<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Glossary of Terms................................ 6
Portfolio of Investments......................... 8
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Dividend Reinvestment Plan....................... 23
</TABLE>
VLT SAR 8/98
<PAGE> 2
LETTER TO SHAREHOLDERS
July 23, 1998
Dear Shareholder,
Recently, we decided to
consolidate all Van Kampen American
Capital mutual funds under the single
name of Van Kampen Funds. This move
accompanies the change in the legal
name of our firm to Van Kampen Funds [PHOTO]
Inc. Consequently, your Trust's name
will be changing to Van Kampen High
Income Trust II on August 28. You can DENNIS J. MCDONNELL AND DON G. POWELL
be assured that the change in your
Trust's name will not affect its
management or daily operations, and your Trust will continue to trade under its
current ticker symbol. If you have any questions regarding your Trust or our new
name, please contact your financial adviser.
ECONOMIC REVIEW
The economy staged an impressive performance during the first half of the
year. Growth surged despite a sharp drop in exports to Asia, unemployment sank
to a 28-year low, and consumer confidence jumped to its highest level since
1969. Even Alan Greenspan, chairman of the Federal Reserve Board, has sung the
economy's praises.
During the first quarter, economic growth surged at a 5.4 percent annualized
rate--its highest quarterly rate in almost two years. At the same time, consumer
prices rose 2.5 percent on an annual basis. Inflation was tempered by lower oil
prices, a pending budget surplus, and a strong dollar, which reduced import
prices and limited price hikes of competing U.S. goods.
Comforted by the moderate inflation rate and concerned about Asia's
financial future, the Fed refrained from raising interest rates during the
reporting period. The Asian crisis, otherwise, had a limited impact on the U.S.
economy. Heavy consumer spending and a large inventory buildup by manufacturers
overcame the drop in exports to the region.
MARKET OVERVIEW
U.S. bonds rallied during the reporting period against this backdrop of
steady Fed policy, economic crisis in Asia, and restrained price pressures. The
yield of the 30-year Treasury bond, which moves in the opposite direction of its
price, fell from 5.92 percent on December 31, 1997, to 5.63 percent six months
later. The yield had dropped to a record 5.58 percent in June amid heavy buying
by investors seeking a safe haven from the Asian tumult.
Continued on page two
1
<PAGE> 3
Earlier in the reporting period, however, foreign sales of Treasury
securities moved bond yields higher and bond prices lower. Fears of a Fed rate
hike alternating with disappointment about the lack of a rate cut added to the
volatility. The 30-year Treasury bond yield periodically jumped above the
pivotal 6 percent level, after initially dropping below it in December. By
mid-May, bond yields resumed their decline and the rally gained momentum.
High-yield bonds outperformed Treasuries during the first quarter but
underperformed in the second. Early in the year, investors aggressively bought
shares of high-yield bond funds, seeking the additional income that these
securities provide. The vibrant economy and strong stock market convinced them
that most issuing companies probably would not have a problem servicing their
debt.
As Asia's economic troubles worsened and the stock market rally faltered
during the second quarter, investors preferred the safety of Treasury bonds over
the extra income of high-yield bonds. The demand for high-yield bonds eased, and
the heavy supply of new issues triggered an increase in their risk premium over
Treasury bonds.
The average yield of high-yield bonds dropped from 8.94 percent on December
31, 1997, to 8.70 percent on June 30, 1998, according to the KDP Investment
Advisors Index. The yield on 10-year Treasury bonds, the benchmark against which
high-yield bonds are measured, fell from 5.74 percent to 5.45 percent. As a
result, the yield spread between high-yield bonds and 10-year Treasuries widened
slightly, indicating investors' preference for Treasury securities. In the first
quarter, when high-yield bonds outperformed Treasuries, the spread had narrowed.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality*
as of June 30, 1998
<TABLE>
<S> <C>
BB................. 30.2%
B.................. 66.7%
CCC and below...... 0.7%
Non-Rated.......... 2.4%
</TABLE>
*As Percentage of Long-Term Investments
Based upon the highest credit quality ratings as issued by Standard & Poor's
or Moody's.
TRUST STRATEGY
We used the following strategies to manage the Trust during the period:
We maintained a portfolio consisting primarily of noninvestment-grade
corporate bonds, which tend to pay higher yields than investment-grade
securities but are less creditworthy. In order to help reduce the credit risk of
the portfolio, we emphasized higher-quality noninvestment-grade bonds rated B or
above.
