-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 AXQebLGXjzCgBOV+Zus8hqQ1Ehi90XIlCdRL2cDac7nSmJl203vLiIcmSvNNcaeI
 AXNkze5hJbXZeHBuaC+4cw==

<SEC-DOCUMENT>0000950137-02-000951.txt : 20020414
<SEC-HEADER>0000950137-02-000951.hdr.sgml : 20020414
ACCESSION NUMBER:		0000950137-02-000951
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020227

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VAN KAMPEN HIGH INCOME TRUST II
		CENTRAL INDEX KEY:			0000846671
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-05769
		FILM NUMBER:		02560385

	BUSINESS ADDRESS:	
		STREET 1:		ONE PARKVIEW PLZ
		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 LIMITED TERM HIGH INCOME TRUST
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	VAN KAMPEN AMERICAN CAPITAL LIMITED TERM HIGH INCOME
		DATE OF NAME CHANGE:	19960102
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>c66860n-30d.txt
<DESCRIPTION>ANNUAL REPORT
<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 MARKET PRICE       7
             Q&A WITH YOUR PORTFOLIO MANAGERS       8
                            GLOSSARY OF TERMS      11

                               BY THE NUMBERS
                     YOUR TRUST'S INVESTMENTS      12
                         FINANCIAL STATEMENTS      19
                NOTES TO FINANCIAL STATEMENTS      24
               REPORT OF INDEPENDENT AUDITORS      28
                   DIVIDEND REINVESTMENT PLAN      29



    BOARD OF TRUSTEES AND IMPORTANT ADDRESSES      31
              TRUSTEE AND OFFICER INFORMATION      32
</Table>

Van Kampen
wishes peace
and prosperity
to all.
              NOT FDIC INSURED  MAY LOSE VALUE  NO BANK GUARANTEE
<PAGE>

 OVERVIEW

LETTER TO SHAREHOLDERS
January 18, 2002

Dear Shareholder,

As the new year begins, Van Kampen wishes peace, prosperity and hope to all.

With a legacy that spans nearly four generations, Van Kampen has helped
investors pursue their goals through social, political and economic change. In
the face of challenges and uncertainty, our core investment philosophy has been
tested and, we believe affirmed. Whether you're new to the Van Kampen family or
revisiting your investment strategy, we encourage you to focus on two
fundamental investing principles:

SEEK FINANCIAL ADVICE BEFORE YOU INVEST. Your financial advisor can help you
develop a tailored investment strategy based on several factors, including your
age, family status and goals. While no portfolio is immune to volatility, your
advisor can help you structure a portfolio designed to address your long-term
                  financial goals.

                  EXAMINE YOUR PORTFOLIO AND MODERATE YOUR INVESTMENT
                  RISK--DIVERSIFY. Consider including a variety of stock and
                  fixed-income funds in your portfolio, which may improve your
                  long-term performance.

We are grateful for your continued trust in Van Kampen and appreciate the
opportunity to manage your assets. In the new year, we hope you and your loved
ones enjoy life's true wealth--family, friends and life's daily pleasures.

Sincerely,

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

                                        1
<PAGE>

ECONOMIC SNAPSHOT

THE ECONOMY
DECEMBER 2001 MARKED THE NINTH MONTH OF RECESSION FOR THE U.S. ECONOMY, BUT
MIXED DATA AT YEAR'S END SUGGESTED THE WORST MAY BE OVER. GROSS DOMESTIC PRODUCT
(GDP), THE PRIMARY MEASURE OF ECONOMIC GROWTH, INCREASED AT AN ANNUAL RATE OF
0.2 PERCENT FOR THE FOURTH QUARTER.

BUSINESS ACTIVITY, WHICH SLOWED PRIOR TO THE SEPTEMBER TERRORIST ATTACKS AND
SPIRALED DOWNWARD AFTER, APPEARED TO RETURN TO MORE STABLE--ALBEIT
WEAK--PRE-ATTACK LEVELS. MANUFACTURING, THE SECTOR HARDEST HIT BY THE INVENTORY
CYCLE AND ITS EFFECT ON PRODUCTION DEMAND, CONTINUED TO CONTRACT IN
DECEMBER--BUT AT A MUCH SLOWER RATE THAN IN PREVIOUS MONTHS.

CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING, WHICH DRIVES TWO-THIRDS OF U.S. ECONOMIC GROWTH, REMAINED
SURPRISINGLY RESILIENT THROUGHOUT THE REPORTING PERIOD. PRICE-CONSCIOUS
CONSUMERS SHUNNED HIGH-PRICED DEPARTMENT AND SPECIALTY STORES FOR DISCOUNT
STORES DURING THE HOLIDAY SHOPPING SEASON. MANY ALSO TOOK ADVANTAGE OF
HISTORICALLY LOW MORTGAGE RATES TO REFINANCE THEIR LOANS OR PURCHASE NEW HOMES.
BUT HOMES WEREN'T THE ONLY BIG-TICKET ITEMS POPULAR WITH CONSUMERS DURING THE
REPORTING PERIOD. DEEP PRICE DISCOUNTING AND ZERO-PERCENT FINANCING OFFERED BY
CARMAKERS DURING THE FIRST TWO MONTHS OF THE FOURTH QUARTER LURED MANY CAR
BUYERS INTO DEALERS' SHOWROOMS.

CONSUMER CONFIDENCE, WHICH HAD FALLEN FOR FIVE CONSECUTIVE MONTHS, SHOT UP IN
DECEMBER AS REPORTS OF THE U.S. MILITARY'S APPARENT VICTORIES IN AFGHANISTAN
WERE CIRCULATED. HOWEVER, THIS NEWFOUND OPTIMISM WAS TEMPERED BY MOUNTING JOB
REDUCTION ANNOUNCEMENTS AND RISING UNEMPLOYMENT. BY THE END OF DECEMBER,
UNEMPLOYMENT LEVELS HAD SURGED TO 5.8 PERCENT.

INTEREST RATES AND INFLATION
CONSISTENT WITH ITS RECENT ACTIONS, THE FEDERAL RESERVE BOARD (THE FED) AGAIN
ATTEMPTED TO STIMULATE THE FALTERING ECONOMY BY SLASHING INTEREST RATES. THE
FED'S 0.25 PERCENT CUT ON DECEMBER 11--THE 11TH RATE-CUT TO OCCUR SINCE JANUARY
1, 2001--BROUGHT THE FEDERAL FUNDS RATE TO 1.75 PERCENT, A 40-YEAR LOW.

FINALLY, INFLATION REMAINED MODEST DURING THE REPORTING PERIOD. THE CONSUMER
PRICE INDEX, A COMMON MEASURE OF THE INFLATION RATE, ROSE 1.6 PERCENT IN THE 12
MONTHS ENDED DECEMBER 31.

                                        2
<PAGE>

U.S. GROSS DOMESTIC PRODUCT

SEASONALLY ADJUSTED ANNUALIZED RATES

(December 31, 1999--December 31, 2001)

[BAR GRAPH]

<Table>
<Caption>
                                                                      U.S. GROSS DOMESTIC PRODUCT
                                                                      ---------------------------
<S>                                                           <C>
Dec 99                                                                            8.30
Mar 00                                                                            4.80
Jun 00                                                                            5.70
Sep 00                                                                            1.30
Dec 00                                                                            1.90
Mar 01                                                                            1.30
Jun 01                                                                            0.30
Sep 01                                                                           -1.30
Dec 01                                                                            0.20
</Table>

Source: Bureau of Economic Analysis

INTEREST RATES AND INFLATION

(December 31, 1999--December 31, 2001)

[LINE GRAPH]

