VAN KAMPEN MERRITT PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST, N-30D, 1995-12-28

VAN KAMPEN MERRITT PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
N-30D, 1995-12-28

Previous: VAN KAMPEN MERRITT STRATEGIC SECTOR MUNICIPAL TRUST, NSAR-B, 1995-12-28

Next: VAN KAMPEN MERRITT PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST, NSAR-B, 1995-12-28

Table of Contents

<TABLE>
<CAPTION>
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Portfolio of Investments............... 4
Statement of Assets and Liabilities.... 7
Statement of Operations................ 8
Statement of Changes in Net Assets..... 9
Financial Highlights................... 10
Notes to Financial Statements.......... 11
Independent Auditors' Report........... 14
Dividend Reinvestment Plan............. 15
</TABLE>

VPV ANR 12/95

Letter to Shareholders

November 22, 1995

Dear Shareholder:

The first ten months of 1995 have been very positive for most investors. Both
the fixed-income and equity markets have made considerable gains during the
period ended October 31, 1995.

This year serves as a reminder of just how quickly markets can move and how
difficult it can be to predict the timing of those movements. Moreover, this
year reinforces the importance of maintaining a long-term perspective and
reaffirms the principle that it is time---not timing---that leads to
investment success.

[PHOTO]
Dennis J. McDonnell and Don G. Powell

Economic Overview

Although the third quarter posted a stronger-than-expected annual gross
domestic product growth rate of 4.2 percent, the economy has slowed
significantly this year. This slowdown is due in large part to the Federal
Reserve Board's efforts to tighten monetary supply in 1994--a measure that
proved successful, as economic growth during the first half of 1995 was
substantially lower than its fourth quarter 1994 rate of 5.1 percent. And,
while other key economic data have shown mixed signs during recent months,
the general economic trends for the year continue to support a "soft landing"
scenario.

Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed its trend of raising interest rates and lowered short-term rates by a
quarter percent on July 6. With slowing growth, interest rates declined and the
value of many fixed-income investments rose (bond yields and prices move in
opposite directions).

Performance Summary

The Trust produced a tax-exempt distribution of 6.24 percent<F3>, based on
the closing stock price of $12.50 per common share on October 31, 1995. Because
income from the Trust is exempt from federal and Pennsylvania state income
taxes, it is important to compare the Trust's distribution rate to an equivalent
taxable rate. For example, for Pennsylvania residents in the combined marginal
tax bracket of 37.8 percent, the Trust's distribution rate represents a yield
equivalent to a taxable investment earning 10.03 percent<F4>. In fact, many
closed-end municipal bond funds, such as your investment, are currently offering
higher yields (after taxes) over many income alternatives.

As the graph on the following page shows, the Trust's net asset value and
market price have made significant gains over the one-year period. The Trust's
closing stock price, for example, gained 20.5 percent from October 1994 to
October 1995. Moreover, we are pleased to report the Trust generated a one-year
total return at market price of 28.60 percent<F1>, which includes reinvestment
of dividends for the period ended October 31, 1995.

(Continued on page two)

Economic Outlook

We believe the Fed will move cautiously before it continues to lower
short-term rates, waiting for key indicators to show that the economy has truly
settled into a slow growth pattern. Although current economic data continues to
send mixed signals, we anticipate the economy will grow at an annual rate of 3
percent in the fourth quarter and inflation will run under 3 percent.

Based upon a generally modest growth and low inflation outlook, we believe the
outlook for fixed-income markets is positive. As interest rates fall in response
to a slowing economy, we believe yields on short-term municipal bonds will
continue to move significantly lower than long-term municipal bonds. Lower
short-term rates typically translate into lower leveraging costs for the Trust,
which provides increased opportunities for higher earnings over time.
Additionally, a steepening of the municipal yield curve would likely increase
investor demand for long-term municipal bonds and help to boost market prices.
Long-term municipal bond prices will also benefit from the combination of low
supply of new municipal bond issues and increased demand driven by scheduled
bond maturities.

