<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Glossary of Terms................................ 5
Performance Results.............................. 7
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 10
Statement of Operations.......................... 11
Statement of Changes in Net Assets............... 12
Financial Highlights............................. 13
Notes to Financial Statements.................... 14
</TABLE>
VPV SAR 6/98
<PAGE> 2
LETTER TO SHAREHOLDERS
May 22, 1998
Dear Shareholder,
The Taxpayer Relief Act of 1997,
signed into law by President Clinton
last year, was created to fill the need
for a broad variety of tax-advantaged
investments to promote asset growth. We [PHOTO]
are pleased that you s4elected our Trust
as a vehicle to provide the potential
for tax-free income within your
investment portfolio. As you are aware,
dividends distributed by the Trust are
generally free from federal income DENNIS J. MCDONNELL AND DON G. POWELL
taxes, and often from state and local
taxes as well. At Van Kampen American Capital, we strive not only for a high
level of current income, but total return performance as well.
ECONOMIC OVERVIEW
After nearly seven years of continuous growth, the economy remained buoyant
with few signs of accelerating inflation. Wholesale prices in the first quarter
plummeted at an annual rate of 4.2 percent, while consumer prices inched up 0.2
percent and employment costs rose just 0.7 percent. However, inflationary
pressures were eased by factors such as lower oil prices, increasing
productivity, and a pending budget surplus. The Asian financial crisis led to a
stronger dollar and a decline in the prices of Asian imports, which in turn has
discouraged price increases on competing U.S. goods.
To date, Asia's slowdown has had a modest impact on U.S. economic growth. In
the first quarter, the U.S. economy grew at a 4.2 percent annual rate, its
fastest pace in the past year. Strong consumer spending and inventory buildup by
manufacturers offset a decrease in exports to Asia. Despite the economy's
strength, the Federal Reserve Board refrained from raising interest rates, given
the lack of domestic inflationary pressure and concerns about Asia's economic
future.
In Pennsylvania, accelerating economic growth and conservative fiscal
management boosted general fund balances to $403 million in 1997. As a result,
Moody's Investors Services upgraded the state's general obligation debt. Overall
credit prospects for state and local bonds issued in the Commonwealth of
Pennsylvania are positive, reflecting healthy job growth, relatively low
unemployment, and hardy tax conditions.
MARKET OVERVIEW
Against the backdrop of benign inflation and no action by the Fed, U.S. bond
prices rose during the past six months, although they ended the reporting period
below the highs reached in early January.
Continued on page two
1
<PAGE> 3
The yield of the 30-year Treasury bond, which moves in the opposite
direction of its price, fell from 6.15 percent on October 31 to 5.95 percent on
April 30. Bond prices hit a record high as yields reached 5.69 percent in early
January amidst expectations that the Fed would cut interest rates, but the yield
went back to 6.00 percent in early March after the Fed chose not to act. Yields
were volatile for the rest of the reporting period, as foreign investors sold
U.S. Treasury holdings and investors began to fear that the Fed was leaning
toward a rate hike.
Municipal bond yields generally moved in unison with Treasuries but did not
gain nearly as much in price. By the end of the reporting period, the average
yield of AAA- rated, 30-year generic general obligation bonds was 5.14 percent,
two basis points above the yield posted on October 31 of last year. The
underperformance of municipal bonds can be attributed in part to heavy supply
that outpaced demand. Supply increased as state and local governments took
advantage of low interest rates by issuing bonds to refinance outstanding issues
with higher interest rates, as well as to fund new projects. In the first
quarter, long-term municipal issuance totaled $71 billion, up from $40 billion a
year earlier.
More than half of the new issue volume was AAA-rated and insured, which
significantly diminished the amount of uninsured, higher-yielding securities
available in the marketplace. The dominance of insured volume and the high
demand for uninsured paper created an imbalance that compressed the yields
between higher-quality and lower-quality bonds.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality
as of April 30, 1998
<TABLE>
<S> <C>
AAA........... 65.8%
AA............ 13.8%
A............. 8.2%
BBB........... 12.2%
</TABLE>
* As a Percentage of Long-Term Investments
Based upon highest credit quality ratings as issued by Standard & Poor's or
Moody's.
TRUST STRATEGY
We used the following strategies to manage the Trust during the period:
We maintained a portfolio consisting primarily of high-quality bonds with a
heavy emphasis on AAA-rated securities. Under current market conditions, we
believe the yield spread between higher-rated and lower-rated securities does
not adequately compensate the investor for the additional credit risk of the
lower-rated security. Also, high-quality bonds generally have performed better
than lower-quality holdings when interest rates are falling, which was the case
for most of the reporting period.