<Table>
<Caption>
                                                                       INTEREST RATES                       INFLATION
                                                                       --------------                       ---------
<S>                                                           <C>                                <C>
Dec 99                                                                      5.50                               2.70
                                                                            5.50                               2.70
                                                                            5.75                               3.20
Mar 00                                                                      6.00                               3.80
                                                                            6.00                               3.10
                                                                            6.50                               3.20
Jun 00                                                                      6.50                               3.70
                                                                            6.50                               3.70
                                                                            6.50                               3.40
Sep 00                                                                      6.50                               3.50
                                                                            6.50                               3.40
                                                                            6.50                               3.40
Dec 00                                                                      6.50                               3.40
                                                                            5.50                               3.70
                                                                            5.50                               3.50
Mar 01                                                                      5.00                               2.90
                                                                            4.50                               3.30
                                                                            4.00                               3.60
Jun 01                                                                      3.75                               3.20
                                                                            3.75                               2.70
                                                                            3.50                               2.70
Sep 01                                                                      3.00                               2.60
                                                                            2.50                               2.10
                                                                            2.00                               1.90
Dec 01                                                                      1.75                               1.60
</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 December 31, 2001)

- -----------------------------
NYSE Ticker Symbol - VLT
- -----------------------------

<Table>
<Caption>
                                                   MARKET(1)    NAV(2)
- ---------------------------------------------------------------------------
<S>                                                <C>         <C>      <C>
One-year total return                                13.57%       1.47%
- ---------------------------------------------------------------------------
Five-year average annual total return                 1.32%       1.62%
- ---------------------------------------------------------------------------
Ten-year average annual total return                  8.93%       8.40%
- ---------------------------------------------------------------------------
Life-of-Trust average annual total return             6.28%       5.97%
- ---------------------------------------------------------------------------
Commencement date                                              04/28/89
- ---------------------------------------------------------------------------

Distribution rate as a % of closing common share
price(3)                                                         12.83%
- ---------------------------------------------------------------------------
Net asset value                                                   $4.77
- ---------------------------------------------------------------------------
Closing common share price                                        $5.75
- ---------------------------------------------------------------------------
One-year high common share price (02/05/01)                       $7.25
- ---------------------------------------------------------------------------
One-year low common share price (09/20/01)                        $4.61
- ---------------------------------------------------------------------------
Preferred share rate(4)                                          2.000%
- ---------------------------------------------------------------------------
</Table>

                                        4
<PAGE>

(1) Total return based on market price assumes an investment at the market price
    at the beginning of the period indicated, reinvestment of all distributions
    for the period in accordance with the Trust's dividend reinvestment plan,
    and sale of all shares at the closing common share price at the end of the
    period indicated.

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

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

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

    Past performance is no guarantee of future results. Investment return, share
    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 debt investments)


<Table>
<Caption>
As of December 31, 2001
<S>                    <C>     <C>
- - A/A................   3.8%   [PIE CHART]
- - BBB/Baa............  12.5%
- - BB/Ba..............  38.1%
- - B/B................  37.2%
- - CCC/Caa............   8.3%
- - Non-Rated..........   0.1%
<Caption>
As of December 31, 2000
<S>                    <C>     <C>
- - BBB/Baa............   5.7%   [PIE CHART]
- - BB/Ba..............  36.7%
- - B/B................  54.9%
- - CCC/Caa............   2.7%
</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 period ended December 31, 2001, for common shares)

[BAR GRAPH]

<Table>
<Caption>
                                                                               DIVIDENDS
                                                                               ---------
<S>                                                           <C>
1/01                                                                            0.0615
2/01                                                                            0.0615
3/01                                                                            0.0615
4/01                                                                            0.0615
5/01                                                                            0.0615
6/01                                                                            0.0615
7/01                                                                            0.0615
8/01                                                                            0.0615
9/01                                                                            0.0615
10/01                                                                           0.0615
11/01                                                                           0.0615
12/01                                                                           0.0615
</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--December 31, 2001)

[INVESTMENT PERFORMANCE GRAPH]

<Table>
<Caption>
                                                                           DECEMBER 31, 2001
                                                                           -----------------
<S>                                                           <C>
Cable                                                                            10.20
Energy                                                                            9.60
Gaming & Leisure                                                                  9.10
Forest Products                                                                   8.10
Wireless Communications                                                           6.40
</Table>

Subject to change daily.

NET ASSET VALUE AND MARKET PRICE

(based upon quarter-end values--December 1991 through December 2001)

[INVESTMENT PERFORMANCE GRAPH]

<Table>
<Caption>
                                                                      NET ASSET VALUE                      MARKET PRICE
                                                                      ---------------                      ------------
<S>                                                           <C>                                <C>
12/91                                                                      7.6200                             7.5000
                                                                           8.2100                             8.2500
                                                                           8.3400                             8.6250
                                                                           8.5800                             9.1250
12/92                                                                      7.9200                             9.3750
                                                                           8.6100                             9.7500
                                                                           8.8400                            10.1250
                                                                           8.7400                            10.2500
12/93                                                                      8.9800                             9.7500
                                                                           8.4900                             9.8750
                                                                           8.1200                             9.7500
                                                                           7.7500                             8.8750
12/94                                                                      7.3200                             7.5000
                                                                           7.6700                             8.2500
                                                                           7.9700                             8.6250
                                                                           8.0300                             8.6250
12/95                                                                      8.1200                             8.7500
                                                                           8.0900                             8.8750
                                                                           7.9400                             8.7500
                                                                           8.1200                             9.1250
12/96                                                                      8.3100                             9.3750
                                                                           8.1300                             9.3750
                                                                           8.3200                             9.8125
                                                                           8.4700                            10.0625
12/97                                                                      8.4400                             9.8125
                                                                           8.5000                            10.0000
                                                                           8.3800                             9.5625
                                                                           7.6400                             8.5000
12/98                                                                      7.5900                             8.6250
                                                                           7.3700                             8.4375
                                                                           7.0900                             8.3125
                                                                           6.6500                             7.1875
12/99                                                                      6.5600                             5.7500
                                                                           6.2100                             6.3750
                                                                           6.0900                             6.8125
                                                                           5.9900                             6.4375
12/00                                                                      5.4000                             5.6900
                                                                           5.7400                             6.4000
                                                                           5.4000                             6.4000
                                                                           4.7600                             5.9900
12/01                                                                      4.7700                             5.7500
</Table>

The solid line above represents the trust's net asset value (NAV), which
indicates overall changes in value among the trust's underlying securities. The
trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.

                                        7
<PAGE>

Q&A WITH YOUR PORTFOLIO MANAGERS

WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGEMENT TEAM OF THE VAN KAMPEN HIGH
INCOME TRUST II ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE TRUST'S RETURN DURING THE 12-MONTH PERIOD ENDED DECEMBER 31,
2001. THE TRUST IS MANAGED BY THE ADVISER'S HIGH YIELD TEAM. CURRENT MEMBERS(1)
INCLUDE STEPHEN F. ESSER, MANAGING DIRECTOR, GORDON W. LOERY, EXECUTIVE DIRECTOR
AND DEANNA L. LOUGHNANE, EXECUTIVE DIRECTOR. THE FOLLOWING DISCUSSION REFLECTS
THEIR VIEWS ON THE TRUST'S PERFORMANCE.

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

Q   HOW WOULD YOU CHARACTERIZE
    THE MARKET ENVIRONMENT IN WHICH THE TRUST OPERATED IN THE LAST TWELVE
    MONTHS, AND HOW DID THE TRUST PERFORM IN THAT ENVIRONMENT?

A   The dominant factor in the market
over the period was the slowing U.S. economy. The tragic events of September 11
only made a bad economic situation worse. Business activity came to a standstill
nationwide and across industries, and the travel sector was especially hard hit.
Employment, which had been weak to begin with, fell sharply as companies
announced layoffs as part of a general move to cut costs to address a markedly
weaker future. For the third quarter of 2001, gross domestic product (GDP) fell
by 1.3 percent, its largest decline since the recession of the early 1990s.

    The Federal Reserve Board (the "Fed") responded to this economic weakness
decisively--cutting short-term interest rates 11 times over the course of the
year, four of which occurred after September 11. The bond market reacted
favorably to the interest rate cuts through October. Rates fell across the yield
curve, with the most dramatic declines happening on the short end of the yield
curve, which is the most responsive to changes in monetary policy. This shift
steepened the curve significantly as short- and intermediate-term paper rallied
strongly. That trend only strengthened in the wake of September 11 as investors
flocked to the perceived safety of shorter-duration, lower-risk assets.

