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<SEC-DOCUMENT>0000950137-02-006868.txt : 20021227
<SEC-HEADER>0000950137-02-006868.hdr.sgml : 20021227
<ACCEPTANCE-DATETIME>20021227163906
ACCESSION NUMBER:		0000950137-02-006868
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20021031
FILED AS OF DATE:		20021227
EFFECTIVENESS DATE:		20021227

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
		CENTRAL INDEX KEY:			0000908993
		IRS NUMBER:				367041986
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-07868
		FILM NUMBER:		02870520

	BUSINESS ADDRESS:	
		STREET 1:		ONE PARKVIEW PLAZA
		STREET 2:		VAN KAMPEN INVESTMENTS INC
		CITY:			OAKBROOK TERRACE
		STATE:			IL
		ZIP:			60181
		BUSINESS PHONE:		6306846774

	MAIL ADDRESS:	
		STREET 1:		VAN KAMPEN INVESTMENTS INC
		STREET 2:		ONE PARKVIEW PLAZA
		CITY:			OAKBROOK TERRACE
		STATE:			IL
		ZIP:			60181

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VAN KAMPEN MERRITT ADVANTAGE MUNICIPAL INCOME TRUST II
		DATE OF NAME CHANGE:	19930712

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TR II
		DATE OF NAME CHANGE:	19960102
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>c73225nv30d.txt
<DESCRIPTION>ANNUAL REPORT DATED 10/31/02
<TEXT>
<PAGE>

<Table>
<S>                                                 <C>
                                  Table of Contents

                                           OVERVIEW
                             LETTER TO SHAREHOLDERS       1
                                  ECONOMIC SNAPSHOT       2

                                PERFORMANCE SUMMARY
                                  RETURN HIGHLIGHTS       4

                              PORTFOLIO AT A GLANCE
                                     CREDIT QUALITY       6
                      TWELVE-MONTH DIVIDEND HISTORY       6
                                   TOP FIVE SECTORS       7
      NET ASSET VALUE AND COMMON SHARE MARKET PRICE       7
                   Q&A WITH YOUR PORTFOLIO MANAGERS       8
                                  GLOSSARY OF TERMS      11

                                     BY THE NUMBERS
                           YOUR TRUST'S INVESTMENTS      12
                               FINANCIAL STATEMENTS      21
                      NOTES TO FINANCIAL STATEMENTS      26
                     REPORT OF INDEPENDENT AUDITORS      32
                         DIVIDEND REINVESTMENT PLAN      33



          BOARD OF TRUSTEES AND IMPORTANT ADDRESSES      35
                       RESULTS OF SHAREHOLDER VOTES      36
                    TRUSTEE AND OFFICER INFORMATION      37
</Table>

Look to Van Kampen as a time-tested partner.
              NOT FDIC INSURED  MAY LOSE VALUE  NO BANK GUARANTEE
<PAGE>

 OVERVIEW

LETTER TO SHAREHOLDERS
November 20, 2002

Dear Shareholder,

Market changes are inevitable and impossible to predict. This is why investors
may be best served by having a long-term portfolio, allocated among several
types of assets. Through asset allocation, you may mitigate the effects of
short-term fluctuations in individual investments.

Your financial advisor can help you stay the course with your long-term plan.
Together, you can periodically revisit your asset allocation, and confirm that
it is still suited to your individual needs. Or, if your objectives have
changed, your financial advisor can help you modify your portfolio.

Whether you're building or simply fine-tuning your portfolio, we encourage you
to look to Van Kampen as a time-tested partner. Consistent with our belief in
the importance of asset allocation, we offer a wide range of investment
products, each managed with discipline and integrity.

                  We appreciate the opportunity to help you and your loved ones
                  enjoy life's true wealth--family, friends and life's daily
                  happiness.

Sincerely,

[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investment Advisory Corp.

                                        1
<PAGE>

ECONOMIC SNAPSHOT

THE ECONOMY
ECONOMIES GENERALLY DO NOT GROW IN A STRAIGHT LINE, AS WAS EVIDENT THROUGHOUT
THE REPORTING PERIOD. ON THE HEELS OF THE SECOND QUARTER'S STRONG GROWTH, THE
TREND SHIFTED TOWARD A REDUCED LEVEL OF ECONOMIC ACTIVITY IN SEPTEMBER AND
OCTOBER 2002.

COMPANIES, ESPECIALLY THOSE IN MANUFACTURING, CONTINUED TO EXPRESS RELUCTANCE TO
EXPAND INVENTORIES AND PAYROLLS. AS THEY'VE DONE THROUGHOUT MOST OF 2002,
CONSUMERS TOOK ADVANTAGE OF THE LOWEST MORTGAGE AND FINANCING RATES SEEN IN
DECADES. THE MONTHS-LONG HOME AND CAR BUYING SPREES CONTINUED IN OCTOBER, BUT
CONSUMER CONFIDENCE STATISTICS--A KEY INDICATION OF ECONOMIC ACTIVITY IN FUTURE
MONTHS--REVEALED A DRAMATIC DROP IN SENTIMENT.

THIS UNEXPECTED DIP IN CONFIDENCE HEIGHTENED INVESTORS' CONCERNS ABOUT THE
UPCOMING HOLIDAY SHOPPING SEASON. ADDITIONALLY, IT GAVE INVESTORS REASON TO
BELIEVE THE FEDERAL RESERVE OPEN MARKET COMMITTEE (FOMC) WOULD CHOOSE TO LOWER
RATES AT ITS UPCOMING MEETING IN EARLY NOVEMBER.*

MANY INVESTORS ALSO PROVED WARY OF THE WEST COAST'S DOCKWORKERS' LABOR DISPUTE,
THE RESULTING LOCK-OUT--AND THE POTENTIALLY NEGATIVE IMPLICATIONS IT COULD HAVE
ON THE ECONOMY. WHILE THE PRESIDENT'S INVOCATION OF THE TAFT-HARTLEY ACT IN
EARLY OCTOBER ENABLED DOCKWORKERS TO RESUME THEIR DUTIES--AND ALLOWED
MERCHANDISE TO MOVE THROUGH THE PORTS AND INTO THE STORES--MANY INVESTORS FEARED
THE DELAY WOULD IMPACT SALES AND, ULTIMATELY, PROFITABILITY.

AGAINST THIS BACKDROP, INFLATION LEVELS REMAINED WELL-CONTAINED AS CRUDE OIL
PRICES EXPERIENCED A DRAMATIC DROP.

*NOTE: THE FOMC CUT INTEREST RATES BY 50 BASIS POINTS ON NOVEMBER 6, BRINGING
THE INTENDED FEDERAL FUNDS RATE TO 1.25%--A 40-YEAR LOW.

                                        2
<PAGE>
U.S. GROSS DOMESTIC PRODUCT

SEASONALLY ADJUSTED ANNUALIZED RATES

(September 30, 2000--September 30, 2002)

[BAR GRAPH]

<Table>
<Caption>
                                                                      U.S. GROSS DOMESTIC PRODUCT
                                                                      ---------------------------
<S>                                                           <C>
Sep 00                                                                            0.6%
Dec 00                                                                            1.1%
Mar 01                                                                           -0.6%
Jun 01                                                                           -1.6%
Sep 01                                                                           -0.3%
Dec 01                                                                            2.7%
Mar 02                                                                            5.0%
Jun 02                                                                            1.3%
Sep 02                                                                            4.0%
</Table>

Source: Bureau of Economic Analysis

INTEREST RATES AND INFLATION

(October 31, 2000--October 31, 2002)

[LINE GRAPH]

<Table>
<Caption>
                                                                       INTEREST RATES                       INFLATION
                                                                       --------------                       ---------
<S>                                                           <C>                                <C>
Oct 00                                                                      6.50                               3.40
                                                                            6.50                               3.40
                                                                            6.50                               3.40
Jan 01                                                                      5.50                               3.70
                                                                            5.50                               3.50
                                                                            5.00                               2.90
Apr 01                                                                      4.50                               3.30
                                                                            4.00                               3.60
                                                                            3.75                               3.20
Jul 01                                                                      3.75                               2.70
                                                                            3.50                               2.70
                                                                            3.00                               2.60
Oct 01                                                                      2.50                               2.10
                                                                            2.00                               1.90
                                                                            1.75                               1.60
Jan 02                                                                      1.75                               1.10
                                                                            1.75                               1.10
                                                                            1.75                               1.50
Apr 02                                                                      1.75                               1.60
                                                                            1.75                               1.20
                                                                            1.75                               1.10
Jul 02                                                                      1.75                               1.50
                                                                            1.75                               1.80
                                                                            1.75                               1.50
Oct 02                                                                      1.75                               2.00
</Table>


Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percentage
change of the Consumer Price Index for all urban consumers at the end of each
month.

Source: Bloomberg

                                        3
<PAGE>

       PERFORMANCE SUMMARY

RETURN HIGHLIGHTS

(as of October 31, 2002)

- ------------------------------
AMEX Ticker Symbol - VKI
- ------------------------------

<Table>
<Caption>
- -----------------------------------------------------------------------
<S>                                                        <C>      <C>
One-year total return(1)                                     15.64%
- -----------------------------------------------------------------------
Five-year average annual total return(1)                      8.78%
- -----------------------------------------------------------------------
Life-of-Trust average annual total return(1)                  5.69%
- -----------------------------------------------------------------------
Commencement date                                          08/27/93
- -----------------------------------------------------------------------

Distribution rate as a % of closing common share market
price(2)                                                      7.38%
- -----------------------------------------------------------------------
Taxable-equivalent distribution rate as a % of closing
common share market price(3)                                 12.02%
- -----------------------------------------------------------------------
Preferred share (Series A) rate(4)                            1.58%
- -----------------------------------------------------------------------
Preferred share (Series B) rate(4)                            1.65%
- -----------------------------------------------------------------------
Net asset value                                              $14.87
- -----------------------------------------------------------------------
Closing common share market price                            $13.98
- -----------------------------------------------------------------------
One-year high common share market price (09/26/02)           $15.09
- -----------------------------------------------------------------------
One-year low common share market price (12/20/01)            $12.62
- -----------------------------------------------------------------------
</Table>

                                        4
<PAGE>

(1) Total return assumes an investment at the common share 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 share market price at the end of the
    period indicated.

(2) Distribution rate represents the monthly annualized distributions of the
    Trust at the end of the period and not the earnings of the Trust.

(3) The taxable-equivalent distribution rate is calculated assuming a 38.6%
    federal income tax rate.