Continued on page three
2
<PAGE> 4
Market yields declined during the reporting period, and most of our
acquisitions were designed to offset portfolio changes caused by shifts in
market conditions. Due to the drop in interest rates, for example, several bonds
in the portfolio were called, including many investment-grade securities. As a
result, the number of bonds in the portfolio rated BBB or higher declined. Much
of the proceeds from calls were kept in cash during the spread expansion in the
second quarter. We used that cash to purchase more bonds as favorable
opportunities arose. Fallout from the Asian crisis or a decline in the stock
market, for example, could cause high-yield bond prices to drop, making
additional purchases more affordable. We don't expect the Asian crisis to affect
the Trust negatively, because its exposure to Asian companies is minimal.
Our purchases during the reporting period emphasized intermediate-term bonds
in order to enhance the call protection of the Trust and extend its duration. As
of June 30, 1998, less than 30 percent of the portfolio was priced to calls
before the year 2000, compared with almost 50 percent of the Trust six months
earlier. The average duration of the Trust, which is a measure of its
sensitivity to changing interest rates, was 3.5 years as of June 30, 1998,
compared with 4.53 years for the Lehman Brothers High Yield Bond Index. Our
purchases also enhanced the sector diversification of the Trust in order to
limit its credit risk. As of June 30, 1998, the largest sector concentration was
15.0 percent in telecommunications.
TOP FIVE PORTFOLIO INDUSTRY SECTORS*
AS OF JUNE 30, 1998
<TABLE>
<S> <C>
Telecommunications.......................................... 15.0%
Printing, Publishing, and Broadcasting...................... 10.2%
Oil and Gas................................................. 9.1%
Hotel, Motel, Inns, and Gaming.............................. 8.0%
Health Care................................................. 4.4%
</TABLE>
*As a Percentage of Long-Term Investments
PERFORMANCE SUMMARY
For the six-month period ended June 30, 1998, the Trust generated a total
return of 2.18 percent(1). This reflects a decrease in market price per common
share from $9.8125 on December 31, 1997, to $9.5625 on June 30, 1998, plus
reinvestment of dividends that totaled $.48 per common share. Based on the
monthly dividend of $.08 per share and the closing common stock price on June
30, 1998, the Trust generated a distribution rate of 10.04 percent(3). Please
refer to the chart on page five for additional performance numbers.
Continued on page four
3
<PAGE> 5
SIX-MONTH DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Distribution per Common Share
<S> <C>
Jan 1998..................... $0.08
Feb 1998..................... $0.08
Mar 1998..................... $0.08
Apr 1998..................... $0.08
May 1998..................... $0.08
June 1998.................... $0.08
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
ECONOMIC OUTLOOK
We expect economic growth in the second half of 1998 will slacken from its
brisk first-quarter pace due to the Asian economic crisis, General Motors
strike, and slowing inventory buildup by American industry. The bond market
itself is suggesting a slowdown: the yield spread between short-term and
long-term Treasury securities is almost flat, a configuration that typically
indicates economic moderation.
We believe there is little chance that the Fed will raise rates during the
coming months unless price pressures build and the economic slowdown is
short-lived. One indicator we will be watching closely is the consumer price
index, because its growth rate has begun to accelerate. If inflation rises
sharply and the Fed does decide to raise rates, Treasury yields will likely top
6.00 percent. Otherwise, yields are likely to remain within their recent range
between 5.50 percent and 6.00 percent. We believe the Trust is well positioned
for any future market volatility, due to its intermediate-term average maturity
and emphasis on high-quality noninvestment-grade bonds.
In the meantime, we will closely monitor market developments and their
effects on the performance of the Trust, adjusting the portfolio when
appropriate. We remain committed to maximizing dividend distribution to our
investors and enhancing the total returns of the Trust. Thank you for your
continued support and confidence in Van Kampen and the management of your Trust.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1998
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
(NYSE TICKER SYMBOL--VLT)
COMMON SHARE TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return on market price(1).................. 2.18%
Six-month total return based on NAV(2)..................... 5.06%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3)................................................. 10.04%
SHARE VALUATIONS
Net asset value............................................ $ 8.38
Closing common stock price................................. $9.5625
Six-month high common stock price (02/10/98)............... $10.500
Six-month low common stock price (04/27/98)................ $ 9.375
Preferred share rate(4).................................... 5.490%
</TABLE>
(1) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing stock price at the end of the period indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) See "Notes to Financial Statements" footnote #4, for more information
concerning Preferred Share reset periods.