[GRAPH]

Trust Participates in Market Gains of '95

DATE NAV Market Price

31-Oct-94 12.57 10.375
30-Nov-94 12.00 10.875
31-Dec-94 12.53 10.750
31-Jan-95 13.23 12.000
28-Feb-95 13.90 12.625
31-Mar-95 13.95 12.750
3O-Apr-95 13.81 12.750
31-May-95 14.52 12.500
30-Jun-95 14.10 12.875
31-Jul-95 14.16 12.500
31-Aug-95 14.35 12.625
3O-Sep-95 14.38 12.375
31-Oct-95 14.68 12.500

Based on month-end prices

While there has been varied speculation about the impact of tax reform, no one
is certain about what will finally happen. Consequently, in the near term, the
municipal market may continue to experience periodic market fluctuations as
various proposals come to the forefront. However, in the long term, we believe
the municipal market will remain an attractive investment choice for investors
seeking high current income. We will continue to keep a close watch over any new
developments and evaluate the potential impact they may have on your investment
in the Trust.

Once again, thank you for your continued confidence in your investment with
Van Kampen American Capital and for the privilege of working with you in seeking
to reach your financial goals.

Sincerely,

Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.

Performance Results for the Period Ended October 31, 1995

Van Kampen Merritt Pennsylvania Value Municipal Income Trust

(NYSE Ticker Symbol VPV)
<TABLE>
<CAPTION>
<S> <C>
Total Returns
One-year total return based on market price<F1>........................................ 28.60%
One-year total return based on NAV<F2>................................................. 23.90%
Distribution Rates
Distribution rate as a % of initial offer common stock price<F3>....................... 5.20%
Taxable-equivalent distribution rate as a % of initial offer common stock price<F4>.... 8.36%
Distribution rate as a % of closing common stock price<F3>............................. 6.24%
Taxable-equivalent distribution rate as a % of closing common stock price<F4>.......... 10.03%
Share Valuations
Net asset value........................................................................ $ 14.68
Closing common stock price............................................................. $12.500
One-year high common stock price (07/10/95)............................................ $13.500
One-year low common stock price (11/16/94) ............................................ $10.250
Preferred share rate<F5>............................................................... 3.60%

<FN>
<F1> Total return based on market price assumes an investment at the market price at
the beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing stock price at the end of the period indicated.

<F2> Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment
of all distributions for the period, and sale of all shares at the end of the
period, all at NAV.

<F3> Distribution rate represents the monthly annualized distributions of the Trust
at the end of the period and not the earnings of the Trust.

<F4> The taxable-equivalent distribution rate is calculated assuming a 37.8%
combined federal and state tax bracket, which takes into consideration the
deductibility of individual state taxes paid.

<F5> See "Notes to Financial Statements" footnote #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.
</TABLE>

<TABLE>
<CAPTION>
Portfolio of Investments
October 31, 1995
- -----------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Bonds
Pennsylvania 89.6%
$ 990 Allegheny Cnty, PA Indl Dev Auth Med Cent
Rev Presbyterian Med Cent Rfdg (FHA Gtd) .............. 6.750% 02/01/26 $ 1,028,254
2,600 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp Ser
A Rfdg ................................................ 6.750 11/15/14 2,603,640
1,000 Bedford, PA Area Sch Dist (MBIA Insd) ................. 5.500 04/15/17 988,190
925 Berks Cnty, PA Muni Auth Hosp Rev Reading Hosp & Med
Cent Proj B (MBIA Insd) ............................... 6.000 10/01/14 936,396
2,000 Butler Cnty, PA Hosp Auth Hosp Rev North Hills
Passavant Hosp Ser A (Cap Guar Insd) .................. 6.900 06/01/09 2,210,820
2,270 Cumberland Cnty, PA Auth Rev First Mtg Carlisle Hosp &
Hlth .................................................. 6.800 11/15/14 2,299,782
3,900 Dauphin Cnty, PA Hosp Auth Rev Cmnty Genl Osteopathic
Hosp Rfdg ............................................. 7.375 06/01/16 4,033,458
1,070 Delaware Cnty, PA Auth College Rev Haverford College
Rfdg (MBIA Insd) ...................................... 5.400 11/15/13 1,048,129
3,570 Delaware Cnty, PA Auth Hlth Care Rev Mercy Hlth Corp
Southeastn Ser A (Connie Lee Insd) .................... 5.125 11/15/12 3,381,504
1,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med
Cent .................................................. 6.000 12/15/09 1,009,740
1,675 Delaware Cnty, PA Regl Wtr Quality Ctl Auth Swr Rev
Ser A (FGIC Insd) ..................................... 5.500 05/01/12 1,675,503
1,400 Derry, PA Sch Dist Ser A Rfdg (MBIA Insd) ............. 6.550 09/01/06 1,531,376
3,505 Eastern York Sch Dist, PA (MBIA Insd) ................. 6.000 06/01/09 3,688,312
1,620 Lancaster, PA Hsg Fin Corp Mtg Rev Ser A Rfdg (FHA
Gtd) .................................................. 6.800 08/01/23 1,681,916
1,000 Lehigh Cnty, PA Indl Dev Auth Pollutn Ctl Rev PA Pwr &
Lt Co Proj Ser A Rfdg (MBIA Insd) ..................... 6.400 11/01/21 1,052,710
1,000 Monroeville, PA Hosp Auth Hosp Rev Forbes Hlth Sys
Rfdg .................................................. 6.250 10/01/15 975,490
2,500 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev
Abington Mem Hosp Ser A (AMBAC Insd) .................. 5.125 06/01/24 2,277,000
3,850 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl Ser
E Rfdg (MBIA Insd) .................................... 6.700 12/01/21 4,165,161
3,250 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 40 ..... 6.900 04/01/25 3,392,025
3,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 41B .... 6.450 10/01/12 3,079,890
500 Pennsylvania Infrastructure Invt Auth Rev Pennvest
Subser B .............................................. 6.800 09/01/10 549,325
1,000 Pennsylvania Intergvtl Coop Auth Spl Tax Rev City of
Philadelphia Funding Pgm (MBIA Insd) .................. 5.600 06/15/15 991,120
</TABLE>