(4) See "Notes to Financial Statements" footnote #5, for more information
    concerning Preferred Share reset periods.

    A portion of the interest income may be taxable for those investors subject
    to the federal alternative minimum tax (AMT).

    Past performance is no guarantee of future results. Investment return,
    common share market price and net asset value will fluctuate and Trust
    shares, when sold, may be worth more or less than their original cost. An
    investment in the Trust is subject to investment risks, and you could lose
    money on your investment in the Trust. As a result of recent market
    activity, current performance may vary from the figures shown. For more
    up-to-date information, please visit vankampen.com or speak with your
    financial advisor.

                                        5
<PAGE>

               PORTFOLIO AT A GLANCE

CREDIT QUALITY

(as a percentage of long-term investments)


<Table>
<Caption>
As of October 31, 2002
<S>                    <C>     <C>
- - AAA/Aaa............  79.7%   [PIE CHART]
- - AA/Aa..............   4.8%
- - A/A................   5.3%
- - BBB/Baa............   8.5%
- - BB/Ba..............   0.4%
- - Non-Rated..........   1.3%
<Caption>
As of October 31, 2001
<S>                    <C>     <C>
- - AAA/Aaa............  75.4%   [PIE CHART]
- - AA/Aa..............   6.2%
- - A/A................   8.5%
- - BBB/Baa............   9.0%
- - BB/Ba..............   0.4%
- - Non-Rated..........   0.5%
</Table>

Based upon the credit quality ratings as issued by Standard & Poor's Credit
Market Services/Moody's Investor Services, respectively. Subject to change
daily.

TWELVE-MONTH DIVIDEND HISTORY

(for the year ended October 31, 2002, for common shares)

[BAR GRAPH]

<Table>
<Caption>
                                                                           OCTOBER 31, 2002
                                                                           ----------------
<S>                                                           <C>
11/01                                                                         $ 0.0710
12/01                                                                         $ 0.0710
1/02                                                                          $ 0.0745
2/02                                                                          $ 0.0800
3/02                                                                          $ 0.0800
4/02                                                                          $ 0.0800
5/02                                                                          $ 0.0800
6/02                                                                          $ 0.0830
7/02                                                                          $ 0.0830
8/02                                                                          $ 0.0830
9/02                                                                          $ 0.0860
10/02                                                                         $ 0.0860
</Table>

The dividend history represents dividends that were paid on the trust and is no
guarantee of the trust's future dividends.

                                        6
<PAGE>

TOP FIVE SECTORS

(as a percentage of long-term investments)

[INVESTMENT PERFORMANCE GRAPH]

<Table>
<Caption>
                                                                      OCTOBER 31, 2002                   OCTOBER 31, 2001
                                                                      ----------------                   ----------------
<S>                                                           <C>                                <C>
Health Care                                                                20.90%                             19.50%
Transportation                                                             13.50%                             10.50%
Public Building                                                            11.10%                             10.50%
Industrial Revenue                                                          8.30%                              2.30%
General Purpose                                                             8.10%                             13.30%
</Table>

Subject to change daily.

NET ASSET VALUE AND COMMON SHARE MARKET PRICE

(based upon quarter-end values--August 1993 through October 2002)

[INVESTMENT PERFORMANCE GRAPH]

<Table>
<Caption>
                                                                      NET ASSET VALUE               COMMON SHARE MARKET PRICE
                                                                      ---------------               -------------------------
<S>                                                           <C>                                <C>
8/93                                                                      14.9100                            15.0000
                                                                          15.6100                            15.6100
                                                                          15.0800                            13.5000
                                                                          12.9800                            11.8750
                                                                          12.8100                            11.7500
                                                                          12.5600                            10.6250
12/94                                                                     11.8700                            10.0000
                                                                          13.1300                            11.5000
                                                                          12.8300                            11.5000
                                                                          13.0600                            11.5000
12/95                                                                     13.9100                            11.3750
                                                                          13.1400                            11.1250
                                                                          13.0300                            11.0000
                                                                          13.3600                            11.2500
12/96                                                                     13.6000                            11.2500
                                                                          13.2900                            11.3750
                                                                          13.7200                            12.1250
                                                                          14.1100                            12.5000
12/97                                                                     14.4000                            12.7500
                                                                          14.4000                            12.7500
                                                                          14.4400                            13.1250
                                                                          14.8400                            13.4375
12/98                                                                     14.6500                            13.6250
                                                                          14.4900                            13.1250
                                                                          13.7900                            12.4375
                                                                          13.2800                            11.3750
12/99                                                                     12.7300                            10.8750
                                                                          13.0700                            11.1250
                                                                          13.0200                            11.4375
                                                                          13.2800                            12.0000
12/00                                                                     14.1300                            11.8750
                                                                          14.3300                            12.1700
                                                                          14.1400                            12.1800
                                                                          14.5900                            12.5600
12/01                                                                     14.1100                            12.8600
                                                                          13.9500                            13.1400
10/02                                                                     14.4700                            14.0700
                                                                          15.5200                            14.9000
                                                                          14.8700                            13.9800
</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 common share 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. Common share market price is influenced by a range of factors,
including supply and demand and market conditions.

                                        7
<PAGE>

Q&A WITH YOUR PORTFOLIO MANAGERS

WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN ADVANTAGE MUNICIPAL
INCOME TRUST II ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE TRUST'S RETURN DURING THE 12 MONTHS ENDED OCTOBER 31, 2002.
THE TRUST IS MANAGED BY THE ADVISER'S MUNICIPAL TEAM. CURRENT MEMBERS(1) OF THE
TEAM INCLUDE TIMOTHY HANEY, VICE PRESIDENT; ROBERT WIMMEL, VICE PRESIDENT; AND
JOHN R. REYNOLDSON, EXECUTIVE DIRECTOR. THE FOLLOWING DISCUSSION REFLECTS THEIR
VIEWS ON THE TRUST'S PERFORMANCE DURING THE 12-MONTH PERIOD ENDED OCTOBER 31,
2002.

(1) Team members may change at any time without notice.

Q   WHAT WAS THE MARKET
    ENVIRONMENT OF THE PAST 12 MONTHS, AND HOW DID THE TRUST PERFORM IN THAT
    ENVIRONMENT?

A   The economic backdrop of the
past 12 months set the tone for historic levels of activity in the municipal
bond market. The first six months of the fiscal year saw investors wavering
between expectations of economic recovery on the one hand and continued economic
malaise on the other. The Federal Reserve Bank (the Fed) continued to stimulate
the flagging economy by lowering the federal funds target interest rate three
times over the first three months. With that rate at historic lows, the economy
appeared to be moving gradually into recovery.

    Market sentiment turned decidedly negative in the second half of the period
under review. The economic indicators that had been giving mixed to positive
signals moved into negative territory in October, and from then to the end of
the period the bulk of the economic news came in weaker than expected. This, in
combination with corporate-governance issues and geopolitical concerns, led to a
marked deterioration in investor sentiment, and helped push municipal bond
yields to levels not seen since the mid-1960s.

    One of the most significant effects of the drop in yields has been a surge
in issuance. Municipalities moved aggressively to lock in lower financing rates
by issuing new debt as well as refinancing existing obligations originated
during periods of higher interest rates. This wave of new issuance is on track
to lift calendar year 2002 above the record $292 billion in issuance set in
1993.

    Faltering investor sentiment also prolonged the bear market in equities.
Although this has been a painful time for equity investors, it appears to have
been a boon for municipal bond funds. Investors seeking to put their cash to
work have been drawn by the relatively strong performance of municipal bonds and
have poured near-record

                                        8
<PAGE>

amounts of money into municipal bond mutual funds.

    This is not to say that the bond market was entirely immune to the bad news
that drove the stock markets down. Much of that news centered on
corporate-governance scandals and the faltering economy. These factors served to
undermine the corporate-backed segments of the municipal market as well, and led
to general underperformance by lower-rated bonds relative to AAA paper.

    Looking out along the yield curve, the past 12 months also saw two divergent
periods of performance for intermediate and long-dated municipal bonds. During
the first six months of the period, expectations of economic recovery brought
the inevitable fears of rising interest rates. As a result, the short to
intermediate portion of the curve turned in the best performance for that
period. The long end of the curve rallied sharply in the second half, when hopes
for a quick recovery proved futile. Even with this rally, however, intermediate
bonds still outperformed over the 12-month period.

    The portfolio continued to offer what we believe is a competitive level of
tax-exempt income. The trust's monthly dividend of $0.0860 per share translated
to a distribution rate of 7.38 percent based on the trust's closing common share
market price on October 31, 2002. Based on these figures, investors in the 38.6
percent federal income tax bracket would have to earn a distribution rate of
12.02 percent on a taxable investment to match the tax-exempt yield provided by
the trust.

    For the 12 months ended October 31, 2002, the trust produced a total return
of 15.64 percent based on common share market price. This reflects an increase
in common share market price from $12.95 per share on October 31, 2001 to $13.98
per share on October 31, 2002. Of course, past performance is no guarantee of
future results. Investment return, common share market price and net asset value
will fluctuate and trust shares, when sold, may be worth more or less than their
original cost. As a result of recent market activity, current performance may
vary from the figures shown. For more up-to-date information, please visit
vankampen.com or speak with your financial advisor.

    By comparison, the Lehman Brothers Municipal Bond Index posted a total
return of 5.87 percent for the same period. The index is an unmanaged,
broad-based statistical composite of municipal bonds. Index returns do not
include any sales charges or fees that would be paid by an investor purchasing
the securities it represents. Such costs would lower performance. It is not
possible to invest directly in an index. For additional performance results,
please refer to the chart and footnotes on page 4.

Q   WHAT STRATEGIES DID YOU PURSUE
    IN MANAGING THE TRUST?

A   One of our primary strategies was
to realign the portfolio to position it for a changing interest-rate
environment. We focused purchases on the intermediate part of the yield curve.
Our quantitative analysis indicated that this was the portion of the curve
offering the most attractive total return potential. We focused on premium bonds
in the 15- to 20-year maturity range, which offered the yield advantage of
longer-term securities but carried the interest-rate risk of 10-year bonds.
These bonds offered the

                                        9
<PAGE>

double advantage of meeting our desired investment profile while supporting the
trust's yield. We also shortened the portfolio's duration at the end of the
period in order to attempt to protect shareholders from unwanted volatility if
interest rates reversed their decline.