Continued on page three
2
<PAGE> 4
Overall, we limited the number of acquisitions because current market yields
were below the average yield of bonds in the Trust. In addition, many existing
holdings had appreciated in price, and selling them would have increased the tax
liability of our shareholders through a capital gains distribution. The few
purchases we made emphasized current coupon bonds, priced at face value. These
purchases helped to maintain the Trust's dividend. The portfolio remains well
diversified by sector, with its heaviest weightings in health care and
single-family housing -- both sectors include many high-yielding securities.
The duration of the Trust, which is a measure of its sensitivity to changing
interest rates, declined during the period because a number of the Trust's bonds
were repriced to their first call dates. As a result, many of these bonds became
premium bonds, priced above their face value. This appreciation boosted the
total return of the Trust. As of April 30, the duration of the Trust was 6.30
years compared with 7.55 years for the Lehman Brothers Pennsylvania Municipal
Bond Index. Because of the longer-term nature of the Trust, the calculation of
this index's duration has been adjusted to eliminate bonds with maturities of
five years or less.
TOP FIVE PORTFOLIO SECTORS AS OF APRIL 30, 1998*
Health Care............................................. 24.6%
Single-Family Housing................................... 13.1%
Water & Sewer........................................... 12.5%
Public Building.......................................... 9.4%
General Purpose.......................................... 9.1%
*As a percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six-month period ended April 30, 1998, the Trust generated a total
return of 3.64 percent(1). This reflects a gain in market price per common share
from $13.625 on October 31, 1997, to $13.750 on April 30, 1998, plus
reinvestment of all dividends. The Trust had a tax-exempt distribution rate of
5.67 percent(3), based on the closing price of its common shares. Because income
from the Trust is exempt from federal and Pennsylvania income taxes, this
distribution rate is equivalent to a yield of 9.12 percent(4) on a taxable
investment (for investors in the combined federal and state income tax bracket
of 37.8 percent). Please refer to the chart on page seven for additional
performance numbers.
Continued on page four
3
<PAGE> 5
[DIVIDEND HISTORY GRAPH]
Six-month Dividend History
For the Period Ended April 30, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Nov. 1997...................... $.0625
Dec. 1997...................... $.0625
Jan. 1998...................... $.0625
Feb. 1998...................... $.0625
Mar. 1998...................... $.0625
Apr. 1998...................... $.0650
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
ECONOMIC OUTLOOK
We expect the economy to slow from its brisk first-quarter pace, although
the extent of the slowdown depends on the continued effects of Asia's crisis and
on Fed policy. We believe the Fed is biased toward raising rates, given concerns
about the economy's increasing strength. If economic strength ignites
inflationary pressures, then we believe the Fed will raise interest rates later
this year. As a result, the yield of the 30-year Treasury bond could top 6.25
percent.
We will continue to track market developments and their effects on the
Trust. When appropriate, we will make adjustments to the portfolio. As we
mentioned earlier, our goal remains to provide a high level of current income
for investors, plus gains in total return. Thank you for your continued support
and confidence in Van Kampen American Capital and the management of your Trust.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page seven
4
<PAGE> 6
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to one percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis point move.
CALL FEATURE: Allows the issuer to buy back a bond on specific call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bond holder for loss of income and ownership, the 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.
A callable bond is "priced to call" when it is selling at a premium, because it
is assumed that the issuer will redeem the bond at its call date, rather than at
maturity.
COUPON RATE: The stated rate of interest a bond pays until maturity, expressed
as a percentage of its face value.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investor Services are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D; Moody's ratings range from a high of Aaa to a low of D.
CREDIT SPREAD: The difference in yield between higher-quality issues and
lower-quality issues. Normally, lower-quality issues provide higher yields than
higher-quality issues in order 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.
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
one-percent change in the price of the bond for every one-percent change in
interest rates. The longer a fund's duration, the greater the effect of interest
rate movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.
FEDERAL RESERVE BOARD (THE FED): A group that meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. These
bonds are issued to finance essential government projects, such as highways and
schools.
5
<PAGE> 7
INFLATION: An economic situation in which money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is widely
measured by the Consumer Price Index, an economic indicator that measures the
change in the cost of purchased goods and services.