4 See Notes to Financial Statements

<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
October 31, 1995
- ----------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (Continued)
$ 4,000 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC Insd) ...... 5.100% 07/01/04 $ 4,047,200
4,275 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC Insd) ...... 5.250 07/01/10 4,199,675
1,500 Pennsylvania St Higher Edl Fac Auth College & Univ Rev
Allegheny College Proj B Rfdg ........................... 6.000 11/01/22 1,444,770
1,430 Pennsylvania St Higher Edl Fac Auth Rev Ser H (AMBAC
Insd) ................................................... 5.700 06/15/14 1,435,591
2,970 Pennsylvania St Higher Edl Thomas Jefferson Univ Ser A
Rfdg .................................................... 6.625 08/15/09 3,199,700
2,000 Philadelphia, PA Auth for Indl Dev Rev .................. 5.500 07/01/10 1,989,880
1,500 Philadelphia, PA Gas Wks Rev Ser 14 (FSA Insd) .......... 6.250 07/01/08 1,608,915
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp Rev
Frankford Hosp Rfdg (Connie Lee) ........................ 5.750 01/01/19 987,930
895 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev Cmnty
College Ser A (MBIA Insd) ............................... 6.050 05/01/08 956,334
1,455 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev Cmnty
College Ser B Rfdg (MBIA Insd) .......................... 6.500 05/01/09 1,619,619
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev Saint
Agnes Med Cent Proj Rfdg (FHA Gtd) ...................... 7.250 08/15/31 1,060,160
1,000 Philadelphia, PA Sch Dist Ser B (AMBAC Insd) ............ 5.500 09/01/15 988,620
2,000 Philadelphia, PA Sch Dist Ser B (AMBAC Insd) ............ 5.500 09/01/18 1,955,340
5,305 Philadelphia, PA Ser A Rfdg (FGIC Insd) ................. 5.100 05/15/02 5,430,675
3,000 Philadelphia, PA Ser A Rfdg (FGIC Insd) ................. 6.250 11/15/04 3,307,800
5,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (MBIA Insd) .... 6.750 08/01/03 5,646,750
3,675 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (AMBAC Insd) ... 5.500 06/15/07 3,810,644
3,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (Cap Guar Insd)
......................................................... 5.500 06/15/14 2,899,770
1,000 Pittsburgh, PA Wtr & Swr Auth Wtr & Swr Rev Ser B (FSA
Insd) <F3> .............................................. 5.750 09/01/25 992,150
2,500 Schuylkill Cnty, PA Muni Auth Wtr & Swr Rev Ser A (FGIC
Insd) ................................................... 6.625 02/01/11 2,663,475
1,500 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon Regl Hlth
Sys Proj A Rfdg ......................................... 6.875 12/01/09 1,567,290
1,000 State Pub Sch Bldg Auth PA College Rev Westmoreland Cnty
Cmnty Ser F (MBIA Insd) <F2> ............................ 5.500 10/15/15 985,090
1,715 Wayne Cnty, PA Hosp & Hlth Fac Auth Cnty Gtd Hosp Rev
Wayne Mem Hosp Rfdg (MBIA Insd) ......................... 5.375 07/01/12 1,676,121
------------
99,073,240
------------
</TABLE>