    We focused our intermediate purchases in the higher credit grades as part of
a broader effort to improve the portfolio's credit profile. We did this for
several reasons. First, slow economic growth during the period led to declining
credit conditions that had a negative impact on issuers' ability to meet their
obligations. With rates at such low levels, the possibility of an increase in
interest rates became increasingly likely during the period. Rising rates tend
to cause spreads on lower-rated bonds to widen, thus hampering performance. Over
the course of the period, we increased the portfolio's exposure to AAA-rated
bonds by 4 percent.

    High-grade bonds proved beneficial to the trust's performance over the short
term. Bonds with higher credit ratings have less issuer-specific risk and are
therefore more responsive to general market movements than lower-rated issues.
As a result, these holdings helped boost the trust's sensitivity to falling
interest rates and were a boon to performance during this year's rally.

    At the long end of the curve, we continued to follow our long-standing
strategy of trading between states and sectors as they moved into and out of our
range of fair value. Here again, we focused our efforts on high-grade issues
that offered great liquidity.

    We followed a similar strategy in the hospital sector. Several of the older
bonds in the portfolio reached our performance targets during the period, and we
were able to sell them at attractive prices. We reinvested the proceeds of those
sales into newer issues with what we believed were better total return
prospects.

Q   WHAT IS YOUR OUTLOOK FOR THE
    MUNICIPAL MARKET?

A   Our outlook remains as it has been
for most of the past year. Economic activity is likely to pick up at some point,
though it is of course difficult to say when. That said, with long-bond yields
at 30-year lows, we believe the likelihood of an impending turn in the cycle may
be higher than previously thought. As a result, we will continue to watch the
economy closely for any signs of recovery that might induce the Fed to raise
interest rates. We also expect equity market sentiment to continue to be a key
driver of cash flows into our market. Municipal bond funds are likely to
continue to enjoy strong inflows as long as stocks remain weak.

    In order to seek to manage the portfolio's interest-rate exposure in a
changing interest-rate environment, we may purchase or sell financial futures
contracts or engage in transactions involving interest rate swaps, caps, floors
or collars. We expect to enter into these transactions primarily as a hedge
against anticipated interest rate or fixed-income market changes, for duration
management or for risk management purposes.

                                        10
<PAGE>

GLOSSARY OF TERMS

A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.

BOND: A debt security issued by a government or corporation that pays the
bondholder a stated rate of interest and repays the principal at the maturity
date.

FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, the central bank of the United States. Its policy-making unit, the
Federal Open Market Committee, meets at least eight times a year to establish
monetary policy and monitor the economic pulse of the United States.

FUTURES CONTRACTS: The purchase of a futures contract creates a firm obligation
by the trust, as purchaser, to take delivery from the seller the specific type
of financial instrument called for in the contract at a specific future time for
a specified price. The sale of a futures contract creates a firm obligation by
the trust, as seller, to deliver to the buyer the specific type of financial
instrument called for in the contract at a specific future time for a specified
price.

GENERAL OBLIGATION BONDS: Bonds backed by the full faith and credit (taxing
authority) of the issuer for timely payment of interest and principal. Such
bonds are issued to finance essential government projects, such as highways and
schools.

INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS: Interest rate swaps involve the
exchange by the trust with another party of their respective commitments to pay
or receive interest, for example, an exchange of floating rate payments for
fixed rate payments with respect to a notional amount of principal. An index
swap is an agreement to swap cash flows on a notational amount based on changes
in the values of the reference indices. The purchase of a cap entitles the
purchaser to receive payments on a notional principal amount from the party
selling such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.

YIELD CURVE: The pattern that results from viewing the yields of U.S. Treasury
securities maturing in 1, 5, 10 and 30 years. When grouped together and graphed,
a pattern of increasing yield is often reflected as the time to maturity
extends. This pattern creates an upward sloping curve. A flat yield curve
represents little difference between short- and long-term interest rates, while
a negative yield curve represents decreasing yields as the time to maturity
extends.

                                        11
<PAGE>

                        BY THE NUMBERS

YOUR TRUST'S INVESTMENTS

October 31, 2002
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           MUNICIPAL BONDS  164.0%
           ALABAMA  3.8%
$   650    Birmingham Baptist Med Ctr AL Baptist Hlth
           Sys Ser A................................... 5.875%   11/15/24   $    661,069
  4,000    Jefferson Cnty, AL Swr Rev Cap Impt Wt Ser B
           (FGIC Insd)................................. 5.125    02/01/42      4,021,640
                                                                            ------------
                                                                               4,682,709
                                                                            ------------
           ARIZONA  2.6%
  2,000    Phoenix, AZ Civic Impt Corp Arpt Rev Jr Lien
           (FGIC Insd)................................. 5.375    07/01/29      2,024,340
  1,120    Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
           Oblig Irvington Proj Tucson Ser A Rfdg (FSA
           Insd)....................................... 7.250    07/15/10      1,178,184
                                                                            ------------
                                                                               3,202,524
                                                                            ------------
           CALIFORNIA  4.7%
  6,000    Anaheim, CA Pub Fin Auth Lease Rev Cap
           Apprec Pub Impt Proj Ser C (FSA Insd).......   *      09/01/19      2,569,020
  5,000    Anaheim, CA Pub Fin Auth Lease Rev Cap
           Apprec Pub Impt Proj Ser C (FSA Insd).......   *      09/01/32      1,001,800
  2,000    California St Pub Wks Brd Lease Rev Dept of
           Corrections St Prisons Ser A Rfdg (AMBAC
           Insd)....................................... 5.000    12/01/19      2,131,800
                                                                            ------------
                                                                               5,702,620
                                                                            ------------
           COLORADO  5.0%
  1,000    Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
           E-470 Proj Ser B (Prerefunded @ 08/31/05)... 7.000    08/31/26      1,165,230
  5,000    Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
           E-470 Proj Ser C (Prerefunded @ 08/31/05)...   *      08/31/26        973,550
  1,000    Colorado Hlth Fac Auth Rev Hosp Portercare
           Adventist Hlth.............................. 6.500    11/15/31      1,065,900
    760    Colorado Hsg Fin Auth Single Family Pgm Sr
           Ser A (a)................................... 8.000    06/01/25        775,542
</Table>

                                               See Notes to Financial Statements

                                        12
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           COLORADO (CONTINUED)
$   530    Colorado Hsg Fin Auth Single Family Pgm Sr
           Ser A2...................................... 7.250%   05/01/27   $    555,080
    384    Colorado Hsg Fin Auth Single Family Pgm Sr
           Ser B1 (a).................................. 7.650    11/01/26        401,764
     69    Colorado Hsg Fin Auth Single Family Pgm Sr
           Ser E....................................... 8.125    12/01/24         72,294
  1,000    Northern CO Wtr Conservancy (MBIA Insd)..... 5.000    10/01/21      1,015,990
                                                                            ------------
                                                                               6,025,350
                                                                            ------------
           CONNECTICUT  1.8%
  1,010    Mashantucket Western Pequot Tribe CT Spl Rev
           Ser A, 144A -- Private Placement (b)........ 6.400    09/01/11      1,090,487
    990    Mashantucket Western Pequot Tribe CT Spl Rev
           Ser A, 144A -- Private Placement
           (Prerefunded @ 09/01/07) (b)................ 6.400    09/01/11      1,143,796
                                                                            ------------
                                                                               2,234,283
                                                                            ------------
           FLORIDA  4.3%
  2,000    Greater Orlando Aviation Auth Orlando FL
           Arpt Fac Rev Ser B (FSA Insd)............... 5.125    10/01/21      2,013,820
  3,000    Lake Cnty, FL Sch Brd Ctfs Part (AMBAC
           Insd)....................................... 5.375    07/01/17      3,263,850
                                                                            ------------
                                                                               5,277,670
                                                                            ------------
           GEORGIA  4.3%
  3,215    De Kalb Cnty, GA Hsg Auth Multi-Family Hsg
           Rev North Hill Apts Proj Rfdg (FNMA
           Collateralized) (Variable Rate Coupon)...... 6.625    01/01/25      3,423,300
  1,745    Municipal Elec Auth GA Combustion Turbine
           Proj Ser A (MBIA Insd)...................... 5.250    11/01/20      1,825,846
                                                                            ------------
                                                                               5,249,146
                                                                            ------------
           ILLINOIS  14.7%
  1,710    Bolingbrook, IL Cap Apprec Ser C Rfdg (MBIA
           Insd).......................................   *      01/01/29        412,384
 15,000    Chicago, IL Brd of Ed Cap Apprec Sch Reform
           Ser A Rfdg (FGIC Insd)......................   *      12/01/31      3,061,950
  5,670    Chicago, IL Cap Apprec City Colleges (FGIC
           Insd).......................................   *      01/01/29      1,367,377
</Table>

See Notes to Financial Statements

                                        13
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           ILLINOIS (CONTINUED)
$ 5,000    Chicago, IL O'Hare Intl Arpt Rev Sr Lien Ser
           A Rfdg (MBIA Insd) (a)...................... 5.000%   01/01/12   $  5,406,200
  7,375    Illinois Hlth Fac Auth Rev Swedish Amern
           Hosp Rfdg (AMBAC Insd) (a).................. 5.375    11/15/13      7,604,436
                                                                            ------------
                                                                              17,852,347
                                                                            ------------
           INDIANA  1.1%
  1,500    Indiana St Dev Fin Auth Rev Exempt Fac Conv
           Rfdg........................................ 5.950    08/01/30      1,348,485
                                                                            ------------

           KANSAS  2.4%
  2,655    Kansas St Dev Fin Auth Lease Juvenile
           Justice Auth Ser D (MBIA Insd).............. 5.250    05/01/14      2,901,145
                                                                            ------------

           KENTUCKY  2.2%
  2,500    Kentucky St Ppty & Bldgs Comm Proj No. 74
           Rfdg (FSA Insd)............................. 5.375    02/01/15      2,738,125
                                                                            ------------

           LOUISIANA  5.6%
  2,000    Lafayette, LA Pub Tr Fin Auth Rev Ragin
           Cajun Fac Inc Proj (MBIA Insd) (c).......... 5.000    10/01/32      2,001,340
  1,400    Louisiana Pub Fac Auth Rev Hlth Fac Glen
           Retirement Ser A............................ 6.700    12/01/25      1,407,532
  1,250    Louisiana Pub Fac Auth Rev Ochsner Clinic
           Fndtn Proj Ser B............................ 5.500    05/15/32      1,225,825
  2,000    New Orleans, LA Rfdg (FGIC Insd)............ 5.500    12/01/21      2,198,720
                                                                            ------------
                                                                               6,833,417
                                                                            ------------
           MARYLAND  3.4%
  4,000    Maryland St Hlth & Higher Ed Fac Auth Rev
           Subn Hosp Rfdg (AMBAC Insd)................. 5.000    07/01/13      4,149,280
                                                                            ------------