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
5
<PAGE> 7
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific call dates before
maturity. Call dates and prices are set when the bond is issued. To compensate
the bondholder for loss of income and ownership, the initial call price is
usually higher than the face value of the bond. Bonds are usually called when
interest rates drop so significantly that the issuer can save money by issuing
new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are two
companies that assign bond ratings. Standard & Poor's ratings range from a high
of AAA to a low of D, while Moody's ratings range from a high of Aaa to a low of
C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality issues.
Normally, lower-quality issues provide higher yields to compensate investors for
the additional credit risk.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected one
percent change in the price of a bond for every one percent change in interest
rates. The longer a fund's duration, the greater the effect of interest rate
movements on net asset value. Typically, funds with shorter durations have
performed better in rising rate environments, while funds with longer durations
have performed better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the U.S.
INFLATION: An economic state in which the money supply and business activity
dramatically increase, accompanied by sharply rising prices. Inflation is widely
measured by the Consumer Price Index, an economic indicator that measures the
change in the cost of purchased goods and services.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
MARKET PRICE: The price of a share of a closed-end fund trading on a stock
exchange. When the price is less than a fund's net asset value, the fund is
trading at a discount. When the price is more than the NAV, the fund is trading
at a premium.
MATURITY DATE: The date a bond expires, usually at face value.
6
<PAGE> 8
GLOSSARY OF TERMS (CONTINUED)
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1998
and maturing in 2008 is a 10-year bond. For corporate bonds, short-term bonds
usually mature in five years or less, intermediate-term bonds mature in five to
ten years, and long-term bonds mature after ten years.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of common shares outstanding.
YIELD: The annual rate of return on an investment, expressed as a percentage.
For bonds and notes, the yield is the annual interest divided by the market
price.
YIELD SPREAD: The difference between the yields of different bonds, due to their
different credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities are
narrow, there is less incentive to own the bond with the longer maturity. In
both cases, the investor is not being compensated for the additional risk.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 93.9%
AEROSPACE & DEFENSE 3.4%
$1,350 Dyncorp........................................ 9.500% 03/01/07 $ 1,390,500
1,950 Sequa Corp..................................... 9.625 10/15/99 2,013,375
450 Sequa Corp..................................... 9.375 12/15/03 470,250
------------
3,874,125
------------
AUTOMOBILE 2.7%
300 Aetna Industries, Inc.......................... 11.875 10/01/06 325,500
950 Collins & Aikman Products Co................... 11.500 04/15/06 1,061,625
600 Insilco Corp................................... 10.250 08/15/07 630,000
450 MCII Holdings, Inc. (a)........................ 0/12.000 11/15/02 426,375
325 Venture Holdings, Inc.......................... 9.750 04/01/04 327,438
375 Venture Holdings, Inc.......................... 9.500 07/01/05 380,625
------------
3,151,563
------------
BUILDINGS & REAL ESTATE 2.8%
1,900 American Standard, Inc......................... 10.875 05/15/99 1,976,000
450 Kevco, Inc..................................... 10.375 12/01/07 469,125
675 Webb (Del E.) Corp............................. 9.375 05/01/09 669,937
------------
3,115,062
------------
CHEMICAL 4.1%
800 Acetex Corp.................................... 9.750 10/01/03 824,000
540 American Pacific Corp., 144A Private Placement
