.31 17.39
16.13 17.05
16.31 17.19
Oct 1997 16.44 17.23
16.50 17.24
16.75 17.44
17.19 17.58
16.50 17.48
16.25 17.45
16.81 17.20
17.13 17.43
16.81 17.44
17.19 17.37
17.06 17.62
17.56 17.74
Oct 1998 17.25 17.66
17.19 17.62
17.56 17.59
16.50 17.72
16.50 17.54
16.75 17.42
16.44 17.42
16.69 17.20
16.13 16.82
16.44 16.80
16.06 16.57
15.50 16.46
Oct 1999 14.63 16.18
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A
------- ----- ---
<S> <C> <C> <C>
As of October 31, 1999 80.50 5.30 14.20
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A
------- ----- ---
<S> <C> <C> <C>
As of October 31, 1998 78.90 5.80 15.30
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
'Nov 1998' 0.08
'Dec 1998' 0.08
'Jan 1999' 0.08
'Feb 1999' 0.08
'Mar 1999' 0.08
'Apr 1999' 0.08
'May 1999' 0.08
'Jun 1999' 0.08
'Jul 1999' 0.08
'Aug 1999' 0.08
'Sep 1999' 0.08
'Oct 1999' 0.08
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 98.6%
PENNSYLVANIA 90.8%
$2,500 Allegheny Cnty, PA Arpt Rev Gtr
Pittsburgh Intl Arpt Ser B (FSA
Insd)................................. 6.625% 01/01/22 $ 2,604,450
3,250 Allegheny Cnty, PA Hosp Dev Auth Rev
Hlth Cent Dev Inc Proj Rfdg (MBIA
Insd)................................. 6.300 09/01/13 3,428,718
3,750 Allegheny Cnty, PA Hosp Dev Auth Rev
Hlth Cent Presbyterian Univ Ser A
(Prerefunded @ 11/01/02) (MBIA
Insd)................................. 6.250 11/01/23 3,942,787
2,000 Allegheny Cnty, PA San Auth Swr Rev
(FGIC Insd)........................... 6.000 12/01/12 2,067,460
1,400 Bensalem Twp, PA Wtr & Swr Rev Ser A
(FSA Insd)............................ 6.500 12/01/14 1,450,498
5,000 Dauphin Cnty, PA Genl Auth Hosp Rev
Hapsco Western PA Hosp Proj B Rfdg
(MBIA Insd)........................... 6.250 07/01/16 5,048,750
1,000 Delaware Cnty, PA Cap Apprec Rfdg..... * 11/15/10 546,280
1,045 Delaware Cnty, PA Cap Apprec Rfdg..... * 11/15/11 534,789
1,225 Delaware Cnty, PA Cap Apprec Rfdg..... * 11/15/12 586,261
655 Delaware Cnty, PA Rfdg................ 6.000 11/15/14 669,652
2,345 Delaware Cnty, PA Rfdg (Prerefunded @
11/15/02)............................. 6.000 11/15/14 2,450,431
3,050 Erie Cnty, PA Hosp Auth Rev Saint
Vincent Hlth Cent Proj Ser A (MBIA
Insd)................................. 6.375 07/01/22 3,110,848
1,510 Lackawanna Cnty, PA Multi Purp Stad
Auth Stad Rev Gtd (FGIC Insd)......... 6.150 08/15/05 1,582,752
1,380 Lackawanna Cnty, PA Multi Purp Stad
Auth Stad Rev Gtd (FGIC Insd)......... 6.200 08/15/06 1,448,434
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$1,000 Lackawanna Cnty, PA Multi Purp Stad
Auth Stad Rev Gtd (FGIC Insd)......... 6.300% 08/15/07 $ 1,052,290
4,500 Lehigh Cnty, PA Genl Purp Auth Rev
Hosp Muhlenberg Hosp Cent Ser A
(Prerefunded @ 07/15/04).............. 6.600 07/15/22 4,836,510
3,500 Lehigh Cnty, PA Indl Dev Auth Pollutn
Ctl Rev PA Pwr & Lt Co Proj Ser A Rfdg
(MBIA Insd)........................... 6.400 11/01/21 3,590,860
1,095 Mars, PA Area Sch Dist Ser AA (MBIA
Insd)................................. * 09/01/17 380,436
1,095 Mars, PA Area Sch Dist Ser AA (MBIA
Insd)................................. * 09/01/18 356,587
1,095 Mars, PA Area Sch Dist Ser AA (MBIA
Insd)................................. * 09/01/19 335,322
1,095 Mars, PA Area Sch Dist Ser AA (MBIA
Insd)................................. * 09/01/20 315,261
1,095 Mars, PA Area Sch Dist Ser AA (MBIA
Insd)................................. * 09/01/21 295,409
620 Montgomery Cnty, PA Higher Edl & Hlth
Auth Hosp Rev Abington Mem Hosp Ser A
(AMBAC Insd).......................... 6.000 06/01/16 619,634
1,080 Montgomery Cnty, PA Higher Edl & Hlth
Auth Hosp Rev Abington Mem Hosp Ser A
(Prerefunded @ 06/01/03) (AMBAC
Insd)................................. 6.000 06/01/16 1,150,567
1,000 Montgomery Cnty, PA Indl Dev Auth
Retirement Cmnty Rev Adult Cmntys
Total Svcs Ser B...................... 5.625 11/15/12 952,910
3,000 Montgomery Cnty, PA Indl Dev Auth Rev
Res Recovery (LOC-Banque Paribas)..... 7.500 01/01/12 3,122,340
2,925 Moon Twp, PA Muni Auth Wtr & Swr Rev
(Prerefunded @ 12/01/02) (FSA Insd)... 6.500 12/01/17 3,128,229
1,060 North Penn PA Wtr Auth Rev (FGIC
Insd)................................. 6.200 11/01/22 1,068,385
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 940 North Penn PA Wtr Auth Rev
(Prerefunded @ 11/01/02) (FGIC
Insd)................................. 6.200% 11/01/22 $ 996,080
1,000 Northeastern PA Hosp & Ed Auth Sch Rev
WY Seminary Project (MBIA Insd)....... 4.750 10/01/28 814,670
1,000 Pennsylvania Hsg Fin Agy Single Family
Mtg Ser 53A........................... 6.000 10/01/15 994,880
2,000 Pennsylvania Intergvtl Coop Auth Spl
Tax Rev City of Philadelphia
(Prerefunded @ 06/15/02).............. 6.800 06/15/22 2,118,820
3,490 Pennsylvania Intergvtl Coop Auth Spl
Tax Rev City of Philadelphia
(Prerefunded @ 06/15/03) (MBIA
Insd)................................. 5.600 06/15/15 3,618,746
1,000 Philadelphia, PA Auth Indl Dev Arpt
Rev Philadelphia Arpt Sys Proj Ser A