           MASSACHUSETTS  5.9%
  1,200    Massachusetts Bay Tran Auth MA Gen Tran Sys
           Ser A Rfdg.................................. 6.250    03/01/12      1,433,820
  2,665    Massachusetts Muni Whsl Elec Co Pwr Supply
           Sys Rev Ser B Rfdg (Prerefunded @ 07/01/04)
           (MBIA Insd)................................. 5.000    07/01/12      2,859,971
</Table>

                                               See Notes to Financial Statements

                                        14
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           MASSACHUSETTS (CONTINUED)
$ 1,000    Massachusetts St Hlth & Ed Fac Auth Rev
           Saint Mem Med Ctr Ser A..................... 6.000%   10/01/23   $    887,750
  1,886    Massachusetts St Hsg Fin Agy Hsg Rev Insd
           Rental Ser A (AMBAC Insd) (a)............... 6.650    07/01/19      1,959,490
                                                                            ------------
                                                                               7,141,031
                                                                            ------------
           MICHIGAN  6.0%
  2,000    Detroit, MI Downtown Dev Auth Tax Increment
           Rev Dev Area No. 1 Proj Ser C1 (Prerefunded
           @ 07/01/06)................................. 6.250    07/01/25      2,310,280
  2,000    Grand Rapids, MI Wtr Supply (FGIC Insd)..... 5.750    01/01/15      2,230,620
  2,285    Taylor, MI Bldg Auth (AMBAC Insd)........... 6.000    03/01/13      2,692,964
                                                                            ------------
                                                                               7,233,864
                                                                            ------------
           MISSISSIPPI  5.6%
  3,000    Mississippi Bus Fin Corp MS Pollutn Ctl Rev
           Sys Energy Res Inc Proj Rfdg................ 5.900    05/01/22      2,787,000
  2,490    Mississippi Home Corp Single Family Rev Mtg
           Ser C (GNMA Collateralized)................. 7.600    06/01/29      2,754,139
  1,225    Mississippi Home Corp Single Family Rev Mtg
           Ser F (GNMA Collateralized)................. 6.250    12/01/16      1,305,899
                                                                            ------------
                                                                               6,847,038
                                                                            ------------
           MISSOURI  5.7%
  1,500    Cape Girardeau Cnty, MO Indl Dev Auth
           Hlthcare Fac Rev Southeast MO Hosp Assoc.... 5.625    06/01/27      1,493,985
  1,300    Springfield, MO Pub Util Rev Lease Pur
           (AMBAC Insd)................................ 5.000    12/01/17      1,348,984
  4,000    Saint Louis, MO Arpt Rev Arpt Dev Pgm Ser A
           (MBIA Insd)................................. 5.250    07/01/31      4,096,200
                                                                            ------------
                                                                               6,939,169
                                                                            ------------
           NEBRASKA  2.5%
  3,000    Omaha Convention Hotel Corp Convention Ctr
           First Tier Ser A (AMBAC Insd)............... 5.125    04/01/32      3,039,900
                                                                            ------------
</Table>

See Notes to Financial Statements

                                        15
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           NEW HAMPSHIRE  1.8%
$ 1,000    New Hampshire Hlth & Ed Fac Auth Rev
           Derryfield Sch.............................. 7.000%   07/01/30   $  1,043,730
  1,000    New Hampshire St Bus Fin Auth Wtr Fac Rev
           Pennichuck Wtrwks Inc (AMBAC Insd).......... 6.300    05/01/22      1,121,660
                                                                            ------------
                                                                               2,165,390
                                                                            ------------
           NEW JERSEY  2.8%
  2,210    New Jersey Econ Dev Wtr Fac Rev NJ Amern Wtr
           Co Inc Ser B (FGIC Insd).................... 5.375    05/01/32      2,268,521
  1,000    New Jersey Hlthcare Fac Fin Auth Rev Saint
           Barnabas Hlth Ser C Rfdg (MBIA Insd)........ 5.000    07/01/12      1,092,540
                                                                            ------------
                                                                               3,361,061
                                                                            ------------
           NEW YORK  20.6%
  2,000    Metropolitan Trans Auth NY Rev Ser A Rfdg
           (FSA Insd).................................. 5.000    11/15/30      2,008,580
  3,000    New York City Ser G......................... 6.000    02/01/11      3,250,650
  5,000    New York City Ser H (MBIA Insd) (a)......... 5.250    03/15/14      5,471,000
  2,175    New York St Med Care Fac Fin Agy Rev NY
           Downtown Hosp Ser A (Prerefunded @
           02/15/05)................................... 6.800    02/15/20      2,451,551
  3,000    New York St Med Care Fac Fin Agy Rev NY Hosp
           Mtg Ser A (Prerefunded @ 02/15/05) (AMBAC
           Insd)....................................... 6.200    08/15/05      3,341,340
  3,000    New York St Med Care Fac Fin Agy Rev NY Hosp
           Mtg Ser A (Prerefunded @ 02/15/05) (AMBAC
           Insd)....................................... 6.800    08/15/24      3,381,450
  1,450    New York St Pwr Auth Rev & Gen Purp Ser CC
           (Prerefunded @ 01/01/03) (AMBAC Insd)....... 5.125    01/01/10      1,487,395
  1,000    New York St Twy Auth Svc Contract Rev Loc
           Hwy & Brdg (Prerefunded @ 4/01/03) (MBIA
           Insd)....................................... 5.125    04/01/07      1,034,450
  2,500    Port Auth NY & NJ Cons 92nd Ser (a)......... 5.000    07/15/15      2,545,275
                                                                            ------------
                                                                              24,971,691
                                                                            ------------
</Table>

                                               See Notes to Financial Statements

                                        16
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           NORTH CAROLINA  1.3%
$ 1,500    North Carolina Eastn Muni Pwr Agy Pwr Sys
           Rev Ser D................................... 6.700%   01/01/19   $  1,634,325
                                                                            ------------

           OHIO  7.1%
  1,000    Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
           Proj........................................ 7.500    01/01/30      1,099,280
  1,165    Marion Cnty, OH Hosp Impt Rev Cmnty Hosp
           Rfdg........................................ 6.100    05/15/06      1,246,981
  2,500    Ohio St Bldg Auth St Fac Adult Correction
           Ser A Rfdg (FSA Insd)....................... 5.500    10/01/12      2,829,925
  3,490    Pickerington, OH Loc Sch Dist Cap Apprec Sch
           Fac Contract (FGIC Insd)....................   *      12/01/11      2,409,182
  1,000    Toledo Lucas Cnty, OH Port Auth Northwest Bd
           Fd Ser A.................................... 6.000    05/15/11      1,047,200
                                                                            ------------
                                                                               8,632,568
                                                                            ------------
           OKLAHOMA  4.3%
  1,755    Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev
           (AMBAC Insd)................................ 6.250    11/01/22      2,020,040
  2,785    Tulsa, OK Indl Auth Hosp Rev Hillcrest Med
           Cent Proj Rfdg (Escrowed to Maturity)
           (Connie Lee Insd)........................... 6.250    06/01/06      3,148,415
                                                                            ------------
                                                                               5,168,455
                                                                            ------------
           OREGON  2.1%
  2,010    Emerald Peoples Util Dist OR Rfdg (FGIC
           Insd)....................................... 7.350    11/01/09      2,505,867
                                                                            ------------

           PENNSYLVANIA  4.6%
  2,000    Pennsylvania Econ Dev Fin Auth Res Recovery
           Rev Colver Proj Ser D (a)................... 7.150    12/01/18      2,081,040
  3,000    Philadelphia, PA Sch Dist Ser A (FSA
           Insd)....................................... 5.750    02/01/11      3,450,900
                                                                            ------------
                                                                               5,531,940
                                                                            ------------
</Table>

See Notes to Financial Statements

                                        17
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           SOUTH DAKOTA  1.8%
$ 1,000    South Dakota St Hlth & Ed Fac Auth Rev
           Childrens Care Hosp Rfdg.................... 6.125%   11/01/29   $  1,043,640
  1,170    South Dakota St Hlth & Edl Fac Auth Rev
           Prairie Lakes Hlthcare Sys.................. 5.625    04/01/32      1,140,399
                                                                            ------------
                                                                               2,184,039
                                                                            ------------
           TENNESSEE  3.1%
  1,270    Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp
           First Mtg Ser B Impt & Rfdg................. 8.000    07/01/33      1,424,038
  1,000    Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
           First Mtg Mtn St Hlth Ser A Rfdg (MBIA
           Insd)....................................... 7.500    07/01/25      1,255,660
  1,000    Putnam Cnty, TN Rfdg (FGIC Insd)............ 5.250    04/01/20      1,081,650
                                                                            ------------
                                                                               3,761,348
                                                                            ------------
           TEXAS  17.9%
  3,065    Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev
           Baptist Mem Hosp Sys Proj (Prerefunded @
           08/15/04) (MBIA Insd)....................... 6.625    02/15/13      3,384,894
  1,000    Brazos River Auth TX Pollutn Adj TXU Elec Co
           Proj Ser C Rfdg............................. 5.750    05/01/36        861,740
  1,275    Brownsville, TX Util Sys Rev (Escrowed to
           Maturity)................................... 7.375    01/01/10      1,487,976
  1,515    Cameron Cnty, TX Ctf Oblig (AMBAC Insd)..... 5.750    02/15/16      1,678,575
  3,000    Dallas - Fort Worth, TX Intl Arpt Rev Impt
           Jt Ser A Rfdg (FGIC Insd)................... 5.500    11/01/31      3,093,390
  3,270    Houston, TX Arpt Sys Rev (Escrowed to
           Maturity) (a)............................... 9.500    07/01/10      4,183,736
  1,000    Mesquite, TX Hlth Fac Dev Retirement Fac
           Christian Care Ctr Ser A.................... 7.625    02/15/28      1,038,710
  2,000    San Antonio, TX Elec & Gas Sys Rfdg......... 5.375    02/01/16      2,171,260
  1,990    Stafford, TX Econ Dev Corp (FGIC Insd)...... 6.000    09/01/19      2,264,899
  1,510    Texas St Wtr Fin Assistance................. 5.500    08/01/35      1,559,755
                                                                            ------------
                                                                              21,724,935
                                                                            ------------
           VIRGINIA  1.4%
  1,595    Richmond, VA Indl Dev Auth Govt Fac Rev Bds
           (AMBAC Insd)................................ 5.000    07/15/16      1,724,243
                                                                            ------------
</Table>