    The market shifted again in early November, as confidence slowly returned to
the investor psyche. A combination of stabilization in geopolitical events and a
growing belief that the economy was likely to turn positive in the first half of
2002 led many investors to unwind their long-duration Treasury holdings. This
pushed interest rates at the long end of the curve higher while rates on the
short end fell

                                        8
<PAGE>

even further in response to continued interest-rate cuts (the last cut of the
year came on December 11). This further steepened the yield curve.

    Economic uncertainty in the U.S. led the high-yield market to be similarly
volatile. This was especially true in the first nine months of the reporting
period, which included a six percent slide for the high-yield market in the
month of September alone. Steadily rising defaults were also a factor in the
volatility, as poor economic conditions made it impossible for many lower-rated
companies to make their debt payments on time. The environment improved markedly
in the fourth quarter of 2001 as investor expectations seemed to shift to an
impending economic recovery in 2002. Equities rallied as a result, which proved
a boon for high-yield bonds.

    Sector performance was highly varied. On the negative side, one of the
poorest performers was the fixed-line segment of the telecommunications sector.
Many of these companies were hurt by their ongoing inability to issue new debt
to fund infrastructure expansions, which were necessary to generate the revenues
to make payments on existing debt. These difficulties led to a string of
downgrades and defaults. Other segments of the telecommunications sector also
performed poorly.

    At the other end of the spectrum, several sectors that are traditionally
perceived as more defensive plays turned in more positive performances over the
period. Energy performed well, and the healthcare sector was particularly
strong.

    The economy also had an impact on companies' issuance of new debt. Because
of their poor prospects, many lower-rated companies and industries found that
they were effectively shut out of the new-issue market. Higher-rated companies,
on the other hand, experienced strong investor demand. Since yields on Treasury
bonds had fallen so low, investors turned to higher-quality issues in the
high-yield market in order to capture more attractive yields. As a result,
higher-rated companies were able to successfully issue large amounts of debt. In
all, the credit quality of the year's high-yield issuance was the highest since
1991.

    For the 12 months through December 31, 2001, the trust produced a total
return of 13.57 percent based on market price. This reflects an increase in
market price from $5.69 per share on December 31, 2000, to $5.75 per share on
December 31, 2001. Of course, past performance is no guarantee of future
results. As a result of recent market activity, current performance may vary
from the figures shown. Investment return, share price and net asset value will
fluctuate and trust shares, when sold, may be worth more or less than their
original cost. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor.

    By comparison, the Chase High Yield Index posted a total return of 6.07
percent for the same period. The Chase High Yield Index is an unmanaged,
broad-based statistical composite of high-yield securities. Index returns do not
include any sales charges or fees that would be paid by an investor purchasing
the

                                        9
<PAGE>

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   HOW DID THESE FACTORS AFFECT THE
    WAY YOU MANAGED THE TRUST?

A   One of the most significant
strategies we used for the trust was to keep it highly diversified over the
course of the year. This proved to be a good strategy as the default rate in the
broader market climbed. While the trust had some defaults among its holdings,
the fact that there were at times as many as 250 companies represented in the
portfolio meant that it was protected from fallout from highly concentrated
positions in any one company. Overall, the trust's default rates were at or
below those of the broader market.

    We continued to make adjustments to the portfolio on a bond-by-bond basis,
in keeping with our bottom-up orientation. Our strategy is to find bonds that
are attractively priced relative to our assessment of their risk and performance
potential. As a result, our focus is on finding individual opportunities rather
than thematic sector plays.

    This process resulted in purchases in sectors across the market. For
example, we selectively added to the trust's exposure to cable companies when we
were able to find what we believed were strong companies that had fallen out of
favor with the market. We were able to find similarly attractive opportunities
in the chemical, forest products, healthcare and housing sectors.

    We funded these additions through sales of bonds that we felt no longer
offered compelling yield-to-value return opportunities. Many of these bonds had
reached their price targets, while in other cases their fundamentals had
weakened to the point where we no longer felt comfortable holding them in the
portfolio. Continuing volatility in the telecommunications sector led us to trim
the trust's exposure to wireless companies. We also reduced the trust's holdings
in the manufacturing, consumer products and retailing sectors in order to
redeploy assets more productively elsewhere.

Q   WHAT IS YOUR OUTLOOK FOR
    THE MARKET?

A   In general, we expect a more
constructive environment. We agree with the general sentiment that the U.S.
economy is likely to improve as we move through 2002, with economic growth
turning positive. At the same time, we expect inflation to remain tame, coming
in below two percent. We believe the dollar should remain stable.

    We expect that 2002 should be a better year for high-yield bonds. An
improving U.S. economy could help to reduce default rates, and while interest
rates may be on the rise, we expect that spread contraction should more than
offset the effects of possible rising rates. At current levels, the market does
not appear to have priced in a full economic recovery. As a result, it may offer
compelling opportunities for investors with a disciplined process.

                                        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.

BOTTOM-UP INVESTING: A management style that emphasizes the analysis of
individual securities, rather than economic and market cycles.

DEFAULT: The failure to make required debt payments on time.

DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates. The longer a bond's duration, the greater the effect of interest-rate
movements on its price. Typically, trusts with shorter durations perform better
in rising-rate environments, while trusts with longer durations perform better
when rates decline.

FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called 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.

GROSS DOMESTIC PRODUCT (GDP): The total market value of all finished goods and
services produced in a country in a given year.

NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders in
its portfolio and dividing this amount by the number of common shares
outstanding.

SECTOR: A group of securities that are similar with respect to industry,
maturity, credit rating, or coupon.

VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.

                                        11
<PAGE>

                        BY THE NUMBERS

YOUR TRUST'S INVESTMENTS

December 31, 2001
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>
         CORPORATE BONDS  90.0%
         AEROSPACE  1.5%
$ 433    Northwest Airlines, Inc. ..................    8.375%   03/15/04   $   376,710
  735    Sequa Corp. ...............................    9.000    08/01/09       694,575
                                                                            -----------
                                                                              1,071,285
                                                                            -----------
         BROADCASTING  1.5%
  425    Nextmedia Operating, Inc., 144A-- Private
         Placement (a)..............................   10.750    07/01/11       440,937
  215    Radio One, Inc. ...........................    8.875    07/01/11       223,062
  400    TV Azteca SA (Mexico)......................   10.500    02/15/07       392,000
                                                                            -----------
                                                                              1,055,999
                                                                            -----------
         CABLE  9.2%
1,100    Adelphia Communications Corp...............    9.250    10/01/02     1,111,000
1,075    British Sky Broadcasting (United
         Kingdom)...................................    7.300    10/15/06     1,093,812
  430    Century Communications Corp. ..............    9.750    02/15/02       432,150
1,080    Charter Communication Holdings LLC.........    8.250    04/01/07     1,039,500
  470    CSC Holdings, Inc. ........................   10.500    05/15/16       514,650
  725    EchoStar Communications Corp. .............    9.250    02/01/06       739,500
  850    International Cabletel, Inc. ..............   12.750    04/15/05       289,000
  460    James Cable Partners L.P. .................   10.750    08/15/04       349,600
  585    Ono Finance PLC (United Kingdom)...........   13.000    05/01/09       446,794
  860    Telewest PLC (United Kingdom)..............    9.625    10/01/06       602,000
  595    United Pan Europe Communications
         (Netherlands)..............................   10.875    11/01/07        98,175
                                                                            -----------
                                                                              6,716,181
                                                                            -----------
         CHEMICALS  2.6%
  650    Equistar Chemicals L.P. ...................    8.500    02/15/04       650,000
  145    ISP Chemco, Inc., 144A--Private Placement
         (a)........................................   10.250    07/01/11       152,250
  430    ISP Holdings, Inc., 144A--Private Placement
         (a)........................................   10.625    12/15/09       432,150
  430    Millennium America, Inc. ..................    9.250    06/15/08       440,750
  155    Om Group, Inc., 144A--Private Placement
         (a)........................................    9.250    12/15/11       158,875
  260    Pioneer Americas Acquisition Corp. (b).....    9.250    06/15/07        75,400
                                                                            -----------
                                                                              1,909,425
                                                                            -----------
</Table>