(FGIC Insd)........................... 5.125 07/01/28 848,980
4,250 Philadelphia, PA Gas Wks Rev 12th Ser
B (MBIA Insd)......................... 7.000 05/15/20 4,777,467
3,000 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd)....................... 6.250 07/01/08 3,199,230
3,500 Philadelphia, PA Hosp & Higher Edl Fac
Auth Hosp Rev Chestnut Hill Hosp...... 6.500 11/15/22 3,473,015
2,820 Philadelphia, PA Redev Auth Fin Corp
Mtg Rev Multi-Family Mtg Chinatown B
Rfdg (FNMA Collateralized)............ 6.750 09/01/22 2,904,403
4,265 Philadelphia, PA Redev Auth Fin Corp
Mtg Rev Multi-Family Mtg Cobbs Creek
Ser A Rfdg (FNMA Collateralized)...... 6.750 08/01/24 4,370,388
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$4,660 Philadelphia, PA Redev Auth
Multi-Family Hsg Rev Mtg Washington
Square Ser C Rfdg (FNMA
Collateralized)....................... 6.950% 11/15/24 $ 4,839,410
4,905 Philadelphia, PA Wtr & Swr Rev Cap
Apprec 14th Ser (MBIA Insd)........... * 10/01/07 3,245,884
1,000 Pittsburgh & Allegheny Cnty, PA Pub
Aud Auth Regl Asset Dist Sales Tax Rev
(AMBAC Insd).......................... 5.250 02/01/31 886,160
4,300 Somerset Cnty, PA Genl Auth Comwlth
Lease Rev (Prerefunded @ 10/15/01)
(FGIC Insd)........................... 6.250 10/15/11 4,466,238
1,035 Unity Twp, PA Muni Auth Gtd Swr Cap
Apprec (AMBAC Insd)................... * 11/01/14 435,373
2,500 Upper Darby Twp, PA Rfdg (AMBAC
Insd)................................. 6.500 07/15/18 2,587,650
1,000 West Shore, PA Area Hosp Auth Hosp Rev
Holy Spirit Hosp Proj (MBIA Insd)..... 5.700 01/01/22 954,080
4,290 Westmoreland Cnty, PA Muni Auth Muni
Svc Rev Ser C (FGIC Insd)............. 5.000 08/15/10 4,159,198
------------
100,367,522
------------
PUERTO RICO 7.8%
1,100 Puerto Rico Comwlth Hwy & Tran Auth
Hwy Rev Ser T (Prerefunded @
07/01/02)............................. 6.500 07/01/22 1,179,893
2,000 Puerto Rico Pub Bldgs Auth Gtd Pub Edl
& Hlth Fac Ser K Rfdg................. 6.600 07/01/04 2,120,980
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUERTO RICO (CONTINUED)
$1,000 Puerto Rico Pub Bldgs Auth Gtd Pub Edl
& Hlth Fac Ser M Rfdg................. 5.750% 07/01/15 $ 997,350
4,000 Puerto Rico Pub Bldgs Auth Rev Gtd Ser
K (Prerefunded @ 07/01/02)............ 6.875 07/01/12 4,327,000
------------
8,625,223
------------
TOTAL INVESTMENTS 98.6%
(Cost $103,245,731)................................................ 108,992,745
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%.......................... 1,561,781
------------
NET ASSETS 100.0%.................................................... $110,554,526
============
</TABLE>
* Zero coupon bond
AMBAC--AMBAC Indemnity Corporation
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $103,245,731)....................... $108,992,745
Receivables:
Interest.................................................. 2,112,852
Investments Sold.......................................... 15,000
Other....................................................... 7,666
------------
Total Assets.......................................... 111,128,263
------------
LIABILITIES:
Payables:
Custodian Bank............................................ 190,742
Income Distributions - Common and Preferred Shares........ 94,666
Investment Advisory Fee................................... 61,222
Administrative Fee........................................ 18,838
Affiliates................................................ 14,629
Trustees' Deferred Compensation and Retirement Plans........ 105,012
Accrued Expenses............................................ 88,628
------------
Total Liabilities..................................... 573,737
------------
NET ASSETS.................................................. $110,554,526
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,600 issued with liquidation preference of
$25,000 per share)........................................ $ 40,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 4,361,902 shares issued and
outstanding).............................................. 43,619
Paid in Surplus............................................. 64,141,911
Net Unrealized Appreciation................................. 5,747,014
Accumulated Undistributed Net Investment Income............. 674,481
Accumulated Net Realized Loss............................... (52,499)
------------
Net Assets Applicable to Common Shares................ 70,554,526
------------
NET ASSETS.................................................. $110,554,526
============
NET ASSET VALUE PER COMMON SHARE ($70,554,526 divided by
4,361,902
shares outstanding)....................................... $ 16.18
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 6,662,402
-----------
EXPENSES:
Investment Advisory Fee..................................... 745,862
Administrative Fee.......................................... 229,496
Preferred Share Maintenance................................. 103,599