                                               See Notes to Financial Statements

                                        18
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

<Table>
<Caption>
PAR
AMOUNT                                                                         MARKET
(000)      DESCRIPTION                                  COUPON   MATURITY      VALUE
<C>        <S>                                          <C>      <C>        <C>
           WASHINGTON  6.3%
$ 1,745    Clark Cnty, WA Sch Dist 114 Evergreen (FSA
           Insd)....................................... 5.500%   12/01/15   $  1,934,751
  5,000    Energy Northwest WA Elec Rev Proj No 3 Ser B
           Rfdg (FSA Insd)............................. 6.000    07/01/16      5,689,500
                                                                            ------------
                                                                               7,624,251
                                                                            ------------
           WYOMING  1.3%
  1,500    Laramie Cnty, WY Hosp Rev Mem Hosp Proj
           (AMBAC Insd)................................ 6.700    05/01/12      1,535,850
                                                                            ------------

           PUERTO RICO  6.0%
  6,000    Puerto Rico Comwlth Hwy & Tran Auth Hwy Rev
           Ser Y Rfdg (FSA Insd) (a)................... 6.250    07/01/21      7,243,560
                                                                            ------------

TOTAL LONG-TERM INVESTMENTS  164.0%
  (Cost $184,461,213)....................................................    199,167,626
                                                                            ------------
SHORT-TERM INVESTMENTS  0.7%
    400    New York City SubSer E2 (Variable Rate
           Coupon)..................................... 1.950    8/01/20         400,000
    450    Ohio St Wtr Dev Auth Rev Rfdg (Variable Rate
           Coupon) (d)................................. 1.990    11/01/15        450,000
                                                                            ------------
TOTAL SHORT-TERM INVESTMENTS
  (Cost $850,000)........................................................        850,000
                                                                            ------------
TOTAL INVESTMENTS  164.7%
  (Cost $185,311,213)....................................................    200,017,626
OTHER ASSETS IN EXCESS OF LIABILITIES  1.2%..............................      1,434,244

PREFERRED SHARES  (65.9%)................................................    (80,008,814)
                                                                            ------------

NET ASSETS APPLICABLE TO COMMON SHARES  100.0%...........................   $121,443,056
                                                                            ============
</Table>

See Notes to Financial Statements

                                        19
<PAGE>

YOUR TRUST'S INVESTMENTS

October 31, 2002

 * Zero coupon bond

(a) Assets segregated as collateral for when-issued or delayed delivery purchase
    commitments and open futures transactions.

(b) 144A securities are those which are exempt from registration under Rule 144A
    of the Securities Act of 1933, as amended. These securities may only be
    resold in transactions exempt from registration which are normally those
    transactions with qualified institutional buyers.

(c) Securities purchased on a when-issued or delayed delivery basis.

(d) These securities are restricted and may be resold only in transactions
    exempt from registration which are normally those transactions with
    qualified institutional buyers.

AMBAC--AMBAC Indemnity Corp.
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.

                                               See Notes to Financial Statements

                                        20
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
October 31, 2002

<Table>
<S>                                                           <C>
ASSETS:
Total Investments (Cost $185,311,213).......................  $200,017,626
Cash........................................................        77,910
Receivables:
  Interest..................................................     3,280,987
  Investments Sold..........................................       414,814
Other.......................................................         2,275
                                                              ------------
    Total Assets............................................   203,793,612
                                                              ------------
LIABILITIES:
Payables:
  Investments Purchased.....................................     1,945,460
  Investment Advisory Fee...................................       103,260
  Variation Margin on Futures...............................        76,922
  Administrative Fee........................................         8,605
  Affiliates................................................         5,157
Trustees' Deferred Compensation and Retirement Plans........       135,173
Accrued Expenses............................................        67,165
                                                              ------------
    Total Liabilities.......................................     2,341,742
Preferred Shares............................................    80,008,814
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $121,443,056
                                                              ============
NET ASSET VALUE PER COMMON SHARE ($121,443,056 divided by
  8,168,211 shares outstanding).............................  $      14.87
                                                              ============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
  shares authorized, 8,168,211 shares issued and
  outstanding)..............................................  $     81,682
Paid in Surplus.............................................   115,791,428
Net Unrealized Appreciation.................................    14,700,251
Accumulated Undistributed Net Investment Income.............     2,078,099
Accumulated Net Realized Loss...............................   (11,208,404)
                                                              ------------
NET ASSETS APPLICABLE TO COMMON SHARES......................  $121,443,056
                                                              ============

PREFERRED SHARES ($.01 par value, authorized 100,000,000
  shares, 3,200 issued with liquidation preference of
  $25,000 per share)........................................  $ 80,000,000
                                                              ============

NET ASSETS INCLUDING PREFERRED SHARES.......................  $201,443,056
                                                              ============
</Table>

See Notes to Financial Statements

                                        21
<PAGE>

Statement of Operations
For the Year Ended October 31, 2002

<Table>
<S>                                                           <C>
INVESTMENT INCOME:
Interest....................................................  $10,835,940
                                                              -----------
EXPENSES:
Investment Advisory Fee.....................................    1,192,207
Administrative Fee..........................................      257,217
Preferred Share Maintenance.................................      230,695
Legal.......................................................       23,008
Trustees' Fees and Related Expenses.........................       12,618
Custody.....................................................       12,188
Other.......................................................      150,970
                                                              -----------
    Total Expenses..........................................    1,878,903
                                                              -----------
NET INVESTMENT INCOME.......................................  $ 8,957,037
                                                              ===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain...........................................  $ 3,627,321
                                                              -----------
Unrealized Appreciation/Depreciation:
  Beginning of the Period...................................   17,515,720
                                                              -----------
  End of the Period:
    Investments.............................................   14,706,413
    Futures.................................................       (6,162)
                                                              -----------
                                                               14,700,251
                                                              -----------
Net Unrealized Depreciation During the Period...............   (2,815,469)
                                                              -----------
NET REALIZED AND UNREALIZED GAIN............................  $   811,852
                                                              ===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS.....................  $(1,129,170)
                                                              ===========
NET INCREASE IN NET ASSETS FROM OPERATIONS..................  $ 8,639,719
                                                              ===========
</Table>

                                               See Notes to Financial Statements

                                        22
<PAGE>

Statements of Changes in Net Assets

<Table>
<Caption>
                                                         YEAR ENDED         YEAR ENDED
                                                      OCTOBER 31, 2002   OCTOBER 31, 2001
                                                      -----------------------------------
<S>                                                   <C>                <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................   $  8,957,037       $  9,156,187
Net Realized Gain....................................      3,627,321          1,658,235
Net Unrealized Appreciation/Depreciation During the
  Period.............................................     (2,815,469)         8,353,928
Distributions to Preferred Shareholders:
  Net Investment Income..............................     (1,129,170)        (2,584,391)
                                                        ------------       ------------
Change in Net Assets from Operations.................      8,639,719         16,583,959
Distributions to Common Shareholders:
  Net Investment Income..............................     (7,820,534)        (5,864,457)
                                                        ------------       ------------

NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..        819,185         10,719,502
NET ASSETS:
Beginning of the Period..............................    120,623,871        109,904,369
                                                        ------------       ------------
End of the Period (Including accumulated
  undistributed net investment income of $2,078,099
  and $987,869, respectively)........................   $121,443,056       $120,623,871
                                                        ============       ============
</Table>

See Notes to Financial Statements

                                        23
<PAGE>

Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

<Table>
<Caption>

                                                          ------------------------------
                                                          2002 (a)     2001       2000
                                                          ------------------------------
<S>                                                       <C>         <C>        <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD (B)............  $ 14.77     $ 13.46    $ 12.92
                                                          -------     -------    -------
  Net Investment Income.................................     1.10        1.12       1.08
  Net Realized and Unrealized Gain/Loss.................      .10        1.23        .64
  Common Share Equivalent of Distributions Paid to
    Preferred Shareholders:
    Net Investment Income...............................     (.14)       (.32)      (.40)
                                                          -------     -------    -------
Total from Investment Operations........................     1.06        2.03       1.32
Less Distributions Paid to Common Shareholders:
    Net Investment Income...............................      .96         .72        .78
                                                          -------     -------    -------
NET ASSET VALUE, END OF THE PERIOD......................  $ 14.87     $ 14.77    $ 13.46
                                                          =======     =======    =======
Common Share Market Price at End of the Period..........  $ 13.98     $ 12.95    $11.625
Total Return (c)........................................   15.64%      18.05%     11.15%
Net Assets at End of the Period (In millions)...........  $ 121.4     $ 120.6    $ 109.9
Ratio of Expenses to Average Net Assets Applicable to
  Common Shares (d).....................................    1.58%       1.76%      1.88%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (d).......................    7.55%       7.89%      8.35%
Portfolio Turnover......................................      45%         38%        24%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
  Preferred Shares (d)..................................     .95%       1.04%      1.07%
Ratio of Net Investment Income to Average Net Assets
  Applicable to Common Shares (e).......................    6.59%       5.66%      5.27%
SENIOR SECURITIES:
Total Preferred Shares Outstanding......................    3,200       3,200      3,200
Asset Coverage Per Preferred Share (f)..................  $62,954     $62,695    $59,345
Involuntary Liquidating Preference Per Preferred
  Share.................................................  $25,000     $25,000    $25,000
Average Market Value Per Preferred Share................  $25,000     $25,000    $25,000
</Table>

 * Non-Annualized

(a) As required, effective November 1, 2001, the Trust has adopted the
    provisions of the AICPA Audit and Accounting Guide for Investment Companies
    and began accreting market discount on fixed income securities. The effect
    of this change for the year ended October 31, 2002 was to increase net
    investment income per share by $.02, decrease net realized and unrealized
    gains and losses per share by $.02 and increase the ratio of net investment
    income to average net assets applicable to common shares by .17%. Per share,
    ratios, and supplemental data for periods prior to October 31, 2002 have not
    been restated to reflect this change in presentation.

(b) Net Asset Value at August 27, 1993, of $15.00 is adjusted for common share
    offering costs of $.08 per common share. Net asset value at October 31, 1993
    of $15.13 is adjusted for preferred share offering costs of $.16 per common
    share.