INSURED BOND: A bond that is insured against default by the municipal bond
insurer. If the issuer defaults, the insurance company will step in and take
over payments of interest and principal. As a result of this protection against
credit risk, most municipal bonds are AAA-rated. Insurance on the bonds does not
relate to mutual fund shares, which will fluctuate in price.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's NAV, the fund is trading at a
discount. When the price is more than the NAV, the fund is trading at a premium.
MUNICIPAL BOND: A debt security issued by a state, municipality, or other
governmental entity to finance capital expenditures such as the construction of
highways or public works.
NET ASSET VALUE (NAV): The value of a fund share, calculated by deducting a
fund's liabilities from its total assets and dividing this amount by the number
of shares outstanding.
PREREFUNDING: A process whereby new bonds are issued to refinance an outstanding
bond issue. This typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
PREMIUM BOND: A bond whose market price is above its face value (or "par
value"). Because bonds usually mature at face value, a premium bond has less
potential to appreciate in price than a par bond.
YIELD SPREAD: The difference between the yields of distinct bonds, due to
variant credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
ZERO COUPON BONDS: A corporate or municipal debt security that trades at a deep
discount to face value and pays no interest. It may be redeemed at maturity for
full face value.
6
<PAGE> 8
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1998
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA
VALUE MUNICIPAL INCOME TRUST
(NYSE TICKER SYMBOL--VPV)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1).......... 3.64%
Six-month total return based on NAV(2)................... 2.89%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................. 5.67%
Taxable-equivalent distribution rate as a % of closing
common stock price(4).................................... 9.12%
SHARE VALUATIONS
Net asset value.......................................... $ 15.55
Closing common stock price............................... $ 13.75
Six-month high common stock price (03/19/98)............. $14.9375
Six-month low common stock price (11/17/97).............. $13.1875
Preferred share rate(5).................................. 4.00%
</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.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 98.7%
PENNSYLVANIA 91.0%
$ 940 Allegheny Cnty, PA Indl Dev Auth Med Cent Rev
Presbyterian Med Cent Rfdg (FHA Gtd)............... 6.750% 02/01/26 $ 1,026,254
2,600 Allentown, PA Area Hosp Auth Rev Sacred Heart Hosp
Ser A Rfdg......................................... 6.750 11/15/14 2,821,754
925 Berks Cnty, PA Muni Auth Hosp Rev Reading Hosp &
Med Cent Proj B (MBIA Insd)........................ 6.000 10/01/14 989,852
2,000 Butler Cnty, PA Hosp Auth Hosp Rev North Hills
Passavant Hosp Ser A (Prerefunded @ 06/01/01) (FSA
Insd).............................................. 6.900 06/01/09 2,186,200
2,270 Cumberland Cnty, PA Auth Rev First Mtg Carlisle
Hosp & Hlth Rfdg................................... 6.800 11/15/14 2,469,919
3,900 Dauphin Cnty, PA Hosp Auth Rev Cmnty Genl
Osteopathic Hosp Rfdg.............................. 7.375 06/01/16 4,261,842
3,570 Delaware Cnty, PA Auth Hlth Care Rev Mercy Hlth
Corp Southeastn Ser A Rfdg (Connie Lee Insd)....... 5.125 11/15/12 3,649,397
1,000 Delaware Cnty, PA Auth Hosp Rev Crozer Chester Med
Cent............................................... 6.000 12/15/09 1,052,650
1,400 Derry, PA Sch Dist Ser A Rfdg (MBIA Insd).......... 6.550 09/01/06 1,515,654
3,505 Eastern York Sch Dist PA (MBIA Insd)............... 6.000 06/01/09 3,772,361
1,565 Lancaster, PA Hsg Fin Corp Mtg Rev Ser A Rfdg (FHA
Gtd)............................................... 6.800 08/01/23 1,644,189
2,000 Lehigh Cnty, PA Genl Purp Auth Cedar Crest College
Rfdg............................................... 6.700 04/01/26 2,159,260
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 1,087,470
1,000 Monroeville, PA Hosp Auth Hosp Rev Forbes Hlth Sys
Rfdg............................................... 6.250 10/01/15 1,056,010
2,500 Montgomery Cnty, PA Higher Edl & Hlth Auth Hosp Rev
Abington Mem Hosp Ser A (AMBAC Insd)............... 5.125 06/01/24 2,400,900
3,850 Montgomery Cnty, PA Indl Dev Auth Rev Pollutn Ctl
Ser E Rfdg (MBIA Insd)............................. 6.700 12/01/21 4,169,050
1,500 Parkland, PA Sch Dist (FGIC Insd).................. 5.000 09/01/18 1,453,365
3,250 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
40................................................. 6.900 04/01/25 3,508,765
3,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 41B
Rfdg............................................... 6.450 10/01/12 3,188,730