Trustees' Fees and Related Expenses......................... 22,385
Legal....................................................... 9,917
Custody..................................................... 8,181
Other....................................................... 147,446
-----------
Total Expenses.......................................... 1,266,886
-----------
NET INVESTMENT INCOME....................................... $ 5,395,516
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (48,164)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 12,061,488
End of the Period......................................... 5,747,014
-----------
Net Unrealized Depreciation During the Period............... (6,314,474)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(6,362,638)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (967,122)
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 5,395,516 $ 5,411,564
Net Realized Gain/Loss........................... (48,164) 107,703
Net Unrealized Appreciation/Depreciation During
the Period..................................... (6,314,474) 1,944,365
------------ ------------
Change in Net Assets from Operations............. (967,122) 7,463,632
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................. (4,187,211) (4,187,208)
Preferred Shares............................... (1,324,355) (1,417,648)
------------ ------------
Total Distributions.............................. (5,511,566) (5,604,856)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (6,478,688) 1,858,776
NET ASSETS:
Beginning of the Period.......................... 117,033,214 115,174,438
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $674,481
and $790,531, respectively).................... $110,554,526 $117,033,214
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a).............................. $ 17.660 $17.234 $ 16.722
-------- ------- --------
Net Investment Income................. 1.238 1.241 1.250
Net Realized and Unrealized
Gain/Loss........................... (1.459) .470 .546
-------- ------- --------
Total from Investment Operations........ (.221) 1.711 1.796
-------- ------- --------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders......... .960 .960 .958
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders...................... .304 .325 .326
Distributions from and in Excess of
Net Realized Gain:
Paid to Common Shareholders......... -0- -0- -0-
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders...................... -0- -0- -0-
-------- ------- --------
Total Distributions..................... 1.264 1.285 1.284
-------- ------- --------
Net Asset Value, End of the Period...... $ 16.175 $17.660 $ 17.234
======== ======= ========
Market Price Per Share at End of the
Period................................ $ 14.625 $17.250 $16.4375
Total Investment Return at Market
Price (b)............................. (10.14%) 11.03% 15.38%
Total Return at Net Asset Value (c)..... (3.10%) 8.27% 9.04%
Net Assets at End of the Period (In
millions)............................. $ 110.6 $ 117.0 $ 115.2
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**......... 1.69% 1.67% 1.70%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)..................... 5.45% 5.25% 5.48%
Portfolio Turnover...................... 7% 3% 2%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred Shares.... 1.10% 1.10% 1.10%
</TABLE>
(a) Net Asset Value at September 25, 1992, is adjusted for common and preferred
share offering costs of $.285 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.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 25, 1992
(Commencement
Year Ended October 31 of Investment
- ------------------------------------------- Operations) to
1996 1995 1994 1993 October 31, 1992(a)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
$16.694 $14.629 $17.327 $14.443 $14.715
------- ------- ------- ------- -------
1.244 1.253 1.254 1.220 .042
.038 2.059 (2.774) 2.764 (.311)
------- ------- ------- ------- -------
1.282 3.312 (1.520) 3.984 (.269)
------- ------- ------- ------- -------
.928 .888 .876 .803 -0-
.326 .359 .275 .297 .003
-0- -0- .020 -0- -0-
-0- -0- .007 -0- -0-
------- ------- ------- ------- -------
1.254 1.247 1.178 1.100 .003
------- ------- ------- ------- -------
$16.722 $16.694 $14.629 $17.327 $14.443
======= ======= ======= ======= =======
$15.125 $14.000 $12.125 $16.125 $14.375
14.85% 23.03% (19.94%) 18.14% (4.17%)*
5.91% 20.65% (10.75%) 26.01% (3.73%)*
$ 112.9 $ 112.8 $ 103.8 $ 115.6 $ 103.0
1.77% 1.77% 1.80% 1.79% 1.31%
5.52% 5.68% 6.05% 5.70% 2.61%
2% 9% 5% 12% 0%*
1.14% 1.12% 1.15% 1.14% 1.18%
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Advantage Pennsylvania 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
Pennsylvania income taxes and, where possible under local law, local income and
personal property taxes, consistent with preservation of capital. The Trust will
invest substantially all of its assets in Pennsylvania municipal securities