(c) Total return assumes an investment at the common share 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 share market price at the end of the
    period indicated.

(d) Ratios do not reflect the effect of dividend payments to preferred
    shareholders.

(e) Ratios reflect the effect of dividend payments to preferred shareholders.

(f) Calculated by subtracting the Trust's total liabilities (not including the
    preferred shares) from the Trust's total assets and dividing this by the
    number of preferred shares outstanding.

                                        24
<PAGE>

<Table>
<Caption>
                                                                      AUGUST 27, 1993
                                                                       (COMMENCEMENT
YEAR ENDED OCTOBER 31,                                                 OF INVESTMENT
- -------------------------------------------------------------------    OPERATIONS) TO
      1999       1998       1997       1996       1995       1994     OCTOBER 31, 1993
- --------------------------------------------------------------------------------------
<S> <C>        <C>        <C>        <C>        <C>        <C>        <C>
    $  14.72   $  14.17   $  13.51   $  13.31   $  11.93   $  14.97       $ 14.92
    --------   --------   --------   --------   --------   --------       -------
        1.10       1.10       1.12       1.12       1.15       1.12           .09
       (1.84)       .54        .63        .19       1.45      (3.07)          .12
        (.32)      (.35)      (.35)      (.35)      (.39)      (.26)          -0-
    --------   --------   --------   --------   --------   --------       -------
       (1.06)      1.29       1.40        .96       2.21      (2.21)          .21
         .74        .74        .74        .76        .83        .83           -0-
    --------   --------   --------   --------   --------   --------       -------
    $  12.92   $  14.72   $  14.17   $  13.51   $  13.31   $  11.93       $ 15.13
    ========   ========   ========   ========   ========   ========       =======
    $11.1875   $13.6875   $  12.50   $  11.50   $  11.50   $  9.875       $14.625
     -13.37%     15.87%     15.58%      6.82%     25.22%    -27.65%        -2.50%*
    $  105.6   $  120.2   $  115.7   $  110.3   $  108.7   $   97.4       $ 123.6
       1.79%      1.83%      1.88%      1.94%      1.98%      1.82%         1.30%
       7.86%      7.67%      8.16%      8.42%      9.06%      8.24%         3.40%
         36%        15%        16%        37%        79%       214%           24%*
       1.06%      1.09%      1.09%      1.12%      1.12%      1.09%         1.30%
       5.60%      5.24%      5.61%      5.77%      6.01%      6.34%         3.40%
       3,200      1,600      1,600      1,600      1,600      1,600       $    --
    $ 57,986   $125,139   $122,327   $118,953   $117,963   $110,892       $    --
    $ 25,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000       $    --
    $ 25,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000       $    --
</Table>

See Notes to Financial Statements

                                        25
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen Advantage Municipal Income Trust II (the "Trust") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Trust's investment
objective is to provide a high level of current income exempt from federal
income tax, consistent with preservation of capital. The Trust will invest
substantially all of its assets in municipal securities rated investment grade
at the time of investment. The Trust commenced investment operations on August
27, 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 accounting principles
generally accepted in the United States of America 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 or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

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. At October 31, 2002, the Trust had
$1,945,460 of when-issued and delayed delivery purchase commitments.

C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security.

                                        26
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

    As required, effective November 1, 2001, the Trust has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies and
began accreting market discount on fixed income securities. Prior to November 1,
2001, the Trust did not accrete market discount on fixed income securities
daily. The cumulative effect of this accounting change had no impact on total
net assets of the Trust, but resulted in a $1,081,889 increase in cost of
securities and a corresponding $1,081,889 decrease in net unrealized
appreciation based on securities held by the Trust on November 1, 2001.

    The effect of this change for the year ended October 31, 2002 was to
increase net investment income by $201,566; decrease net unrealized depreciation
by $295,043, and decrease net realized gains by $496,609. The Statement of
Changes in Net Assets and Financial Highlights for prior periods have not been
restated to reflect this change in presentation.

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, 2002, the Trust had an accumulated capital loss
carryforward for tax purposes of $10,942,288 which will expire between October
31, 2003 and October 31, 2008. Of this amount, $9,652,675 will expire on October
31, 2003.

    At October 31, 2002, the cost and related gross unrealized appreciation and
depreciation are as follows:

<Table>
<S>                                                             <C>
Cost of investments for tax purposes........................    $184,525,877
                                                                ============
Gross tax unrealized appreciation...........................    $ 16,015,038
Gross tax unrealized depreciation...........................        (523,289)
                                                                ------------
Net tax unrealized appreciation on investments..............    $ 15,491,749
                                                                ============
</Table>

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.

                                        27
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

    The tax character of distributions paid during the years ended October 31,
2002 and 2001 was as follows:

<Table>
<Caption>
                                                                2002       2001
<S>                                                           <C>         <C>
Distributions paid from:
  Ordinary income...........................................  $119,517    $11,574
  Long-term capital gain....................................       -0-        -0-
                                                              --------    -------
                                                              $119,517    $11,574
                                                              ========    =======
</Table>

    Due to inherent differences in the recognition of income, expenses and
realized gain/losses under accounting principles generally accepted in the
United States of America and federal income tax purposes, permanent differences
between book and tax basis reporting have been identified and appropriately
reclassified on the Statement of Assets and Liabilities. A permanent book and
tax difference relating to a portion of the capital loss carryforward expiring
in the current year totaling $5,017,441 was reclassified from accumulated net
realized loss to paid in surplus. Additionally, a permanent book and tax
difference relating to expenses that are not deductible for tax purpose totaling
$1,008 was reclassified from accumulated undistributed net investment income to
paid in surplus.

    As of October 31, 2002, the components of distributable earnings on a tax
basis were as follows:

<Table>
<Caption>

<S>                                                             <C>
Undistributed ordinary income...............................    $119,924
</Table>

    Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions, gains or losses recognized for tax purposes on open futures
transactions on October 31, 2002 and the capital loss carryforward expiring in
the current year.

F. RECLASSIFICATIONS In accordance with the provisions of EITF D-98,
"Classification and Measurement of Redeemable Securities", effective for the
current period, the Trust has reclassified its Auction Preferred Shares ("APS")
outside of permanent equity in the Net Assets section of the Statement of Assets
and Liabilities. In addition, distributions to APS shareholders are now
classified as a component of the "Increase in net assets from operations" on the
Statement of Operations and the Statements of Changes in Net Assets and as a
component of the "Total from investment operations" on the Financial Highlights.
Prior year amounts presented have been reclassified to conform to this period's
presentation. This change has no impact on the net assets applicable to common
shares of the Trust.

                                        28
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

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 .60% of the average
daily net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Investments Inc. or its affiliates
(collectively "Van Kampen"), the Trust's Administrator, at an annual rate of
..05% of the average daily net assets of the Trust. Effective May 15, 2002, this
fee was reduced from .20% to .05% of the average daily 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, 2002, the Trust recognized expenses of
approximately $11,800 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.

    Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the year ended October
31, 2002, the Trust recognized expenses of approximately $30,500 representing
Van Kampen's cost of providing accounting and legal services to the Trust, which
are reported as part of "Other" and "Legal" expenses, respectively, on the
Statement of Operations.

    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 upon retirement 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 October 31, 2002, Van Kampen 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 $88,574,857 and $90,351,442,
respectively.

                                        29
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

4. DERIVATIVE FINANCIAL INSTRUMENTS

A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.

    In order to seek to manage the interest rate exposure of the Trust's
portfolio in a changing interest rate environment, the Trust may purchase or
sell financial futures contracts or engage in transactions involving interest
rate swaps, caps, floors or collars. The Trust expects to enter into these
transactions primarily as a hedge against anticipated interest rate or
fixed-income market changes, for duration management or for risk management
purposes, but may also enter into these transactions to generate additional
income. All of the Trust's portfolio holdings, including derivative instruments,
are marked to market each day with the change in value reflected in the
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when taking delivery of a security underlying
a futures contract. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the futures contract.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.

    During the period, the Trust invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Trust
generally invests in exchange traded futures contracts on U.S. Treasury Bonds
and Notes and typically closes the contract prior to the delivery date. These
contracts are generally used as a substitute for purchasing and selling specific
securities.

    Upon entering into futures contracts, the Trust maintains an amount of cash
or liquid securities with a value equal to a percentage of the contract amount
with either a future commission merchant pursuant to rules and regulations
promulgated under the 1940 Act, as amended, or with its custodian in an account
in the broker's name. This amount is known as initial margin. During the period
the futures contract is open, payments are received from or made to the broker
based upon changes in the value of the contract (the variation margin). The risk
of loss associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.

    Transactions in futures contracts for the year ended October 31, 2002 were
as follows:

<Table>
<Caption>
                                                                CONTRACTS
<S>                                                             <C>
Outstanding at October 31, 2001.............................       -0-
Futures Opened..............................................       255
Futures Closed..............................................       -0-
                                                                   ---
Outstanding at October 31, 2002.............................       255
                                                                   ===
</Table>

                                        30
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

October 31, 2002

    The futures contracts outstanding as of October 31, 2002, and the
descriptions and unrealized appreciation/depreciation are as follows:

<Table>
<Caption>
                                                                           UNREALIZED
                                                                          APPRECIATION/
                                                              CONTRACTS   DEPRECIATION
<S>                                                           <C>         <C>
Short Contracts:
  U.S. Treasury Notes 10-Year Futures December 2002 (Current
    Notional Value of $114,719 per contract)................      49         $20,464
  U.S. Treasury Notes 5-Year Futures December 2002 (Current
    Notional Value of $113,734 per contract)................     206         (26,626)
                                                                 ---         -------
                                                                 255         $(6,162)
                                                                 ===         =======
</Table>

5. PREFERRED SHARES

The Trust has outstanding 3,200 APS in two series of 1,600 shares each.
Dividends are cumulative and the dividend rate is generally reset every 7 days
for both series through an auction process. The average rate in effect on
October 31, 2002 was 1.615%. During the year ended October 31, 2002, the rates
ranged from 1.000% to 1.980%.

    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 on the Statement of Operations.

    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.