(b)............................................ 9.250 03/01/05 558,900
1,694 ISP Holdings, Inc.............................. 9.750 02/15/02 1,795,640
1,500 Pioneer Americas Acquisition Corp.............. 9.250 06/15/07 1,485,000
------------
4,663,540
------------
CONTAINERS, PACKAGING & GLASS 4.0%
1,150 Fonda Group, Inc............................... 9.500 03/01/07 1,115,500
870 Printpack, Inc................................. 10.625 08/15/06 913,500
1,100 Radnor Holdings Corp........................... 10.000 12/01/03 1,149,500
950 S.D. Warren Co................................. 12.000 12/15/04 1,049,750
300 Sweetheart Cup, Inc............................ 9.625 09/01/00 298,500
------------
4,526,750
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIVERSIFIED/CONGLOMERATE MANUFACTURING 1.1%
$1,050 Communications & Power Industries, Inc......... 12.000% 08/01/05 $ 1,181,250
------------
ECOLOGICAL 0.6%
400 Envirosource, Inc.............................. 9.750 06/15/03 404,000
200 Norcal Waste Systems, Inc...................... 13.000 11/15/05 232,500
------------
636,500
------------
ELECTRONICS 1.3%
450 Advanced Micro Devices, Inc. (c)............... 11.000 08/01/03 479,250
900 Decisionone Corp............................... 9.750 08/01/07 868,500
150 Decisionone Corp. (Including 150 common stock
warrants) (a).................................. 0/11.500 08/01/08 90,375
------------
1,438,125
------------
FINANCE 3.3%
1,450 Americredit Corp............................... 9.250 02/01/04 1,479,000
1,000 Contifinancial Corp............................ 8.375 08/15/03 1,027,500
1,050 Trizec Finance................................. 10.875 10/15/05 1,181,250
------------
3,687,750
------------
GROCERY 4.1%
850 Fleming Cos., Inc.............................. 10.500 12/01/04 881,875
250 Fleming Cos., Inc.............................. 10.625 07/31/07 261,250
1,050 Jitney Jungle Stores America Inc............... 12.000 03/01/06 1,186,500
791 Pantry, Inc. (a)............................... 12.500 11/15/00 858,235
900 Pantry, Inc.................................... 10.250 10/15/07 915,750
435 Shoppers Food Warehouse, Inc................... 9.750 06/15/04 480,675
------------
4,584,285
------------
HEALTHCARE 4.3%
450 Fisher Scientific International, Inc........... 7.125 12/15/05 416,250
1,050 Fresenius Medical Care Capital Trust........... 9.000 12/01/06 1,086,750
225 Imagyn Medical Technologies, Inc............... 12.500 04/01/04 90,000
500 Paragon Health Network, Inc.................... 9.500 11/01/07 510,000
1,500 Sun Healthcare Group, Inc., 144A Private
Placement (b).................................. 9.500 07/01/07 1,533,750
1,100 Tenet Healthcare Corp.......................... 8.625 12/01/03 1,160,500
------------
4,797,250
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOTEL, MOTEL, INNS & GAMING 7.7%
$1,450 Argosy Gaming Co............................... 13.250% 06/01/04 $ 1,631,250
250 Booth Creek Ski Holdings, Inc.................. 12.500 03/15/07 271,875
50 Booth Creek Ski Holdings, Inc., 144A Private
Placement (b).................................. 12.500 03/15/07 54,375
652 Boyd Gaming Corp............................... 9.250 10/01/03 676,450
870 Casino America, Inc............................ 12.500 08/01/03 983,100
675 Casino Magic Louisiana......................... 13.000 08/15/03 789,750
800 Coast Hotels & Casinos, Inc.................... 13.000 12/15/02 924,000
1,100 Grand Casinos, Inc............................. 9.000 10/15/04 1,193,500
870 Hollywood Casino, Inc.......................... 12.750 11/01/03 952,650
1,090 Majestic Star Casino L.L.C..................... 12.750 05/15/03 1,193,550
------------
8,670,500
------------
LEISURE 3.0%
2,100 Selmer, Inc.................................... 11.000 05/15/05 2,299,500
1,000 Viacom International, Inc...................... 10.250 09/15/01 1,105,000
------------
3,404,500
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 3.9%
870 Armco, Inc..................................... 9.000 09/15/07 861,300
130 Inland Steel Co................................ 12.000 12/01/98 133,250