                                               See Notes to Financial Statements

                                        12
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
PAR
AMOUNT                                                                        MARKET
(000)    DESCRIPTION                                  COUPON     MATURITY      VALUE
<C>      <S>                                         <C>         <C>        <C>
         CONSUMER PRODUCTS  1.1%
$ 875    Dan River, Inc. ...........................   10.125%   12/15/03   $   363,125
  200    Elizabeth Arden, Inc.......................   11.750    02/01/11       207,000
  500    Hosiery Corp. of America, Inc. (b).........   13.750    08/01/02       130,000
   80    Supreme International, Inc. ...............   12.250    04/01/06        80,400
                                                                            -----------
                                                                                780,525
                                                                            -----------
         DIVERSIFIED MEDIA  4.1%
  185    Belo Corp. ................................    8.000    11/01/08       189,195
1,100    K-III Communications Corp. ................   10.250    06/01/04     1,034,000
  650    MDC Corporation, Inc. (Canada).............   10.500    12/01/06       438,750
  650    Primedia, Inc. ............................    8.875    05/15/11       588,250
  660    Quebecor Media, Inc. (Canada)..............   11.125    07/15/11       707,850
                                                                            -----------
                                                                              2,958,045
                                                                            -----------
         ENERGY  8.8%
  760    Benton Oil & Gas, Inc. ....................   11.625    05/01/03       539,600
  240    BRL Universal Equipment....................    8.875    02/15/08       250,800
  170    BRL Universal Equipment, 144A--Private
         Placement (a)..............................    8.875    02/15/08       177,650
  430    Chesapeake Energy Corp. ...................    7.875    03/15/04       436,450
  315    Chesapeake Energy Corp. ...................    8.125    04/01/11       307,125
  910    Frontier Oil Corp. ........................   11.750    11/15/09       969,150
1,086    KCS Energy, Inc. ..........................   11.000    01/15/03     1,091,430
  255    Pogo Producing Co. ........................    8.250    04/15/11       258,825
  480    Port Arthur Finance Corp. .................   12.500    01/15/09       482,400
  430    R & B Falcon Corp. ........................    6.500    04/15/03       445,050
  515    R & B Falcon Corp. ........................    9.500    12/15/08       581,950
  240    Stone Energy Corp., 144A--Private Placement
         (a)........................................    8.250    12/15/11       244,800
  600    Vintage Petroleum, Inc. ...................    7.875    05/15/11       591,000
                                                                            -----------
                                                                              6,376,230
                                                                            -----------
         FINANCIAL  0.3%
  240    Banco Nacional de Comercio Exterior
         (Mexico)...................................    7.250    02/02/04       250,098
                                                                            -----------

         FOOD & DRUG  2.5%
1,100    Fleming Cos., Inc. ........................   10.500    12/01/04     1,091,750
1,180    Jitney-Jungle Stores America, Inc. (b)
         (c)........................................   12.000    03/01/06           118
  765    Pantry, Inc. ..............................   10.250    10/15/07       755,437
                                                                            -----------
                                                                              1,847,305
                                                                            -----------
</Table>

See Notes to Financial Statements

                                        13
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
PAR
AMOUNT                                                                        MARKET
(000)    DESCRIPTION                                  COUPON     MATURITY      VALUE
<C>      <S>                                         <C>         <C>        <C>
         FOOD & TOBACCO  4.1%
$ 900    Coca Cola Femsa S.A. (Mexico)..............    8.950%   11/01/06   $ 1,008,000
  850    Pepsi Gemex S.A. (Mexico)..................    9.750    03/30/04       905,250
  625    Smithfield Foods, Inc. ....................    7.625    02/15/08       615,625
  450    Smithfield Foods, Inc., 144A--Private
         Placement (a)..............................    8.000    10/15/09       463,500
                                                                            -----------
                                                                              2,992,375
                                                                            -----------
         FOREST PRODUCTS  7.4%
  215    Fibermark, Inc. ...........................   10.750    04/15/11       196,725
  700    Fonda Group, Inc. .........................    9.500    03/01/07       633,500
  585    Louisiana Pacific Corp. ...................   10.875    11/15/08       570,375
  460    Norske Skog, 144A--Private Placement
         (Canada) (a)...............................    8.625    06/15/11       483,000
  495    Pacifica Papers, Inc. (Canada).............   10.000    03/15/09       534,600
1,100    Radnor Holdings Corp. .....................   10.000    12/01/03       797,500
  575    Repap New Brunswick, Inc. (Canada).........    9.000    06/01/04       606,625
  205    Sweetheart Cup, Inc. ......................   10.500    09/01/03       200,900
1,450    Vicap S.A. (Mexico)........................   10.250    05/15/02     1,370,250
                                                                            -----------
                                                                              5,393,475
                                                                            -----------
         GAMING & LEISURE  8.3%
  415    Argosy Gaming Co. .........................   10.750    06/01/09       458,575
  340    Harrahs Operating Co., Inc. ...............    7.875    12/15/05       353,600
  170    Harrahs Operating Co., Inc. ...............    8.000    02/01/11       175,401
  575    HMH Properties, Inc. ......................    7.875    08/01/05       549,125
  510    Horseshoe Gaming LLC.......................    8.625    05/15/09       529,125
1,075    International Game Technology..............    7.875    05/15/04     1,112,625
1,100    Mohegan Tribal Gaming Authority............    8.125    01/01/06     1,138,500
  380    Park Place Entertainment Corp. ............    7.875    12/15/05       381,900
  325    Park Place Entertainment Corp. ............    8.875    09/15/08       331,500
  595    Station Casinos, Inc. .....................    8.375    02/15/08       606,900
  350    Station Casinos, Inc. .....................    9.875    07/01/10       357,000
                                                                            -----------
                                                                              5,994,251
                                                                            -----------
         HEALTHCARE  4.1%
  250    AdvancePCS.................................    8.500    04/01/08       260,000
  800    Columbia/HCA, Inc. ........................    6.910    06/15/05       822,000
   50    Columbia/HCA, Inc. ........................    7.150    03/30/04        52,375
  450    Fisher Scientific International, Inc. .....    7.125    12/15/05       445,500
  620    Fresenius Medical Care Capital Trust.......    9.000    12/01/06       638,600
  750    Healthsouth Corp., 144A--Private Placement
         (a)........................................    7.375    10/01/06       753,750
                                                                            -----------
                                                                              2,972,225
                                                                            -----------
</Table>