                                        31
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Trustees and Shareholders of Van Kampen Advantage Municipal
Income Trust II:

We have audited the accompanying statement of assets and liabilities of Van
Kampen Advantage Municipal Income Trust II (the "Trust"), including the
portfolio of investments, as of October 31, 2002, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended. 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. The Trust's financial highlights for
the periods ended prior to October 31, 2000, were audited by other auditors
whose report, dated December 9, 1999, expressed an unqualified opinion on those
financial highlights.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2002 by correspondence with the Trust's
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 Municipal Income Trust II as of October 31, 2002, the results
of its operations, the changes in its net assets and the financial highlights
for the respective stated periods, in conformity with accounting principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Chicago, Illinois
December 6, 2002

                                        32
<PAGE>

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

                                        33
<PAGE>

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

                                        34
<PAGE>

BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN ADVANTAGE MUNICIPAL

INCOME TRUST II

BOARD OF TRUSTEES

DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*

INVESTMENT ADVISER

VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555

CUSTODIAN AND TRANSFER AGENT

STATE STREET BANK
AND TRUST COMPANY
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011

LEGAL COUNSEL

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606

INDEPENDENT AUDITORS

DELOITTE & TOUCHE LLP
180 North Stetson Avenue
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, 2002. The Trust designated 98.7% of the income distributions as a
 tax-exempt income distribution. In January, the Trust provides tax information
 to shareholders for the preceding calendar year.

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

                                        35
<PAGE>

RESULTS OF
SHAREHOLDER VOTES

The Annual Meeting of Shareholders of the Trust was held on June 12, 2002, where
shareholders voted on the election of trustees.

With regards to the election of the following trustees by the common
shareholders of the Trust:

<Table>
<Caption>
                                                                  # OF SHARES
                                                         -----------------------------
                                                         IN FAVOR             WITHHELD
- --------------------------------------------------------------------------------------
<S>                                                      <C>                  <C>
Richard F. Powers, III.................................  7,294,747            110,911
Hugo F. Sonnenschein...................................  7,328,963             76,695
</Table>

With regards to the election of the following trustee by the preferred
shareholders of the Trust:

<Table>
<Caption>
                                                                  # OF SHARES
                                                         -----------------------------
                                                         IN FAVOR             WITHHELD
- --------------------------------------------------------------------------------------
<S>                                                      <C>                  <C>
Theodore A. Myers......................................      2,719                  5
</Table>

The other trustees of the Trust whose terms did not expire in 2002 are David C.
Arch, Rod Dammeyer, Howard J Kerr, and Wayne W. Whalen.

                                        36
<PAGE>

TRUSTEE AND OFFICER INFORMATION

The business and affairs of the Trust are managed under the direction of the
Trust's Board of Trustees and the Trust's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Trust and their
principal occupations for the last five years, other directorships held by the
trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van
Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."),
Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc.
(the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van
Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset
Management sometimes are referred to herein collectively as the "Advisers." For
purposes hereof, the term "Fund Complex" includes each of the investment
companies advised by the Advisers. Trustees serve three year terms or until
their successors are duly elected and qualified. Officers are annually elected
by the trustees.

INDEPENDENT TRUSTEES:
<Table>
<Caption>
                                                                                                    NUMBER OF
                                         TERM OF                                                     FUNDS IN
                                        OFFICE AND                                                     FUND
                           POSITION(S)  LENGTH OF                                                    COMPLEX
NAME, AGE AND ADDRESS       HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                          OVERSEEN
OF INDEPENDENT TRUSTEE        TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
David C. Arch (57)         Trustee      Trustee     Mr. Arch is Chairman and Chief Executive            37
Blistex Inc.                            since 1992  Officer of Blistex Inc., a consumer health
1800 Swift Drive                                    care products manufacturer, and former
Oak Brook, IL 60523                                 Director of the World Presidents
                                                    Organization-Chicago Chapter. Mr. Arch is also
                                                    a Trustee or Managing General Partner of other
                                                    investment companies advised by the Advisers.

<Caption>

NAME, AGE AND ADDRESS      OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE     HELD BY TRUSTEE
<S>                        <C>
David C. Arch (57)         Mr. Arch is a member of
Blistex Inc.               the Board of Directors of
1800 Swift Drive           the Heartland Alliance, a
Oak Brook, IL 60523        non-profit organization
                           serving human needs based
                           in Chicago.
</Table>

                                        37
<PAGE>
<Table>
<Caption>
                                                                                                    NUMBER OF
                                         TERM OF                                                     FUNDS IN
                                        OFFICE AND                                                     FUND
                           POSITION(S)  LENGTH OF                                                    COMPLEX
NAME, AGE AND ADDRESS       HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                          OVERSEEN
OF INDEPENDENT TRUSTEE        TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
Rod Dammeyer (62)          Trustee      Trustee     Mr. Dammeyer is President of CAC, llc., a           37
CAC, llc.                               since 1992  private company offering capital investment
676 North Michigan Avenue                           and management advisory services. Mr. Dammeyer
Suite 2800                                          is also a Trustee or Managing General Partner
Chicago, IL 60611                                   of other investment companies advised by the
                                                    Advisers. Prior to February 2001, Mr. Dammeyer
                                                    was Vice Chairman and Director of Anixter
                                                    International, Inc. and IMC Global Inc. Prior
                                                    to July 2000, Mr. Dammeyer was a Managing
                                                    Partner of Equity Group Corporate Investment
                                                    (EGI), a company that makes private
                                                    investments in other companies. Prior to 1997,
                                                    Mr. Dammeyer was President, Chief Executive
                                                    Officer and a Director of Great American
                                                    Management & Investment, Inc., a diversified
                                                    manufacturing company.

<Caption>

NAME, AGE AND ADDRESS      OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE     HELD BY TRUSTEE
<S>                        <C>
Rod Dammeyer (62)          Mr. Dammeyer is a member
CAC, llc.                  of the Board of Directors
676 North Michigan Avenue  of TeleTech Holdings
Suite 2800                 Inc., Stericycle, Inc.,
Chicago, IL 60611          GATX Corporation,
                           Therasence, Inc. and
                           Peregrine Systems Inc.
                           and a member of the Board
                           of Trustees of the
                           University of Chicago
                           Hospitals and Health
                           Systems. Prior to July
                           2000, Mr. Dammeyer was a
                           member of the Board of
                           Directors of Allied Riser
                           Communications Corp.,
                           Matria Healthcare Inc.,
                           Transmedia Networks,
                           Inc., CNA Surety, Corp.
                           and Grupo Azcarero Mexico
                           (GAM). Prior to April
                           1999, Mr. Dammeyer was a
                           Director of Metal
                           Management, Inc. Prior to
                           1998, Mr. Dammeyer was a
                           Director of Lukens, Inc.,
                           Capsure Holdings Corp.,
                           Revco D.S., Inc., the
                           Chase Manhattan
                           Corporation National
                           Advisory Board and Sealy,
                           Inc. Prior to 1997, Mr.
                           Dammeyer was a Director
                           of Flacon Building
                           Products, Inc.
</Table>

                                        38
<PAGE>
<Table>
<Caption>
                                                                                                    NUMBER OF
                                         TERM OF                                                     FUNDS IN
                                        OFFICE AND                                                     FUND
                           POSITION(S)  LENGTH OF                                                    COMPLEX
NAME, AGE AND ADDRESS       HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                          OVERSEEN
OF INDEPENDENT TRUSTEE        TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
Howard J Kerr (67)         Trustee      Trustee     Mr. Kerr is a Trustee or Managing General           37
736 North Western Avenue                since 1992  Partner of other investment companies advised
P.O. Box 317                                        by the Advisers. Prior to 1998, Mr. Kerr was
Lake Forest, IL 60045                               the President and Chief Executive Officer of
                                                    Pocklington Corporation, Inc., an Investment
                                                    holding company.
Theodore A. Myers (72)     Trustee      Trustee     Mr. Myers is a financial consultant. Mr. Myers      37
550 Washington Avenue                   since 1992  is also a Trustee or Managing General Partner
Glencoe, IL 60022                                   of other investment companies advised by the
                                                    Advisers. Prior to 1998, Mr. Myers was a
                                                    Senior Financial Advisor (and, prior to 1997,
                                                    an Executive Vice President, Chief Financial
                                                    Officer and Director) of Qualitech Steel
                                                    Corporation, a producer of high quality
                                                    engineered steels for automotive,
                                                    transportation and capital goods industries.
                                                    Prior to 1997, Mr. Myers was a member of the
                                                    Arthur Andersen Chief Financial Officers'
                                                    Committee.

<Caption>

NAME, AGE AND ADDRESS      OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE     HELD BY TRUSTEE
<S>                        <C>
Howard J Kerr (67)         Mr. Kerr is a Director of
736 North Western Avenue   Canbra Foods, Ltd., a
P.O. Box 317               Canadian oilseed
Lake Forest, IL 60045      crushing, refining,
                           processing and packaging,
                           operations, the Marrow
                           Foundation and Lake
                           Forest Bank & Trust.
Theodore A. Myers (72)     Mr. Myers is a Director
550 Washington Avenue      of Met Life Investors
Glencoe, IL 60022          (formerly known as COVA
                           Financial Life
                           Insurance). Prior to
                           1997, Mr. Myers was a
                           Director of McLouth
                           Steel.
</Table>

                                        39
<PAGE>
<Table>
<Caption>
                                                                                                    NUMBER OF
                                         TERM OF                                                     FUNDS IN
                                        OFFICE AND                                                     FUND
                           POSITION(S)  LENGTH OF                                                    COMPLEX
NAME, AGE AND ADDRESS       HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                          OVERSEEN
OF INDEPENDENT TRUSTEE        TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
Hugo F. Sonnenschein (62)  Trustee      Trustee     Mr. Sonnenschein is President Emeritus and          37
1126 E. 59th Street                     since 1994  Honorary Trustee of the University of Chicago
Chicago, IL 60637                                   and the Hutchinson Distinguished Service
                                                    Professor in the Department of Economics at
                                                    the University of Chicago. Prior to July 2000,
                                                    Mr. Sonnenschein was President of the
                                                    University of Chicago. Mr. Sonnenschein is a
                                                    member of the Board of Trustees of the
                                                    University of Rochester and a member of its
                                                    investment committee. Mr. Sonnenschein is a
                                                    member of the National Academy of Sciences,
                                                    the American Philosophical Society, and a
                                                    fellow of the American Academy of Arts and
                                                    Sciences. Mr. Sonnenschein is also a Trustee
                                                    or Managing General Partner of other
                                                    investment companies advised by the Advisers.