5 See Notes to Financial Statements

<FN>
<F1> At October 31, 1995, cost for federal income tax purposes is $103,501,567;
the aggregate gross unrealized appreciation is $4,860,406 and the
aggregate gross unrealized depreciation is $100,063, resulting in net
unrealized appreciation of $4,760,343.

<F2> Securities purchased on a when issued or delayed delivery basis.

<F3> Assets segregated as collateral for when issued or delayed delivery
purchase commitments.
</TABLE>

The following table summarizes the portfolio composition at October 31, 1995,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

Portfolio Composition by Credit Quality

AAA..... 67.3%
AA...... 9.3
A....... 9.6
BBB..... 13.8
=======
100.0%
=======

6 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Assets and Liabilities
October 31, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at Market Value (Cost $103,501,567) (Note 1)................................... $ 108,261,910
Short-Term Investments (Note 1)............................................................. 4,300,000
Interest Receivable......................................................................... 2,126,065
Unamortized Organizational Expenses (Note 1)................................................ 12,474
---------------
Total Assets............................................................................ 114,700,449
---------------
Liabilities:
Payables:
Custodian Bank............................................................................ 2,862,023
Investments Purchased..................................................................... 979,824
Investment Advisory Fee (Note 2).......................................................... 60,819
Income Distributions - Common and Preferred Shares........................................ 56,403
Administrative Fee (Note 2)............................................................... 18,713
Accrued Expenses............................................................................ 112,497
---------------
Total Liabilities....................................................................... 4,090,279
---------------
Net Assets.................................................................................. $ 110,610,170
===============
Net Assets Consist of:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 900 issued with
liquidation preference of $50,000 per share) (Note 4)..................................... $ 45,000,000
---------------
Common Shares ($.01 par value with an unlimited number of shares authorized,
4,468,924 shares issued and outstanding).................................................. 44,689
Paid in Surplus ............................................................................ 65,577,874
Net Unrealized Appreciation on Investments.................................................. 4,760,343
Accumulated Undistributed Net Investment Income............................................. 241,872
Accumulated Net Realized Loss on Investments................................................ (5,014,608)
---------------
Net Assets Applicable to Common Shares.................................................. 65,610,170
---------------
Net Assets.................................................................................. $ 110,610,170
===============
Net Asset Value Per Common Share ($65,610,170 divided by 4,468,924 shares outstanding)...... $ 14.68
===============
</TABLE>

7 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended October 31, 1995
- ---------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest........................................................ $ 6,294,278
---------------
Expenses:
Investment Advisory Fee (Note 2)................................ 690,593
Administrative Fee (Note 2)..................................... 212,490
Preferred Share Maintenance (Note 4)............................ 139,364
Custody (Note 1)................................................ 39,092
Trustees Fees and Expenses (Note 2)............................. 21,180
Legal (Note 2).................................................. 9,220
Amortization of Organizational Expenses (Note 1)................ 4,997
Other........................................................... 125,078
---------------
Total Expenses.............................................. 1,242,014
Earnings Credits on Cash Balances (Note 1).................. (14,844)
---------------
Net Expenses................................................ 1,227,170
---------------
Net Investment Income........................................... $ 5,067,108
===============
Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales........................................... $ 43,043,981
Cost of Securities Sold....................................... (44,701,276)
---------------
Net Realized Loss on Investments ............................... (1,657,295)
---------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period....................................... (6,683,208)
End of the Period............................................. 4,760,343
---------------
Net Unrealized Appreciation on Investments During the Period.... 11,443,551
---------------
Net Realized and Unrealized Gain on Investments................. $ 9,786,256
===============
Net Increase in Net Assets from Operations...................... $ 14,853,364
===============
</TABLE>