rated investment grade at the time of investment. The Trust commenced investment
operations on September 25, 1992.
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--Municipal bonds are valued by independent pricing
services or dealers using the mean of the bid and asked prices or, in the
absence of market quotations, at fair value based upon yield data relating to
municipal bonds with similar characteristics and general market conditions.
Securities which are not valued by independent pricing services are valued at
fair value using 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. As of October 31, 1999, there were
no when issued or delayed delivery purchase commitments.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
D. FEDERAL INCOME TAXES--It is the 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, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of $52,498, which will expire between October 31,
2005 and October 31, 2007.
At October 31, 1999, for federal income tax purposes, cost of long-term
investments is $103,245,731; the aggregate gross unrealized appreciation is
$5,988,970 and the aggregate gross unrealized depreciation is $241,956,
resulting in net unrealized appreciation on long-term investments of $5,747,014.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually 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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (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 Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), 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.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $1,900 representing legal services provided by Skadden, Arps,
Slate,
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $59,200 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. 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 per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $8,604,128 and $7,845,660, respectively.
4. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
The Trust has outstanding 1,600 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 October 31, 1999, was 3.60%. During the
year ended October 31, 1999, the rates ranged from 2.99% to 3.85%.
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 $25,000 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.
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Advantage Pennsylvania Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Advantage Pennsylvania Municipal Income Trust (the "Trust"), including
the portfolio of investments, as of October 31, 1999, 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, 1999, 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 Advantage Pennsylvania Municipal Income Trust as of October 31, 1999, 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 LLP
Chicago, Illinois
December 6, 1999
23
<PAGE> 25
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, of 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 Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd., Houston, TX 77056
24
<PAGE> 26
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income
Global Franchise
Global Government Securities
Global Managed Assets
International Magnum
Latin American
Short-Term Global Income*
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
* Closed to new investors
25
<PAGE> 27
VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
STEVEN MULLER
THEODORE A. MYERS
RICHARD F. POWERS, III* -- Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President
and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer
and Chief Financial Officer
CURTIS W. MORELL*
Vice President and
Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 LLP
303 East Wacker Drive
Chicago, Illinois 60601
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
October 31, 1999. The Trust designated 100.0% of the income distributions as a
tax-exempt income distribution. In January, 2000, the Trust will provide tax
information to shareholders for the 1999 calendar year.
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
26
<PAGE> 28
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) 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................................... 3,784,981 26,076
Howard J Kerr................................... 3,784,781 26,276
Dennis J. McDonnell............................. 3,784,981 26,076
</TABLE>
The other trustees of the Trust whose term did not expire in 1999 are Rod
Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell*, Hugo F. Sonnenschein
and Wayne W. Whalen.
2) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 3,774,979 shares voted in favor of the proposal,
6,790 shares voted against and 29,288 shares abstained.
* On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
27
<PAGE> 29
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> ADV. PA MUNI INC. TRUST
<MULTIPLIER> 1
<S> <C>
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