                                               See Notes to Financial Statements

                                        14
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
PAR
AMOUNT                                                                        MARKET
(000)    DESCRIPTION                                  COUPON     MATURITY      VALUE
<C>      <S>                                         <C>         <C>        <C>
         HOUSING  4.2%
$ 465    Cemex SA, 144A--Private Placement (Mexico)
         (a)........................................    8.625%   07/18/03   $   492,900
  360    Istar Financial, Inc. .....................    8.750    08/15/08       360,696
  190    Nortek, Inc................................    8.875    08/01/08       191,900
  430    Schuler Homes..............................    9.375    07/15/09       447,200
  825    Toll Corp. ................................    8.250    02/01/11       820,875
  675    Webb (Del E.) Corp. .......................   10.250    02/15/10       732,375
                                                                            -----------
                                                                              3,045,946
                                                                            -----------
         INFORMATION TECHNOLOGY  3.1%
  325    Fairchild Semiconductor Corp. .............   10.500    02/01/09       346,125
  975    Filtronic PLC (United Kingdom).............   10.000    12/01/05       882,375
  650    Flextronics International Ltd.
         (Singapore)................................    8.750    10/15/07       669,500
  325    Tektronix, Inc. ...........................    7.625    08/15/02       332,313
                                                                            -----------
                                                                              2,230,313
                                                                            -----------
         MANUFACTURING  1.4%
  190    Case Corp..................................    6.250    12/01/03       177,110
  195    Case Credit Corp. .........................    6.125    02/15/03       183,870
1,050    Communications & Power Industries, Inc. ...   12.000    08/01/05       498,750
  455    Numatics, Inc. ............................    9.625    04/01/08       163,800
                                                                            -----------
                                                                              1,023,530
                                                                            -----------
         METALS  3.0%
  220    Doe Run Resources Corp.....................   11.250    03/15/05        41,800
  900    GS Technologies Operating, Inc. (b) (c)....   12.250    10/01/05        13,500
1,475    Kaiser Aluminum & Chemical Corp. ..........    9.875    02/15/02     1,467,625
  140    Renco Steel Holdings, Inc. ................   10.875    02/01/05        14,700
1,210    WCI Steel, Inc. ...........................   10.000    12/01/04       641,300
                                                                            -----------
                                                                              2,178,925
                                                                            -----------
         RETAIL  1.2%
  205    Big 5 Corp. ...............................   10.875    11/15/07       202,950
  430    J C Penney, Inc. ..........................    7.250    04/01/02       431,564
  260    K Mart Corp. ..............................    8.375    12/01/04       219,050
                                                                            -----------
                                                                                853,564
                                                                            -----------
         SERVICES  2.5%
  630    Allied Waste North America, Inc. ..........    8.875    04/01/08       652,050
1,170    Dyncorp....................................    9.500    03/01/07     1,199,250
                                                                            -----------
                                                                              1,851,300
                                                                            -----------
         TELECOMMUNICATIONS  5.0%
  430    Asia Global Crossing (Bermuda).............   13.375    10/15/10       152,650
  220    Exodus Communications, Inc. (b) (c)........   11.250    07/01/08        48,400
  283    Focal Communications Corp. ................   11.875    01/15/10       116,030
</Table>

See Notes to Financial Statements

                                        15
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
PAR
AMOUNT                                                                        MARKET
(000)    DESCRIPTION                                  COUPON     MATURITY      VALUE
<C>      <S>                                         <C>         <C>        <C>
         TELECOMMUNICATIONS (CONTINUED)
$ 430    France Telecom, 144A-- Private Placement
         (France) (a)...............................    7.750%   03/01/11   $   461,473
  650    Frontier Corp. (f).........................    6.000    10/15/03       100,750
  795    Global Crossing Holdings Ltd.
         (Bermuda) (b) (f)..........................    9.125    11/15/06        87,450
  390    Globix Corp. ..............................   12.500    02/01/10        85,800
  960    GT Group Telecom, Inc. (Canada) (d)........ 0/13.250    02/01/10       144,000
  940    Intermedia Communications, Inc. ...........    8.600    06/01/08       971,725
  120    Intermedia Communications, Inc. ...........    8.875    11/01/07       126,750
  220    Madison River Capital LLC..................   13.250    03/01/10       160,600
  140    McLeodUSA, Inc. (b) (f)....................   11.375    01/01/09        32,200
  875    Metromedia Fiber Network, Inc. ............   10.000    12/15/09       258,125
  220    MGC Communications, Inc. ..................   13.000    10/01/04        72,600
  430    Nextlink Communications, Inc. .............    9.625    10/01/07        49,450
  420    Nextlink Communications, Inc. (b)..........   10.500    12/01/09        52,500
  150    Philippine Long Distance Telephone
         (Philippines)..............................   10.500    04/15/09       120,573
  220    Philippine Long Distance Telephone
         (Philippines)..............................   10.625    06/02/04       209,377
  495    PSI Net, Inc. (b) (c)......................   10.500    12/01/06        39,600
  320    WorldCom, Inc. ............................    8.250    05/15/31       339,225
                                                                            -----------
                                                                              3,629,278
                                                                            -----------
         TRANSPORTATION  5.3%
1,150    Aetna Industries, Inc. (b).................   11.875    10/01/06       184,000
  350    Aftermarket Technology Corp. ..............   12.000    08/01/04       357,000
  300    AutoNation, Inc., 144A-- Private Placement
         (a)........................................    9.000    08/01/08       306,750
  330    Cenargo International PLC (United
         Kingdom)...................................    9.750    06/15/08       240,900
   95    Collins & Aikman Products Co. .............   11.500    04/15/06        93,100
  295    Collins & Aikman Products Co., 144A--
         Private Placement (a)......................   10.750    12/31/11       297,213
  470    Dana Corp., 144A--Private Placement (a)....    9.000    08/15/11       432,400
  710    Ford Motor Credit Co. .....................    6.500    01/25/07       695,349
  345    General Motors Acceptance Corp. ...........    7.500    07/15/05       362,968
  470    International Shipholding Corp. ...........    9.000    07/01/03       467,650
  430    Stena AB (Sweden)..........................   10.500    12/15/05       432,150
  110    Talon Automotive Group, Inc. (b) (c).......    9.625    05/01/08         1,650
                                                                            -----------
                                                                              3,871,130
                                                                            -----------
</Table>

                                               See Notes to Financial Statements

                                        16
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
PAR
AMOUNT                                                                        MARKET
(000)    DESCRIPTION                                  COUPON     MATURITY      VALUE
<C>      <S>                                         <C>         <C>        <C>
         UTILITY  3.0%
$ 170    Calpine Corp. .............................    8.500%   02/15/11   $   152,150
  430    Calpine Corp. .............................    8.625    08/15/10       384,850
  430    CMS Energy Corp. ..........................    7.625    11/15/04       427,850
  385    Mirant Americas Generation LLC.............    7.625    05/01/06       351,328
  305    PG & E National Energy Group, Inc. ........   10.375    05/16/11       322,173
  510    PSEG Energy Holdings.......................    9.125    02/10/04       536,349
                                                                            -----------
                                                                              2,174,700
                                                                            -----------
         WIRELESS COMMUNICATIONS  5.8%
  755    Airgate PCS, Inc. (d)...................... 0/13.500    10/01/09       573,800
  180    Alamosa Delaware, Inc. ....................   12.500    02/01/11       184,500
  190    Alamosa Holdings, Inc. (d)................. 0/12.875    02/15/10       117,800
  215    American Cellular Corp. ...................    9.500    10/15/09       209,625
  215    American Tower Corp. ......................    9.375    02/01/09       173,613
  440    Grupo Iusacell S.A. (Mexico)...............   10.000    07/15/04       453,200
  620    IPCS, Inc. (d)............................. 0/14.000    07/15/10       415,400
  845    Nextel Communications, Inc. ...............    9.375    11/15/09       667,550
  220    Pinnacle Holdings, Inc. (d)................ 0/10.000    03/15/08        52,800
  430    Price Communications Wireless, Inc. .......    9.125    12/15/06       455,800
  265    Rural Cellular Corp. ......................    9.625    05/15/08       268,975
  220    Telecorp PCS, Inc. ........................   10.625    07/15/10       255,200
  280    Tritel PCS, Inc. ..........................   10.375    01/15/11       318,500
  140    US Unwired, Inc. (d)....................... 0/13.375    11/01/09       100,100
                                                                            -----------
                                                                              4,246,863
                                                                            -----------

TOTAL CORPORATE BONDS 90.0%..............................................    65,422,968
                                                                            -----------

         GOVERNMENT AND GOVERNMENT AGENCY
         OBLIGATION  0.2%
  110    United Mexican States (Mexico).............    8.375    01/14/11       114,017
                                                                            -----------
</Table>