8 See Notes to Financial Statements

<TABLE>
<CAPTION>
Statement of Changes in Net Assets

For the Years Ended October 31, 1995 and 1994
- -------------------------------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 1995 October 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................................. $ 5,067,108 $ 5,101,522
Net Realized Loss on Investments................................... (1,657,295) (3,357,313)
Net Unrealized Appreciation/Depreciation on Investments During the
Period........................................................... 11,443,551 (10,638,924)
---------------- ----------------
Change in Net Assets from Operations .............................. 14,853,364 (8,894,715)
---------------- ----------------
Distributions from Net Investment Income:
Common Shares.................................................... (3,642,106) (3,673,437)
Preferred Shares................................................. (1,790,430) (1,218,288)
---------------- ----------------
(5,432,536) (4,891,725)
---------------- ----------------
Distributions from Net Realized Gain on Investments (Note 1):
Common Shares.................................................... -0- (51,840)
Preferred Shares................................................. -0- (9,896)
---------------- ----------------
-0- (61,736)
---------------- ----------------
Total Distributions................................................ (5,432,536) (4,953,461)
---------------- ----------------
Net Change in Net Assets from Investment Activities................ 9,420,828 (13,848,176)
Net Assets:
Beginning of the Period............................................ 101,189,342 115,037,518
---------------- ----------------
End of the Period (Including undistributed net investment income
of$241,872 and $607,300, respectively)........................... $ 110,610,170 $ 101,189,342
================ ================
</TABLE>

9 See Notes to Financial Statements

<TABLE>
<CAPTION>
Financial Highlights

The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- ----------------------------------------------------------------------------------------------
April 30, 1993
Year Year (Commencement
Ended Ended of Investment
October 31, October 31, Operations) to
1995 1994 October 31, 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period <F1>.... $ 12.573 $ 15.672 $ 14.687
----------- ------------ ----------------
Net Investment Income.......................... 1.134 1.142 .433
Net Realized and Unrealized Gain/Loss on
Investments.................................. 2.190 (3.132) .896
----------- ------------ ----------------
Total from Investment Operations................. 3.324 (1.990) 1.329
----------- ------------ ----------------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders.................. .815 .822 .274
Common Share Equivalent of Distributions Paid
to Preferred Shareholders.................. .401 .273 .070
Distributions from Net Realized Gain on
Investments (Note 1):
Paid to Common Shareholders.................. -0- .012 -0-
Common Share Equivalent of Distributions Paid
to Preferred Shareholders.................... -0- .002 -0-
----------- ------------ ----------------
Total Distributions.............................. 1.216 1.109 .344
----------- ------------ ----------------
Net Asset Value, End of the Period............... $ 14.681 $ 12.573 $ 15.672
=========== ============ ================
Market Price Per Share at End of the Period...... $ 12.500 $ 10.375 $ 14.875
Total Investment Return at Market Price
(Non-Annualized) <F2>............................ 28.60% (25.61%) 1.00%
Total Return at Net Asset Value (Non-Annualized)
<F3>............................................. 23.90% (14.91%) 6.33%

Net Assets at End of the Period (In millions).... $ 110.6 $ 101.2 $ 115.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares (Annualized) <F4>.... 2.03% 1.98% 1.55%
Ratio of Expenses to Average Net Assets
(Annualized) <F4>.............................. 1.17% 1.16% 1.14%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares
(Annualized) <F5>.............................. 5.35% 6.09% 4.75%
Portfolio Turnover............................... 43.03% 52.74% 8.87%

<FN>
<F1> Net asset value at April 30, 1993, is adjusted for common and preferred
share offering costs of $.313 per common share.

<F2> Total investment return at market price reflects the change in market
value of the common shares for the period indicated with reinvestment of
dividends in accordance with the Trust's dividend reinvestment plan.

<F3> Total return at net asset value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.

<F4> Beginning with the year ended October 31, 1995, the Ratios of Expenses are
based upon Total Expenses which does not reflect credits earned on
overnight cash balances. (Note 1)

<F5> Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
</TABLE>

10 See Notes to Financial Statements

Notes to Financial Statements
October 31, 1995
- --------------------------------------------------------------------------------

1. Significant Accounting Policies

Van Kampen Merritt Pennsylvania 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 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.

A. Security Valuation-Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of less than 60 days are valued at
amortized cost.