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
53A................................................ 6.000 10/01/15 1,040,010
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
53A................................................ 6.050 04/01/18 1,043,930
2,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser 54A
Rfdg (FHA Gtd)..................................... 6.050 10/01/16 2,087,860
1,000 Pennsylvania Hsg Fin Agy Single Family Mtg Ser
56A................................................ 6.050 10/01/16 1,045,480
500 Pennsylvania Infrastructure Invt Auth Rev Pennvest
Subser B........................................... 6.800 09/01/10 547,590
1,500 Pennsylvania Intergvtl Coop Auth Spl Tax Rev
Philadelphia Fdg Pgm Rfdg (FGIC Insd).............. 5.500 06/15/20 1,516,530
4,000 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC
Insd).............................................. 5.100 07/01/04 4,096,400
4,275 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC
Insd).............................................. 5.250 07/01/10 4,308,944
1,000 Pennsylvania St Higher Edl Fac Allegheny DE Vly
Oblig Ser A Rfdg (MBIA Insd)....................... 5.875 11/15/21 1,049,250
1,000 Pennsylvania St Higher Edl Fac Auth College & Univ
Rev Bryn Mawr College (MBIA Insd).................. 5.625 12/01/17 1,037,980
895 Pennsylvania St Higher Edl Facs Auth Rev Ser A
(MBIA Insd)........................................ 6.625 08/15/09 979,067
2,075 Pennsylvania St Higher Edl Facs Auth Rev Thomas
Jefferson Univ Ser A (Prerefunded @ 08/15/02)...... 6.625 08/15/09 2,285,716
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$ 2,000 Philadelphia, PA Auth for Indl Dev Rev Rfdg........ 5.500% 07/01/10 $ 2,058,880
1,500 Philadelphia, PA Gas Wks Rev Ser 14 Rfdg (FSA
Insd).............................................. 6.250 07/01/08 1,640,685
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Hosp
Rev PA Hosp Rfdg................................... 6.250 07/01/06 1,072,170
895 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev
Cmnty Coll Ser A (MBIA Insd)....................... 6.050 05/01/08 976,024
1,455 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev
Cmnty Coll Ser B Rfdg (MBIA Insd).................. 6.500 05/01/09 1,674,618
1,000 Philadelphia, PA Hosp & Higher Edl Fac Auth Rev
Saint Agnes Med Cent Proj Rfdg (Prerefunded @
08/15/01) (FHA Gtd)................................ 7.250 08/15/31 1,105,440
2,000 Philadelphia, PA Sch Dist Ser B (AMBAC Insd)....... 5.500 09/01/18 2,026,060
5,305 Philadelphia, PA Ser A Rfdg (FGIC Insd)............ 5.100 05/15/02 5,440,012
3,000 Philadelphia, PA Ser A Rfdg (FGIC Insd)............ 6.250 11/15/04 3,289,260
5,000 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (MBIA
Insd).............................................. 6.750 08/01/03 5,523,100
3,675 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (AMBAC
Insd).............................................. 5.500 06/15/07 3,874,185
1,720 Pittsburgh, PA Urban Redev Mtg Rev Ser C........... 5.850 10/01/17 1,786,736
1,000 Pittsburgh, PA Urban Redev Mtg Rev Ser C Rfdg...... 6.500 10/01/23 1,064,600
1,500 Pottstown Boro, PA Auth Swr Rev Gtd Rfdg (AMBAC
Insd).............................................. 5.500 11/01/21 1,517,250
2,500 Schuylkill Cnty, PA Muni Auth Wtr & Swr Rev Ser A
(Prerefunded @ 02/01/00) (FGIC Insd)............... 6.625 02/01/11 2,633,200
1,500 Shaler, PA Area Sch Dist (FGIC Insd)............... * 11/15/21 424,650
1,500 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon Regl
Hlth Sys Proj A Rfdg (Prerefunded @ 12/01/02)...... 6.875 12/01/09 1,672,320
1,000 West Shore, PA Area Hosp Auth Hosp Rev Holy Spirit
Hosp Proj (MBIA Insd).............................. 5.700 01/01/22 1,028,670
------------
104,260,239
============
PUERTO RICO 7.7%
2,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser W
Rfdg............................................... 5.500 07/01/17 2,019,880
4,000 Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev Ser Y
Rfdg (Embedded Cap) (FSA Insd) (a)................. 5.730 07/01/21 4,580,760
2,000 Puerto Rico Pub Bldgs Auth Gtd Pub Edl & Hlth Fac
Ser K Rfdg......................................... 6.600 07/01/04 2,177,960
------------
8,778,600
============
TOTAL INVESTMENTS 98.7%
(Cost $105,012,085)............................................................ 113,038,839
OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%...................................... 1,457,323
------------
NET ASSETS 100.0%............................................................... $114,496,162
============
</TABLE>
* Zero coupon bond
(a) An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The price of these
securities may be more volatile than the price of a comparable fixed rate
security. The Trust invests in these instruments as a hedge against a rise
in the short-term interest rates which it pays on its preferred shares.