<Caption>

NAME, AGE AND ADDRESS      OTHER DIRECTORSHIPS
OF INDEPENDENT TRUSTEE     HELD BY TRUSTEE
<S>                        <C>
Hugo F. Sonnenschein (62)  Mr. Sonnenschein is a
1126 E. 59th Street        Director of Winston
Chicago, IL 60637          Laboratories, Inc.
</Table>

                                        40
<PAGE>

INTERESTED TRUSTEES*:
<Table>
<Caption>
                                                                                                    NUMBER OF
                                         TERM OF                                                     FUNDS IN
                                        OFFICE AND                                                     FUND
                           POSITION(S)  LENGTH OF                                                    COMPLEX
NAME, AGE AND ADDRESS       HELD WITH      TIME     PRINCIPAL OCCUPATION(S)                          OVERSEEN
OF INTERESTED TRUSTEE         TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
Richard F. Powers, III*    Chairman     Trustee     Mr. Powers is Chairman of the Board. Trustee/       96
(56)                                    since 1999  Director of funds in the Fund Complex. Prior
1 Parkview Plaza                                    to December 2002, Mr. Powers was Chairman,
Oakbrook Terrace, IL                                Director, President, Chief Executive Officer
60181                                               and Managing Director of Van Kampen; Chairman,
                                                    Director, Chief Executive Officer and Managing
                                                    Director of the Advisers, Distributor, Van
                                                    Kampen Advisors Inc. and Van Kampen Management
                                                    Inc.; Director of other subsidiaries of Van
                                                    Kampen; and Chief Sales and Marketing Officer
                                                    of Morgan Stanley Asset Management Inc. Prior
                                                    to May 1998, Mr. Powers was Executive Vice
                                                    President; and Director of Marketing of Morgan
                                                    Stanley and Director of Dean Witter Discover &
                                                    Co. and Dean Witter Realty. Prior to 1996, Mr.
                                                    Powers was Director of Dean Witter Reynolds
                                                    Inc.
Wayne W. Whalen* (63)      Trustee      Trustee     Mr. Whalen is a Partner in the law firm of          96
333 West Wacker Drive                   since 1992  Skadden, Arps, Slate, Meagher & Flom
Chicago, IL 60606                                   (Illinois), legal counsel to certain funds
                                                    advised by the Advisers. Mr. Whalen is a
                                                    Trustee, Director or Managing General Partner
                                                    of other funds advised by the Advisers.

<Caption>

NAME, AGE AND ADDRESS      OTHER DIRECTORSHIPS
OF INTERESTED TRUSTEE      HELD BY TRUSTEE
<S>                        <C>
Richard F. Powers, III*
(56)
1 Parkview Plaza
Oakbrook Terrace, IL
60181
Wayne W. Whalen* (63)
333 West Wacker Drive
Chicago, IL 60606
</Table>

* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
  of the 1940 Act). Mr. Whalen is an interested person to certain of the funds
  in the Fund Complex by reason of his firm currently acting as legal counsel to
  such funds in the Fund Complex. Mr. Powers is an interested person of such
  funds in the Fund Complex and the Advisers by reason of their positions with
  Morgan Stanley or its affiliates.

                                        41
<PAGE>

OFFICERS:

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                  TRUST           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
Stephen L. Boyd (61)          Vice President      Officer     Managing Director and Chief Investment Officer of Van Kampen
2800 Post Oak Blvd.                               since 1998  Investments, and Managing Director and President of the
45th Floor                                                    Advisers and Van Kampen Advisors Inc. Executive Vice
Houston, TX 77056                                             President and Chief Investment Officer of funds in the Fund
                                                              Complex. Prior to December 2000, Executive Vice President
                                                              and Chief Investment Officer of Van Kampen Investments, and
                                                              President and Chief Operating Officer of the Advisers. Prior
                                                              to April 2000, Executive Vice President and Chief Investment
                                                              Officer for Equity Investments of the Advisers. Prior to
                                                              October 1998, Vice President and Senior Portfolio Manager
                                                              with AIM Capital Management, Inc. Prior to February 1998,
                                                              Senior Vice President and Portfolio Manager of Van Kampen
                                                              American Capital Asset Management, Inc., Van Kampen American
                                                              Capital Investment Advisory Corp. and Van Kampen American
                                                              Capital Management, Inc.
</Table>

                                        42
<PAGE>

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                  TRUST           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
Mitchell M. Merin (49)        President and       Officer     President and Chief Executive Officer of funds in the Fund
1221 Avenue of the Americas   Chief Executive     since 2002  Complex since December 2002. Trustee/Director of certain
New York, NY 10020            Officer                         funds in the Fund Complex. President and Chief Operating
                                                              Officer of Morgan Stanley since December 1998. President and
                                                              Director since April 1997 and Chief Executive Officer since
                                                              June 1998 of Morgan Stanley Investment Advisors Inc. and
                                                              Morgan Stanley Services Company Inc. Chairman, Chief
                                                              Executive Officer and Director of Morgan Stanley
                                                              Distributors Inc. since June 1998. Chairman since June 1998,
                                                              and Director since January 1998 of Morgan Stanley Trust.
                                                              Director of various Morgan Stanley subsidiaries. President
                                                              of the Morgan Stanley Funds since May 1999. Previously Chief
                                                              Strategic Officer of Morgan Stanley Investment Advisors Inc.
                                                              and Morgan Stanley Services Company Inc. and Executive Vice
                                                              President of Morgan Stanley Distributors Inc. April 1997-
                                                              June 1998, Vice President of the Morgan Stanley Funds May
                                                              1997-April 1999, and Executive Vice President of Dean
                                                              Witter, Discover & Co. prior to May 1997.
Joseph J. McAlinden (59)      Chief Investment    Officer     Managing Director and Chief Investment Officer of Morgan
1221 Avenue of the Americas   Officer             since 2002  Stanley Investment Advisors Inc. and Director of Morgan
New York, NY 10020                                            Stanley Trust for 5 years.
</Table>

                                        43
<PAGE>

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                  TRUST           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
A. Thomas Smith III (45)      Vice President and  Officer     Managing Director and Director of Van Kampen Investments,
1221 Avenue of Americas       Secretary           since 1999  Director of the Advisers, Van Kampen Advisors Inc., the
New York, NY 10020                                            Distributor, Investor Services and certain other
                                                              subsidiaries of Van Kampen Investments. Managing Director
                                                              and General Counsel-Mutual Funds of Morgan Stanley
                                                              Investment Advisors, Inc. Vice President or Principal Legal
                                                              Officer and Secretary of funds in the Fund Complex. Prior to
                                                              July 2001, Managing Director, General Counsel, Secretary and
                                                              Director of Van Kampen Investments, the Advisers, the
                                                              Distributor, Investor Services, and certain other
                                                              subsidiaries of Van Kampen Investments. Prior to December
                                                              2000, Executive Vice President, General Counsel, Secretary
                                                              and Director of Van Kampen Investments, the Advisers, Van
                                                              Kampen Advisors Inc., the Distributor, Investor Services and
                                                              certain other subsidiaries of Van Kampen Investments. Prior
                                                              to January 1999, Vice President and Associate General
                                                              Counsel to New York Life Insurance Company ("New York
                                                              Life"), and prior to March 1997, Associate General Counsel
                                                              of New York Life. Prior to December 1993, Assistant General
                                                              Counsel of The Dreyfus Corporation. Prior to August 1991,
                                                              Senior Associate, Willkie Farr & Gallagher. Prior to January
                                                              1989, Staff Attorney at the Securities and Exchange
                                                              Commission, Division of Investment Management, Office of
                                                              Chief Counsel.
John R. Reynoldson (49)       Vice President      Officer     Executive Director of the Advisers and Van Kampen Advisors
1 Parkview Plaza                                  since 2000  Inc. Vice President of funds in the Fund Complex. Prior to
Oakbrook Terrace, IL 60181                                    July 2001, Principal and Co- head of the Fixed Income
                                                              Department of the Advisers and Van Kampen Advisors Inc.
                                                              Prior to December 2000, Senior Vice President of the
                                                              Advisers and Van Kampen Advisors Inc. Prior to May 2000, he
                                                              managed the investment grade taxable group for the Advisers
                                                              since July 1999. From July 1988 to June 1999, he managed the
                                                              government securities bond group for Asset Management. Mr.
                                                              Reynoldson has been with Asset Management since April 1987.
John L. Sullivan (47)         Vice President,     Officer     Executive Director of Van Kampen Investments, the Advisers
1 Parkview Plaza              Chief Financial     since 1998  and Van Kampen Advisors Inc. Vice President, Chief Financial
Oakbrook Terrace, IL 60181    Officer and                     Officer and Treasurer of funds in the Fund Complex. Head of
                              Treasurer                       Fund Accounting for Morgan Stanley Investment Management.
</Table>

                                        44
<PAGE>

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                  TRUST           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
John H. Zimmermann, III (44)  Vice President      Officer     Managing Director and Director of Van Kampen Investments,
Harborside Financial Center                       since 2000  and Managing Director, President and Director of the
Plaza 2 - 7th Floor                                           Distributor. Vice President of funds in the Fund Complex.
Jersey City, NJ 07311                                         Prior to December 2000, President of Van Kampen Insurance
                                                              Agency of Illinois Inc., and Senior Vice President and
                                                              Director of Van Kampen Investments. From November 1992 to
                                                              December 1997, Mr. Zimmermann was Senior Vice President of
                                                              the Distributor.
</Table>

                                        45
<PAGE>

Van Kampen
Privacy Notice

The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you make with us,
our affiliates, or third parties. We may also collect information you provide
when using our web site, and text files (a.k.a. "cookies") may be placed on your
computer to help us to recognize you and to facilitate transactions you
initiate. We do not disclose any nonpublic personal information about you or any
of our former customers to anyone, except as permitted by law. For instance, so
that we may continue to offer you Van Kampen investment products and services
that meet your investing needs, and to effect transactions that you request or
authorize, we may disclose the information we collect to companies that perform
services on our behalf, such as printers and mailers that assist us in the
distribution of investor materials. These companies will use this information
only for the services for which we hired them, and are not permitted to use or
share this information for any other purpose. To protect your nonpublic personal
information internally, we permit access to it only by authorized employees, and
maintain physical, electronic and procedural safeguards to guard your nonpublic
personal information.

* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
  Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
  Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van
  Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as
  well as the many Van Kampen mutual funds and Van Kampen unit investment
  trusts.

Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com

                         [VAN KAMPEN INVESTMENTS LOGO]
Copyright (C)2002 Van Kampen Funds Inc. All rights reserved.
VKI ANR 12/02                                                  Member NASD/SIPC.
                                                                8736L02-AS-12/02

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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