870 Kaiser Aluminum & Chemical, Inc................ 10.875 10/15/06 935,250
1,300 Renco Metals, Inc.............................. 11.500 07/01/03 1,391,000
250 Renco Steel Holdings, Inc., 144A Private
Placement (b).................................. 10.875 02/01/05 251,250
850 WCI Steel, Inc................................. 10.000 12/01/04 871,250
------------
4,443,300
------------
OIL & GAS 8.7%
1,200 Benton Oil & Gas, Inc.......................... 11.625 05/01/03 1,275,000
870 Chesapeake Energy, Inc......................... 7.875 03/15/04 809,100
500 Crown Century Petroleum, Inc................... 10.875 02/01/05 528,750
1,400 Dawson Production Services, Inc................ 9.375 02/01/07 1,410,500
1,053 Giant Industries, Inc.......................... 9.750 11/15/03 1,100,385
1,600 Giant Industries, Inc.......................... 9.000 09/01/07 1,668,000
450 KCS Energy, Inc................................ 11.000 01/15/03 483,750
500 Petroleum Heat & Power, Inc.................... 12.250 02/01/05 496,250
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OIL & GAS (CONTINUED)
$ 800 Pride Petroleum Services, Inc.................. 9.375% 05/01/07 $ 846,000
700 Universal Compression, Inc., 144A Private
Placement (b).................................. * 02/15/08 444,500
800 Wainoco Oil Corp., 144A Private Placement
(b)............................................ 9.125 02/15/06 806,000
------------
9,868,235
------------
PAPER 0.6%
650 Doman Industries............................... 9.250 11/15/07 653,250
------------
PERSONAL & NON-DURABLE 2.6%
1,550 Cole National Group, Inc....................... 9.875 12/31/06 1,677,875
1,300 Revlon Consumer Products Corp.................. 8.625 02/01/08 1,306,500
------------
2,984,375
------------
PRINTING, PUBLISHING & BROADCASTING 8.5%
350 CSC Holdings, Inc.............................. 8.125 08/15/09 373,625
900 CSC Holdings, Inc.............................. 10.500 05/15/16 1,059,750
1,100 Fundy Cable Ltd................................ 11.000 11/15/05 1,210,000
900 Grupo Televisa, Inc............................ 11.875 05/15/06 1,003,500
870 Helicon Group, Inc............................. 11.000 11/01/03 930,900
850 International Cabletel, Inc. (a)............... 0/12.750 04/15/05 750,125
400 International Cabletel, Inc. (a)............... 0/11.500 02/01/06 327,000
1,100 K-III Communications Corp...................... 10.250 06/01/04 1,179,750
550 Northland Cable Television, Inc................ 10.250 11/15/07 588,500
1,100 United International Holdings, Inc. (a)........ 0/10.750 02/15/08 684,750
550 Valassis Communications........................ 9.550 12/01/03 618,750
800 Young Broadcasting, Inc........................ 11.750 11/15/04 888,000
------------
9,614,650
------------
PRODUCER MANUFACTURING 0.8%
150 Associated Materials, Inc...................... 9.250 03/01/08 153,000
500 Carpenter W.R., Inc............................ 10.625 06/15/07 527,500
250 Numatics, Inc., 144A Private Placement (b)..... 9.625 04/01/08 253,750
------------
934,250
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RETAIL 3.5%
$ 200 Big 5 Corp..................................... 10.875% 11/15/07 $ 206,000
600 Community Distributors, Inc.................... 10.250 10/15/04 624,000
500 Hosiery Corp. America, Inc. (Including 500
common stock warrants)......................... 13.750 08/01/02 551,250
675 Musicland Group, Inc........................... 9.875 03/15/08 671,625
1,610 United Stationers Supply Co.................... 12.750 05/01/05 1,835,400
------------
3,888,275
------------
TELECOMMUNICATIONS 14.4%
950 Capstar Broadcasting Partners (d).............. 9.250 07/01/07 997,500
1,410 Centennial Cellular Corp....................... 8.875 11/01/01 1,473,450
1,004 Centennial Cellular Corp....................... 10.125 05/15/05 1,129,500
400 Century Communications Corp.................... * 03/15/03 272,000
200 Century Communications Corp.................... 9.500 03/01/05 217,000
1,100 Century Communications Corp.................... 8.875 01/15/07 1,168,750
1,100 Echostar Communications Corp. (a).............. 0/12.875 06/01/04 1,075,250