These derivative instruments are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly.
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $105,012,085)....................... $113,038,839
Interest Receivable......................................... 2,007,437
Other....................................................... 1,552
------------
Total Assets.......................................... 115,047,828
------------
LIABILITIES:
Payables:
Custodian Bank............................................ 292,480
Investment Advisory Fee................................... 61,553
Income Distributions -- Common and Preferred Shares....... 24,755
Administrative Fee........................................ 18,939
Affiliates................................................ 8,590
Trustees' Deferred Compensation and Retirement Plans........ 81,810
Accrued Expenses............................................ 63,539
------------
Total Liabilities..................................... 551,666
------------
NET ASSETS.................................................. $114,496,162
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 900 issued with liquidation preference of $50,000
per share)................................................ $ 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................................. 8,026,754
Accumulated Undistributed Net Investment Income............. 454,525
Accumulated Net Realized Loss............................... (4,607,680)
------------
Net Assets Applicable to Common Shares................ 69,496,162
------------
NET ASSETS.................................................. $114,496,162
============
NET ASSET VALUE PER COMMON SHARE ($69,496,162 divided
by 4,468,924 shares outstanding).......................... $ 15.55
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $3,154,594
----------
EXPENSES:
Investment Advisory Fee..................................... 371,525
Administrative Fee.......................................... 114,315
Preferred Share Maintenance................................. 59,028
Trustees' Fees and Expenses................................. 13,898
Legal....................................................... 4,275
Amortization of Organizational Costs........................ 2,466
Custody..................................................... 1,986
Other....................................................... 64,099
----------
Total Expenses............................................ 631,592
----------
NET INVESTMENT INCOME....................................... $2,523,002
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 97,489
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 7,859,568
End of the Period......................................... 8,026,754
----------
Net Unrealized Appreciation During the Period............... 167,186
----------
NET REALIZED AND UNREALIZED GAIN............................ $ 264,675
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $2,787,677
==========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1998 and
the Year Ended October 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 2,523,002 $ 5,038,831
Net Realized Gain..................................... 97,489 160,863
Net Unrealized Appreciation During the Period......... 167,186 2,637,712
------------ ------------
Change in Net Assets from Operations.................. 2,787,677 7,837,406
------------ ------------
Distributions from Net Investment Income:
Common Shares....................................... (1,686,923) (3,351,526)
Preferred Shares.................................... (789,178) (1,582,718)
------------ ------------
Total Distributions................................... (2,476,101) (4,934,244)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES... 311,576 2,903,162
NET ASSETS:
Beginning of the Period............................... 114,184,586 111,281,424
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $454,525 and $407,624,
respectively)....................................... $114,496,162 $114,184,586
============ ============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, 1993
Six Months (Commencement
Ended Year Ended October 31, of Investment
April 30, ------------------------------------- Operations) to
1998 1997 1996 1995 1994 October 31, 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a)........................ $15.481 $14.832 $14.681 $12.573 $15.672 $14.687
------- ------- ------- ------- ------- -------
Net Investment Income............. .565 1.128 1.127 1.134 1.142 .433
Net Realized and Unrealized
Gain/Loss....................... .060 .625 .137 2.190 (3.132) .896
------- ------- ------- ------- ------- -------
Total from Investment Operations... .625 1.753 1.264 3.324 (1.990) 1.329
------- ------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders..... .378 .750 .753 .815 .822 .274
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ .177 .354 .360 .401 .273 .070
Distributions from Net Realized
Gain:
Paid to Common Shareholders..... -0- -0- -0- -0- .012 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders........ -0- -0- -0- -0- .002 -0-