<Table>
<S>                                                           <C>

EQUITIES  0.9%
DecisionOne Corp. (2,450 common shares) (e)(g)..............        5,196
DecisionOne Corp. (5,386 common stock warrants) (e) (g).....           54
Focal Communications Corp. (64,889 common shares) (e).......       39,582
GT Group Telecom, Inc. (960 common stock warrants) 144A--
  Private Placement (a) (e).................................        5,280
Hosiery Corp. of America, Inc. (500 common shares) (e)......            5
IPCS, Inc. (620 common stock warrants) 144A--Private
  Placement (a) (e).........................................       15,810
NTL, Inc. (1,187 common stock warrants) 144A--Private
  Placement (a) (e).........................................           12
</Table>

See Notes to Financial Statements

                                        17
<PAGE>

YOUR TRUST'S INVESTMENTS

December 31, 2001

<Table>
<Caption>
                                                                MARKET
DESCRIPTION                                                      VALUE
<S>                                                           <C>
EQUITIES (CONTINUED)
Ono Finance PLC (585 equity value certificates)
  144A--Private Placement (United Kingdom) (a) (e)..........  $    17,550
Pathmark Stores, Inc. (22,672 common shares) (e)............      559,092
Star Gas Partners L.P. (220 limited partnership units)......        4,490
                                                              -----------

TOTAL EQUITIES  0.9%........................................      647,071
                                                              -----------

TOTAL LONG-TERM INVESTMENTS  91.1%
  (Cost $78,674,054)........................................   66,184,056
                                                              -----------

REPURCHASE AGREEMENT  7.0%
State Street Bank & Trust Co. ($5,087,000 par collateralized
  by U.S. Government obligations in a pooled cash account,
  dated 12/31/01, to be sold on 01/02/02 at $5,087,480)
  (Cost $5,087,000).........................................    5,087,000
                                                              -----------

TOTAL INVESTMENTS  98.1%
  (Cost $83,761,054)........................................   71,271,056
OTHER ASSETS IN EXCESS OF LIABILITIES  1.9%.................    1,388,554
                                                              -----------

NET ASSETS  100.0%..........................................  $72,659,610
                                                              ===========
</Table>

(a) 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.

(b) Non-income producing as security is in default.

(c) This borrower has filed for protection in federal bankruptcy court.

(d) Security is a "step-up" bond where the coupon increases or steps up at a
    predetermined date.

(e) Non-Income producing security.

(f) Subsequent to December 31, 2001, the company filed for protection in federal
    bankruptcy court.

(g) Market value is determined in accordance with procedures established in good
    faith by the Board of Trustees.

                                               See Notes to Financial Statements

                                        18
<PAGE>

FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2001

<Table>
<S>                                                             <C>
ASSETS:
Total Investments (Cost $83,761,054)........................    $ 71,271,056
Cash........................................................             560
Interest Receivable.........................................       1,687,012
Other.......................................................             687
                                                                ------------
    Total Assets............................................      72,959,315
                                                                ------------
LIABILITIES:
Payables:
  Income Distributions--Preferred Shares....................          48,443
  Investment Advisory Fee...................................          39,362
  Shareholder Reports.......................................          19,508
  Affiliates................................................           1,092
Trustees' Deferred Compensation and Retirement Plans........         133,739
Accrued Expenses............................................          57,561
                                                                ------------
    Total Liabilities.......................................         299,705
                                                                ------------
NET ASSETS..................................................    $ 72,659,610
                                                                ============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
  shares, 1,360 issued with liquidation preference of
  $25,000 per share)........................................    $ 34,000,000
                                                                ------------
Common Shares ($.01 par value with an unlimited number of
  shares authorized, 8,109,000 shares issued and
  outstanding)..............................................          81,090
Paid in Surplus.............................................      68,046,827
Accumulated Distributions in Excess of Net Investment
  Income....................................................      (1,220,331)
Net Unrealized Depreciation.................................     (12,489,998)
Accumulated Net Realized Loss...............................     (15,757,978)
                                                                ------------
    Net Assets Applicable to Common Shares..................      38,659,610
                                                                ------------
NET ASSETS..................................................    $ 72,659,610
                                                                ============
NET ASSET VALUE PER COMMON SHARE ($38,659,610 divided by
  8,109,000 shares outstanding).............................    $       4.77
                                                                ============
</Table>

See Notes to Financial Statements

                                        19
<PAGE>

Statement of Operations
For the Year Ended December 31, 2001

<Table>
<S>                                                           <C>
INVESTMENT INCOME:
Interest....................................................  $  8,199,281
Other.......................................................        23,275
                                                              ------------
    Total Income............................................     8,222,556
                                                              ------------
EXPENSES:
Investment Advisory Fee.....................................       563,116
Preferred Share Maintenance.................................       103,126
Trustees' Fees and Related Expenses.........................        31,508
Legal.......................................................        23,190
Custody.....................................................        10,850
Other.......................................................       196,977
                                                              ------------
    Total Expenses..........................................       928,767
                                                              ------------
NET INVESTMENT INCOME.......................................  $  7,293,789
                                                              ============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss...........................................  $ (6,366,705)
                                                              ------------
Unrealized Appreciation/Depreciation:
  Beginning of the Period...................................   (13,896,734)
  End of the Period.........................................   (12,489,998)
                                                              ------------
Net Unrealized Appreciation During the Period...............     1,406,736
                                                              ------------
NET REALIZED AND UNREALIZED LOSS............................  $ (4,959,969)
                                                              ============
NET INCREASE IN NET ASSETS FROM OPERATIONS..................  $  2,333,820
                                                              ============
</Table>

                                               See Notes to Financial Statements

                                        20
<PAGE>

Statements of Changes in Net Assets
For the Years Ended December 31, 2001 and 2000

<Table>
<Caption>
                                                     YEAR ENDED           YEAR ENDED
                                                  DECEMBER 31, 2001    DECEMBER 31, 2000
                                                  --------------------------------------
<S>                                               <C>                  <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................    $ 7,293,789         $  8,917,606
Net Realized Loss................................     (6,366,705)          (3,815,549)
Net Unrealized Appreciation/Depreciation During
  the Period.....................................      1,406,736           (5,156,599)
                                                     -----------         ------------
Change in Net Assets from Operations.............      2,333,820              (54,542)
                                                     -----------         ------------

Distributions from and in Excess of Net
  Investment Income:
  Common Shares..................................     (5,939,518)          (6,309,638)
  Preferred Shares...............................     (1,474,556)          (2,562,945)
                                                     -----------         ------------
                                                      (7,414,074)          (8,872,583)
                                                     -----------         ------------
Return of Capital Distribution:
  Common Shares..................................        (43,874)            (342,437)
  Preferred Shares...............................        (10,892)            (139,097)
                                                     -----------         ------------
                                                         (54,766)            (481,534)
                                                     -----------         ------------
Total Distributions..............................     (7,468,840)          (9,354,117)
                                                     -----------         ------------

NET CHANGE IN NET ASSETS FROM INVESTMENT
  ACTIVITIES.....................................     (5,135,020)          (9,408,659)

FROM CAPITAL TRANSACTIONS:
Redemption of Preferred Shares...................     (4,000,000)          (7,000,000)
                                                     -----------         ------------
TOTAL DECREASE IN NET ASSETS.....................     (9,135,020)         (16,408,659)
NET ASSETS:
Beginning of the Period..........................     81,794,630           98,203,289
                                                     -----------         ------------
End of the Period (Including accumulated
  distributions in excess of net investment
  income of $1,220,331 and $635,816,
  respectively)..................................    $72,659,610         $ 81,794,630
                                                     ===========         ============
</Table>