950 EZ Communications, Inc......................... 9.750 12/01/05 1,047,375
675 Fonorola, Inc.................................. 12.500 08/15/02 747,563
950 Gray Communications Systems, Inc............... 10.625 10/01/06 1,045,000
550 GST USA, Inc. (a).............................. 0/13.875 12/15/05 446,875
400 Intermedia Communications of Florida, Inc.
(Including 400 common stock warrants).......... 13.500 06/01/05 470,000
150 Intermedia Communications, Inc................. 8.875 11/01/07 154,125
940 Intermedia Communications, Inc., 144A Private
Placement (b).................................. 8.600 06/01/08 954,100
900 McLeod USA, Inc................................ 9.250 07/15/07 936,000
1,250 Pegasus Communications Corp.................... 9.625 10/15/05 1,287,500
1,000 Pinnacle Holdings, Inc., 144A Private Placement
(a)(b)......................................... 0/10.000 03/15/08 657,500
1,350 Rogers Cantel, Inc. (c)........................ 9.375 06/01/08 1,409,062
700 Teleport Communications Group.................. 9.875 07/01/06 801,500
------------
16,290,050
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXTILES 3.1%
$1,100 Dan River, Inc................................. 10.125% 12/15/03.. $ 1,168,750
1,000 Pillowtex Corp................................. 10.000 11/15/06 1,072,500
800 Pillowtex Corp................................. 9.000 12/15/07 824,000
450 Scovill Fasteners, Inc......................... 11.250 11/30/07 464,625
------------
3,529,875
------------
TRANSPORTATION 1.6%
450 International Shipholding Corp................. 9.000 07/01/03 461,250
1,300 U.S. Air, Inc.................................. 8.625 09/01/98 1,304,212
------------
1,765,462
------------
UTILITIES 3.8%
1,700 AES Corp....................................... 10.250 07/15/06 1,853,000
300 AES Corp....................................... 8.375 08/15/07 303,750
400 El Paso Electric Co............................ 8.250 02/01/03 427,000
800 El Paso Electric Co............................ 8.900 02/01/06 896,000
114 Midland Cogeneration Venture................... 10.330 07/23/02 122,958
800 National Energy Group, Inc..................... 10.750 11/01/06 728,000
------------
4,330,708
------------
TOTAL CORPORATE BONDS 93.9%.................................................. 106,033,630
------------
GOVERNMENT OBLIGATIONS 1.1%
1,300 Republic of Korea.............................. 8.750 04/15/03 1,231,750
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------------------
<S> <C>
EQUITIES 1.4%
Hosiery Corp. America, Inc., 144A Private Placement (500 common stock
warrants) (b)................................................................. $ 26,250
Intermedia Communication of Florida, Inc$., 144A Private Placement
(400 common stock warrants) (b)............................................... 63,414
Time Warner, Inc., 144A Private Placement (1,384 preferred shares) (b)........ 1,546,620
Urohealth Systems, Inc., 144A Private Placement (525 common stock warrants)
(b)......................................................................... 5
------------
TOTAL EQUITIES................................................................ 1,636,289
------------
TOTAL LONG-TERM INVESTMENTS 96.4%
(Cost $107,296,127)......................................................... 108,901,689
REPURCHASE AGREEMENT 3.6%
J.P. Morgan Securities (U.S. Treasury Note, $3,062,000 par, 12.375% coupon,
due 05/15/04, dated 06/30/98, to be sold on 07/01/98 at $4,052,619)
(Cost $4,052,000)........................................................... 4,052,000
------------
TOTAL INVESTMENTS 100.0%
(Cost $111,348,127)......................................................... 112,953,669
LIABILITIES IN EXCESS OF OTHER ASSETS 0.0%................................... (37,303)
------------
NET ASSETS 100.0%............................................................ $112,916,366
============
</TABLE>
* Zero coupon bond
(a) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined rate.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(c) Securities purchased on a when issued or delayed delivery basis.
(d) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $111,348,127)....................... $112,953,669
Cash........................................................ 830
Interest Receivable......................................... 2,310,754
Other....................................................... 2,554
------------
Total Assets.......................................... 115,267,807
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,916,742
Income Distributions - Common and Preferred Shares........ 154,816
Investment Advisory Fee................................... 69,600
Affiliates................................................ 13,207
Accrued Expenses............................................ 107,936
Trustees' Deferred Compensation and Retirement Plans........ 89,140
------------
Total Liabilities..................................... 2,351,441
------------
NET ASSETS.................................................. $112,916,366
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, 100,000,000 shares
authorized, 900 outstanding with liquidation preference of
$50,000 per share)........................................ $ 45,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 8,109,000 shares issued and
outstanding).............................................. 81,090