------- ------- ------- ------- ------- -------
Total Distributions................ .555 1.104 1.113 1.216 1.109 .344
------- ------- ------- ------- ------- -------
Net Asset Value, End of the
Period............................ $15.551 $15.481 $14.832 $14.681 $12.573 $15.672
======= ======= ======= ======= ======= =======
Market Price Per Share at End of
the Period........................ $13.750 $13.625 $12.625 $12.500 $10.375 $14.875
Total Investment Return at Market
Price (b)......................... 3.64%* 14.26% 7.17% 28.60% (25.61%) 1.00%*
Total Return at Net Asset Value
(c)............................... 2.89%* 9.70% 6.33% 23.90% (14.91%) 6.33%*
Net Assets at End of the Period
(In millions)..................... $ 114.5 $ 114.2 $ 111.3 $ 110.6 $ 101.2 $ 115.0
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**.......................... 1.81% 1.91% 1.97% 2.03% 1.98% 1.55%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)................. 4.97% 5.15% 5.24% 5.35% 6.09% 4.75%
Portfolio Turnover................. 3%* 9% 27% 43% 53% 9%*
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred
Shares......................... 1.10% 1.14% 1.17% 1.17% 1.16% 1.14%
</TABLE>
(a) Net Asset Value at April 30, 1993, is adjusted for common and preferred
share offering costs of $.313 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.
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital 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'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 April 30, 1993.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. As of April 30, 1998, there were no
when issued or delayed delivery purchase commitments.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $25,000. These costs
were amortized on a straight line basis over the 60 month period ending April
29, 1998.
E. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1997, the Trust had an accumulated capital loss carry
forward for tax purposes of $4,705,169, which will expire between October 31,
2002 and October 31, 2003.
At April 30, 1998, for federal income tax purposes, cost of long-term
investments is $105,012,085; the aggregate gross unrealized appreciation is
$8,039,596 and the aggregate gross unrealized depreciation is $12,842, resulting
in net unrealized appreciation of $8,026,754.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains which are included as ordinary income for tax
purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
American Capital 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 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.
For the six months ended April 30, 1998, the Trust recognized expenses of
approximately $1,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1998, the Trust recognized expenses of
approximately $19,000 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Trust. The maximum annual
benefit per trustee under the plan is $2,500.
At April 30, 1998, VKAC owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $4,318,029 and $3,679,882, 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 April 30, 1998, was 4.000%. During the
six months ended April 30, 1998, the rates ranged from 3.350% to 4.000%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
16
<PAGE> 18
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in
the Investment Company Act of 1940.
(C) Van Kampen American Capital Distributors, Inc., 1998
All rights reserved.
(SM) denotes a service mark of Van Kampen American
Capital Distributors, Inc.
17
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> PA VALUE MUNI INC TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 105,012,085
<INVESTMENTS-AT-VALUE> 113,038,839
<RECEIVABLES> 2,007,437
<ASSETS-OTHER> 1,552
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115,047,828
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 551,666
<TOTAL-LIABILITIES> 551,666
<SENIOR-EQUITY> 45,000,000
<PAID-IN-CAPITAL-COMMON> 65,622,563
<SHARES-COMMON-STOCK> 4,468,924
<SHARES-COMMON-PRIOR> 4,468,924
<ACCUMULATED-NII-CURRENT> 454,525
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,607,680)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,026,754
<NET-ASSETS> 114,496,162
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,154,594
<OTHER-INCOME> 0
<EXPENSES-NET> (631,592)
<NET-INVESTMENT-INCOME> 2,523,002
<REALIZED-GAINS-CURRENT> 97,489
<APPREC-INCREASE-CURRENT> 167,186
<NET-CHANGE-FROM-OPS> 2,787,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,476,101)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 311,576
<ACCUMULATED-NII-PRIOR> 407,624
<ACCUMULATED-GAINS-PRIOR> (4,705,169)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 371,525
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 631,592
<AVERAGE-NET-ASSETS> 70,280,103
<PER-SHARE-NAV-BEGIN> 15,481
<PER-SHARE-NII> 0.565
<PER-SHARE-GAIN-APPREC> 0.060
<PER-SHARE-DIVIDEND> (0.555)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15,551
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