B. Security Transactions-Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Trust may purchase and sell securities on a "when issued" or "delayed
delivery" basis with settlement to occur at a later date. The value of the
security so purchased is subject to market fluctuations during this period.
The Trust will maintain, in a segregated account with its custodian, assets
having an aggregate value at least equal to the amount of the when issued or
delayed delivery purchase commitments until payment is made.

C. Investment Income-Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.

D. Organizational Expenses-The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization and initial registration in the amount
of $25,000. These costs are being amortized on a 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 expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.

Notes to Financial Statements (Continued)
October 31, 1995
- --------------------------------------------------------------------------------

E. Expense Reductions-During the year ended October 31, 1995, the Trust's
custody fee was reduced by $14,844 as a result of credits earned from overnight
cash balances.

F. 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, 1995, the Trust had an accumulated capital loss
carry forward for tax purposes of $5,014,608, of which $3,357,313 and
$1,657,295 will expire on October 31, 2002 and 2003, respectively.

G. Distribution of Income and Gains-The Trust declares and pays dividends from
net investment income to common shareholders monthly. 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, 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 record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.

Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.

For the year ended October 31, 1995, the Trust recognized expenses of
approximately $11,900 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.

Notes to Financial Statements (Continued)
October 31, 1995
- --------------------------------------------------------------------------------

The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. The Trust's liability under the
deferred compensation and retirement plans at October 31, 1995, was
approximately $24,100.

At October 31, 1995, VKAC owned 6,700 common shares of the Trust.

3. Investment Transactions

Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended October 31, 1995, were $44,761,313 and
$44,701,276, respectively.

4. Preferred Shares

The Trust has outstanding 900 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, 1995, was 3.60%. During the
year ended October 31, 1995, the rates ranged from 2.75% to 6.12%.

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.

Independent Auditors' Report
- --------------------------------------------------------------------------------

The Board of Trustees and Shareholders of
Van Kampen Merritt Pennsylvania Value Municipal Income Trust:

We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Pennsylvania Value Municipal Income Trust (the "Trust"),
including the portfolio of investments, as of October 31, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Merritt Pennsylvania Value Municipal Income Trust as of October 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
November 29, 1995

Dividend Reinvestment Plan
- --------------------------------------------------------------------------------

The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.

If you decide to participate in the Plan, State Street Bank and Trust Company,
as your Plan Agent, will automatically invest your dividends and capital gains
distributions in Common Shares of the Trust for your account.

How to Participate

If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.

How the Plan Works

Participants in the Plan will receive the equivalent in Common Shares valued on
the valuation date, generally at the lower of market price or net asset value,
except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Trust's Common Shares,
resulting in the acquisition of fewer Common Shares than if the dividend or
distribution had been paid in Common Shares issued by the Trust. All
reinvestments are in full and fractional Common Shares and are carried to three
decimal places.

Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.

Costs of the Plan

The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.

Tax Implications

You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of divi
dends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.

Right to Withdraw

Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:

One Parkview Plaza, Oakbrook Terrace, IL 60181
Attn: Closed-End Funds

Funds Distributed by Van Kampen American Capital
- --------------------------------------------------------------------------------

GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

Van Kampen Merritt Pennsylvania Value Municipal Income Trust
- --------------------------------------------------------------------------------

Officers and Trustees

Don G. Powell*
Chairman and Trustee

Dennis J. McDonnell*
President and Trustee

David C. Arch
Trustee

Rod Dammeyer
Trustee

Howard J Kerr
Trustee

Theodore A. Myers
Trustee

Hugo F. Sonnenschein
Trustee

Wayne W. Whalen*
Trustee

Peter W. Hegel*
Vice President

Ronald A. Nyberg*
Vice President and Secretary

Edward C. Wood, III*
Vice President and Treasurer

Scott E. Martin*
Assistant Secretary

Weston B. Wetherell*
Assistant Secretary

Nicholas Dalmaso*
Assistant Secretary

John L. Sullivan*
Controller

Steven M. Hill*
Assistant Treasurer

Investment Adviser

Van Kampen American Capital Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

Custodian and
Transfer Agent

State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606

Independent Auditors

KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

*"Interested" persons of the Trust, as defined in the Investment Company Act of
1940.

SM denotes a service mark of
Van Kampen American Capital Distributors, Inc.