Paid in Surplus............................................. 84,242,988
Net Unrealized Appreciation................................. 1,605,542
Accumulated Undistributed Net Investment Income............. 725,510
Accumulated Net Realized Loss............................... (18,738,764)
------------
Net Assets Applicable to Common Shares................ 67,916,366
------------
NET ASSETS.................................................. $112,916,366
============
NET ASSET VALUE PER COMMON SHARE ($67,916,366 divided by
8,109,000 shares outstanding)............................. $ 8.38
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 5,145,241
Dividend.................................................... 70,930
Other....................................................... 223,188
-----------
Total Income.......................................... 5,439,359
-----------
EXPENSES:
Investment Advisory Fee..................................... 422,533
Preferred Share Maintenance................................. 56,698
Shareholder Services........................................ 21,950
Trustees' Fees and Expenses................................. 12,031
Custody..................................................... 8,142
Legal....................................................... 7,351
Other....................................................... 105,692
-----------
Total Expenses........................................ 634,397
-----------
NET INVESTMENT INCOME....................................... $ 4,804,962
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 958,356
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,752,247
End of the Period......................................... 1,605,542
-----------
Net Unrealized Depreciation During the Period............... (1,146,705)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (188,349)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 4,616,613
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For Six Months Ended June 30, 1998 and
the Year Ended December 31, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.................................. $ 4,804,962 $ 9,743,548
Net Realized Gain...................................... 958,356 1,859,915
Net Unrealized Depreciation During the Period.......... (1,146,705) (407,134)
------------ ------------
Change in Net Assets from Operations................... 4,616,613 11,196,329
------------ ------------
Distributions from Net Investment Income:
Common Shares........................................ (3,891,753) (7,783,356)
Preferred Shares..................................... (1,222,283) (2,362,959)
------------ ------------
Total Distributions.................................... (5,114,036) (10,146,315)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... (497,423) 1,050,014
NET ASSETS:
Beginning of the Period................................ 113,413,789 112,363,775
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $725,510 and $1,034,584,
respectively)........................................ $112,916,366 $113,413,789
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended ------------------------------------
June 30, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period (a)................ $8.437 $8.307 $8.117 $7.320 $8.982
------ ------ ------ ------ ------
Net Investment Income......... .593 1.202 1.228 1.273 1.283
Net Realized and Unrealized
Gain/Loss................... (.024) .179 .214 .806 (1.530)
------ ------ ------ ------ ------
Total from Investment
Operations.................... .569 1.381 1.442 2.079 (.247)
------ ------ ------ ------ ------
Less:
Distributions from Net
Investment Income:
Paid to Common
Shareholders.............. .480 .960 .960 .960 1.180
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders.... .151 .291 .292 .322 .235
Return of Capital Paid to
Common Shareholders......... -0- -0- -0- -0- -0-
------ ------ ------ ------ ------
Total Distributions............. .631 1.251 1.252 1.282 1.415
------ ------ ------ ------ ------
Net Asset Value, End of the
Period........................ $8.375 $8.437 $8.307 $8.117 $7.320
====== ====== ====== ====== ======
Market Price Per Share at End of
the Period.................... $9.5625 $9.8125 $9.375 $8.750 $7.500
Total Investment Return at
Market Price (b).............. 2.18%* 15.34% 18.91% 30.33% (12.94%)
Total Return at Net Asset Value
(c)........................... 5.06%* 13.90% 15.15% 25.19% (5.70%)
Net Assets at End of the Period
(In millions)................ $112.9 $113.4 $112.4 $110.8 $104.4
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares**...................... 1.86% 1.83% 1.89% 1.96% 1.97%
Ratio of Net Investment Income
to Average Net Assets
Applicable to Common Shares
(d)........................... 10.53% 10.93% 11.58% 12.09% 12.87%
Portfolio Turnover.............. 42%* 98% 94% 124% 125%
* Non-Annualized
** Ratio of Expenses to Average
Net Assets Including
Preferred Shares............. 1.13% 1.10% 1.12% 1.15% 1.17%
</TABLE>
(a) Net Asset Value at April 28, 1989 of $11.160 is adjusted for common and
preferred share offering costs of $.395 per share. Net asset value at
December 31, 1991 of $7.619 is adjusted for redemption costs associated with
the 9.5% cumulative preferred shares and offering costs associated with the
auction preferred shares of $.332 per share.