See Notes to Financial Statements

                                        21
<PAGE>

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

<Table>
<Caption>
                                                      --------------------------------------
                                                      2001(d)    2000      1999       1998
                                                      --------------------------------------
<S>                                                   <C>       <C>       <C>       <C>
NET ASSET VALUE, BEGINNING OF THE PERIOD............  $  5.40   $  6.56   $  7.59   $   8.44
                                                      -------   -------   -------   --------
 Net Investment Income..............................      .90      1.10      1.14       1.18
 Net Realized and Unrealized Gain/Loss..............     (.61)    (1.11)    (1.00)      (.77)
                                                      -------   -------   -------   --------
Total from Investment Operations....................      .29      (.01)      .14        .41
                                                      -------   -------   -------   --------
Less:
 Distributions from and in Excess of Net Investment
   Income:
   Paid to Common Shareholders......................      .73       .76       .90        .96
   Common Share Equivalent of Distributions Paid to
     Preferred Shareholders.........................      .18       .33       .27        .30
 Return of Capital Distributions:
   Paid to Common Shareholders......................      .01       .06       -0-        -0-
   Common Share Equivalent of Distributions Paid to
     Preferred Shareholders.........................      -0-*      -0-*      -0-        -0-
                                                      -------   -------   -------   --------
Total Distributions.................................      .92      1.15      1.17       1.26
                                                      -------   -------   -------   --------
NET ASSET VALUE, END OF THE PERIOD..................  $  4.77   $  5.40   $  6.56   $   7.59
                                                      =======   =======   =======   ========
Market Price Per Share at End of the Period.........  $  5.75   $  5.69   $  5.75   $  8.625
Total Investment Return at Market Price (a).........   13.57%    12.13%   -25.28%     -2.73%
Total Return at Net Asset Value (b).................    1.47%    -5.69%    -1.77%      1.22%
Net Assets at End of the Period (In millions).......  $  72.7   $  81.8   $  98.2   $  106.6
Ratio of Expenses to Average Net Assets Applicable
 to Common Shares (c)...............................    2.14%     2.03%     1.97%      1.92%
Ratio of Net Investment Income to Average Net Assets
 Applicable to Common Shares (c)....................   16.83%    18.16%    16.32%     14.54%
Portfolio Turnover..................................      63%       40%       56%        65%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
 Preferred Shares (c)...............................    1.15%     1.07%     1.10%      1.14%
Ratio of Net Investment Income to Average Net Assets
 Applicable to Common Shares (e)....................   13.40%    12.66%    12.41%     10.85%
SENIOR SECURITIES:
Total Preferred Shares Outstanding..................    1,360     1,520     1,800        900
Asset Coverage Per Preferred Share (f)..............  $53,426   $53,812   $54,557   $118,418
Involuntary Liquidating Preference Per Preferred
 Share..............................................  $25,000   $25,000   $25,000   $ 50,000
Average Market Value Per Preferred Share............  $25,000   $25,000   $25,000   $ 50,000
</Table>

 *  Amount is less than $.01.

(a) Total return based on market price assumes an investment at the market price
    at the beginning of the period indicated, reinvestment of all distributions
    for the period in accordance with the Trust's dividend reinvestment plan,
    and sale of all shares at the closing common share price at the end of the
    period indicated.

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

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

(d) As required, effective January 1, 2001, the Trust has adopted the provisions
    of the AICPA Audit and Accounting Guide for Investment Companies and began
    amortizing premium on fixed income securities. The effect of this change for
    the period ended December 31, 2001 was to decrease net investment income per
    share by $.02, increase net realized and unrealized gains and losses per
    share by $.02 and decrease the ratio of net investment income to average net
    assets applicable to common shares by .40%. Per share, ratios and
    supplemental data for periods prior to December 31, 2001 have not been
    restated to reflect this change in presentation.

(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.

                                        22
<PAGE>

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------
       1997       1996       1995       1994       1993       1992
- --------------------------------------------------------------------
<S>  <C>        <C>        <C>        <C>        <C>        <C>
     $   8.31   $   8.12   $   7.32   $   8.98   $   7.92   $   7.29
     --------   --------   --------   --------   --------   --------
         1.20       1.23       1.27       1.28       1.42       1.69
          .18        .21        .81      (1.53)      1.02        .42
     --------   --------   --------   --------   --------   --------
         1.38       1.44       2.08       (.25)      2.44       2.11
     --------   --------   --------   --------   --------   --------
          .96        .96        .96       1.18       1.20        .98
          .29        .29        .32        .23        .18        .50
          -0-        -0-        -0-        -0-        -0-        -0-
          -0-        -0-        -0-        -0-        -0-        -0-
     --------   --------   --------   --------   --------   --------
         1.25       1.25       1.28       1.41       1.38       1.48
     --------   --------   --------   --------   --------   --------
     $   8.44   $   8.31   $   8.12   $   7.32   $   8.98   $   7.92
     ========   ========   ========   ========   ========   ========
     $ 9.8125   $  9.375   $   8.75   $   7.50   $   9.75   $  9.375
       15.34%     18.91%     30.33%    -12.94%     17.01%     39.58%
       13.90%     15.15%     25.19%     -5.70%     30.08%     16.92%
     $  113.4   $  112.4   $  110.8   $  104.4   $  117.8   $  109.2
        1.83%      1.89%      1.96%      1.97%      1.72%      1.73%
       14.43%     15.19%     16.19%     15.75%     16.46%     20.61%
          98%        94%       124%       125%       140%       145%
        1.10%      1.12%      1.15%      1.17%      1.05%      1.02%
       10.93%     11.58%     12.09%     12.87%     14.41%     14.49%
          900        900        900        900        900        900
     $126,015   $124,849   $123,135   $115,957   $130,926   $121,322
     $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000
     $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000   $ 50,000
</Table>

See Notes to Financial Statements

                                        23
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

December 31, 2001

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen High Income Trust II (the "Trust") is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide high current
income, while seeking to preserve shareholders' capital through investment in a
professionally managed diversified portfolio of high yield, fixed income
securities. As of April 1, 1999, through a resolution approved by the Board of
Trustees, the Trust may invest up to 35 percent of its total assets in
securities of foreign issuers. The Trust commenced investment operations on
April 28, 1989.

    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 at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

A. SECURITY VALUATION Investments are stated at value using market quotations or
indications of value obtained from an independent pricing service. For those
securities where quotations or prices are not available, valuations are obtained
from yield data relating to instruments or securities with similar
characteristics, or by other means, in accordance with procedures established in
good faith by the Board of Trustees. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, 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 invest in repurchase agreements, which are short-term
investments in which the Trust acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Trust may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Trust will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Trust.

                                        24
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

December 31, 2001

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

    As required, effective January 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities. Prior to January 1, 2001, the
Trust did not amortize premiums on fixed income securities. The cumulative
effect of this accounting change had no impact on total net assets of the Trust,
but resulted in a $473,533 reduction in cost of securities and a corresponding
$473,533 decrease in net unrealized depreciation based on securities held by the
Trust on January 1, 2001.

    The effect of this change for the year ended December 31, 2001 was to
decrease net investment income by $173,588; decrease net unrealized appreciation
by $137,092, and decrease net realized losses by $310,680. 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 December 31, 2001, the Trust had an accumulated capital loss
carryforward for tax purposes of $13,805,616 which expires between December 31,
2002 and December 31, 2009. Of this amount, $902,223 will expire on December 31,
2002. Net realized gains or losses may differ for financial reporting and tax
purposes as a result of the deferral of losses relating to wash sale
transactions and as a result of post-October losses which may not be recognized
for tax purposes until the first day of the following fiscal year.

    At December 31, 2001, for federal income tax purposes, cost of long- and
short-term investments is $84,126,594, the aggregate gross unrealized
appreciation is $1,979,926 and the aggregate gross unrealized depreciation is
$14,835,464, resulting in net unrealized depreciation on long- and short-term
investments of $12,855,538.

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 to common shareholders. Distributions from net
realized

                                        25
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

December 31, 2001

gains for book purposes may include short-term capital gains which are included
in ordinary income for tax purposes.

    Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 2001 fiscal year have been identified and appropriately reclassified.
Permanent differences of $15,650 relating to fee income received from tender
offers was reclassified from accumulated distributions in excess of net
investment income to accumulated net realized loss, $24,953 relating to proceeds
received from the sale of defaulted bonds was reclassified from accumulated net
realized loss to accumulated distributions in excess of net investment income,
and $54,766 relating to return of capital distributions was reclassified from
accumulated distributions in excess of net investment income to capital.

F. RECLASSIFICATIONS Certain information included in the prior years' financial
highlights has been conformed to the current year presentation.

2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES

Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .70% of the average daily net assets of the Trust.

    For the year ended December 31, 2001, the Trust recognized expenses of
approximately $10,900 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 December
31, 2001, the Trust recognized expenses of approximately $25,600 representing
Van Kampen Investment Inc's or its affiliates (collectively "Van Kampen") cost
of providing accounting and legal services to the Trust, which are reported as
part of "Other" and "Legal" expenses, respectively, in 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

                                        26
<PAGE>

NOTES TO
FINANCIAL STATEMENTS

December 31, 2001

ten-year period and are based upon each trustee's years of service to the Trust.
The maximum annual benefit per trustee under the plan is $2,500.

3. INVESTMENT TRANSACTIONS

During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments were $46,779,669 and $52,801,140, respectively.

4. AUCTION PREFERRED SHARES

As of December 31, 2001, the Trust has outstanding 1,360 Auction Preferred
Shares ("APS"). Dividends are cumulative and the dividend rate is currently
reset every 28 days through an auction process. The rate in effect on December
31, 2001, was 2.00%. During the year ended December 31, 2001, the rates ranged
from 1.90% to 6.55%.

    The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.

    The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.

    On December 4, 2001, the Trust redeemed 160 shares of its Auction Market
Preferred Shares with a liquidation value of $25,000 per share.

                                        27
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Trustees and Shareholders of Van Kampen High Income Trust II

We have audited the accompanying statement of assets and liabilities of Van
Kampen High Income Trust II (the "Trust"), including the portfolio of
investments, as of December 31, 2001, the related statement of operations for
the year then ended, and the statements of changes in net assets and the
financial highlights for each of the two 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 December 31, 2000, were
audited by other auditors whose report, dated February 4, 2000, 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 December 31, 2001, 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 High Income Trust II as of December 31, 2001, 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
February 8, 2002

                                        28
<PAGE>

DIVIDEND REINVESTMENT PLAN

    The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have all distributions
of dividends and capital gains automatically reinvested in Common Shares of the
Trust. All Common Shareholders are deemed to be participants in the Plan unless
they specifically elect not to participate. Common Shareholders who elect not to
participate in the Plan will receive all distributions of dividends and capital
gains in cash paid by check mailed directly to the Common Shareholder by the
Trust's dividend disbursing agent.

HOW THE PLAN WORKS

    State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, 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 capital gains distribution paid subsequent to written
notice of the change 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, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.

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.

                                        29
<PAGE>

RIGHT TO WITHDRAW

    All Common Shareholders of the Trust are deemed to be participants in the
Plan unless they specifically elect not to participate. You may withdraw from
the Plan at any time by calling 1-800-341-2929 or by writing State Street Bank
and Trust Company. 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:

         2800 Post Oak Blvd.
          Houston, TX 77056
        Attn: Closed-End Funds

                                        30
<PAGE>

BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN HIGH 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, Illinois 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

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

                                        31
<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 Trust Company, 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 (56)         Trustee      Trustee     Mr. Arch is Chairman and Chief Executive            37
Blistex Inc.                            since 1988  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 (56)
Blistex Inc.
1800 Swift Drive
Oak Brook, IL 60523
</Table>

                                        32
<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 (61)          Trustee      Trustee     Mr. Dammeyer is President of CAC, llc., a           37
CAC, llc.                               since 1988  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 (61)          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, Arris
                           Group, 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>

                                        33
<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 (65)         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 (71)     Trustee      Trustee     Mr. Myers is a financial consultant. Mr. Myers      37
550 Washington Avenue                   since 1988  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 (65)         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.
                           operation, and the Marrow
                           Foundation.
Theodore A. Myers (71)     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>

                                        34
<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 (60)  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 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 (60)
1126 E. 59th Street
Chicago, IL 60637
</Table>

                                        35
<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 INDEPENDENT TRUSTEE        TRUST       SERVED    DURING PAST 5 YEARS                             BY TRUSTEE
<S>                        <C>          <C>         <C>                                             <C>
Richard F. Powers, III*    Chairman     Trustee     Mr. Powers is Chairman, Director, President,        98
(55)                                    since 1999  Chief Executive Officer and Managing Director
1 Parkview Plaza                                    of Van Kampen; Chairman, Director, Chief
Oakbrook Terrace, IL                                Executive Officer and Managing Director of the
60181                                               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
                                                    Dean Witter Asset Management Inc. Mr. Powers
                                                    is also Chairman of the Board,
                                                    Trustee/Director and President of funds in the
                                                    Fund Complex. Prior to May 1998, Mr. Powers
                                                    was Executive Vice President; and Director of
                                                    Marketing of Morgan Stanley Dean Witter & Co.
                                                    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* (62)      Trustee      Trustee     Mr. Whalen is a Partner in the law firm of          98
333 West Wacker Drive                   since 1988  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 INDEPENDENT TRUSTEE     HELD BY TRUSTEE
<S>                        <C>
Richard F. Powers, III*
(55)
1 Parkview Plaza
Oakbrook Terrace, IL
60181
Wayne W. Whalen* (62)
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.

                                        36
<PAGE>

OFFICERS:

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                   FUND           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
Stephen L. Boyd (61)          Executive Vice      Officer     Managing Director and Chief Investment Officer of Van Kampen
2800 Post Oak Blvd.           President and       since 1998  Investments, and Managing Director, President and Chief
45th Floor                    Chief Investment                Operating Officer of the Advisers and Van Kampen Advisors
Houston, TX 77056             Officer                         Inc. Executive Vice 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>

                                        37
<PAGE>

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                   FUND           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,
Harborside Financial Center   Secretary           since 1999  Director of the Advisers, Van Kampen Advisors Inc., the
Plaza 2 - 7th Floor                                           Distributor, Investor Services and certain other
Jersey City, NJ 07311                                         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.
Michael H. Santo (46)         Vice President      Officer     Managing Director, Chief Operations Officer and Director of
1 Parkview Plaza                                  since 1999  Van Kampen Investments, Managing Director, Chief Executive
Oakbrook Terrace, IL 60181                                    Officer and Director of Investor Services, Managing
                                                              Director, Chief Operations and Technology Officer and
                                                              Director of the Advisers, the Distributor and Van Kampen
                                                              Advisors Inc. and serves as a Director or Officer of certain
                                                              other subsidiaries of Van Kampen Investments. Vice President
                                                              of funds in the Fund Complex. Prior to December 2000,
                                                              Executive Vice President, Chief Administrative Officer and
                                                              Director of Van Kampen Investments, the Advisers, the
                                                              Distributor, Van Kampen Advisors Inc. and Investor Services.
                                                              Prior to 1998, Senior Vice President and Senior Planning
                                                              Officer for Individual Asset Management of Morgan Stanley
                                                              Dean Witter and its predecessor since 1994.
</Table>

                                        38
<PAGE>

<Table>
<Caption>
                                                   TERM OF
                                                  OFFICE AND
                                 POSITION(S)      LENGTH OF
NAME, AGE AND                     HELD WITH          TIME     PRINCIPAL OCCUPATION(S)
ADDRESS OF OFFICER                   FUND           SERVED    DURING PAST 5 YEARS
<S>                           <C>                 <C>         <C>
John R. Reynoldson (48)       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 (46)         Vice President,     Officer     Executive Director of Van Kampen Investments, the Advisers
1 Parkview Plaza              Chief Financial     since 1996  and Van Kampen Advisors Inc. Vice President, Chief Financial
Oakbrook Terrace, IL 60181    Officer and                     Officer and Treasurer of funds in the Fund Complex.
                              Treasurer
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>

                                        39
<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
vankampen.com

                         [VAN KAMPEN INVESTMENTS LOGO]
Copyright (C)2002 Van Kampen Funds Inc. All rights reserved.
920, 913, 100                                                  Member NASD/SIPC.
VLT ANR 2/02                                                     5246B02-AS-2/02

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