(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
N/A = Not Applicable
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 28, 1989
(Commencement
Year Ended December 31, of Investment
- ------------------------------------------------------- Operations) to
1993 1992 1991 1990 December 31, 1989
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$7.916 $7.287 $5.884 $9.307 $10.765
------ ------ ------ ------ -------
1.422 1.691 1.512 1.908 1.283
1.021 .415 1.686 (3.410) (1.461)
------ ------ ------ ------ -------
2.443 2.106 3.198 (1.502) (0.178)
------ ------ ------ ------ -------
1.200 .975 .920 1.238 .909
.177 .502 .543 .666 .371
-0- -0- -0- .017 -0-
------ ------ ------ ------ -------
1.377 1.477 1.463 1.921 1.280
------ ------ ------ ------ -------
$8.982 $7.916 $7.619 $5.884 $ 9.307
====== ====== ====== ====== =======
$9.750 $9.375 $7.500 $5.250 $9.000
17.01% 39.58% 62.27% (30.57%) (18.34%)*
30.08% 16.92% 46.26% (24.92%) (15.21%)*
$117.8 $109.2 $108.2 $94.1 $135.5
1.72% 1.73% 2.73% 2.12% 1.57%
14.41% 14.49% 13.59% 15.99% 12.91%
140% 145% 97% 65% 31%*
1.05% 1.02% 1.52% 1.11% N/A
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital 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, consistent with preservation of capital, by investing in a
portfolio of medium or lower grade fixed-income securities, or non-rated
securities of comparable quality. 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations,
prices provided by market makers or estimates obtained from yield data relating
to instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
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.
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.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
discounts are amortized over the expected life of each applicable security.
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At December 31, 1997, the Trust had an accumulated capital loss
carryforward for tax purposes of $19,676,935 which expires between December 31,
1998 and December 31, 2003, respectively. Of this amount, $5,278,407 will expire
in 1998. Net realized gains or losses differ for financial reporting and tax
purposes as a result of losses from wash sales.
At June 30, 1998, for federal income tax purposes, cost for long- and
short-term investments is $111,348,127, the aggregate gross unrealized
appreciation is $2,502,153 and the aggregate gross unrealized depreciation is
$896,611, resulting in net unrealized appreciation of $1,605,542.
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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp Inc. (the "Adviser") will provide investment advice and
facilities to the Trust for an annual fee payable monthly of .75% of the average
net assets of the Trust.
For the six months ended June 30, 1998, the Fund recognized expenses of
approximately $4,100 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
For the six months ended June 30, 1998, the Trust recognized expenses of
approximately $23,100 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Trust.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Trust. The maximum
annual benefit per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments were $52,412,704 and $42,989,129, respectively.
4. AUCTION PREFERRED SHARES
The Trust has outstanding 900 shares of Auction Preferred Shares ("APS").
Dividends are cumulative and the rate is currently reset every 28 days through
an auction process. The rate in effect on June 30, 1998, was 5.49%. During the
six months ended June 30, 1998, the rates ranged from 5.40% to 5.70%.
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 a
price of $50,000 per share plus accumulated and unpaid dividends. The Trust is
subject to certain asset coverage tests, and the APS are subject to mandatory
redemption if the tests are not met.
22
<PAGE> 24
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 distributions 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.
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
23
<PAGE> 25
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
International/Global
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation and
Senior Loan Fund
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask your financial adviser for a
prospectus, which contains more complete information, including sales
charges, risks, and expenses. Please read it carefully before you invest or
send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our web site at
WWW.VAN-KAMPEN.COM -- to view
prospectuses, select Investors' Place,
then Download a Prospectus
- call us at 1-800-341-2911 weekdays
from 7:00 a.m. to 7:00 p.m. Central
time (Telecommunications Device for
the Deaf users, call 1-800-421-2833)
- e-mail us by visiting
WWW.VAN-KAMPEN.COM and
selecting Investors' Place
24
<PAGE> 26
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIAN AND
TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1998
All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
25
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> HIGH INCOME TRUST II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 111,348,127
<INVESTMENTS-AT-VALUE> 112,953,669
<RECEIVABLES> 2,310,754
<ASSETS-OTHER> 2,554
<OTHER-ITEMS-ASSETS> 830
<TOTAL-ASSETS> 115,267,807
<PAYABLE-FOR-SECURITIES> 1,916,742
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 434,699
<TOTAL-LIABILITIES> 2,351,441
<SENIOR-EQUITY> 45,000,000
<PAID-IN-CAPITAL-COMMON> 84,324,078
<SHARES-COMMON-STOCK> 8,109,000
<SHARES-COMMON-PRIOR> 8,109,000
<ACCUMULATED-NII-CURRENT> 725,510
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18,738,764)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,605,542
<NET-ASSETS> 112,916,366
<DIVIDEND-INCOME> 70,930
<INTEREST-INCOME> 5,145,241
<OTHER-INCOME> 223,188
<EXPENSES-NET> (634,397)
<NET-INVESTMENT-INCOME> 4,804,962
<REALIZED-GAINS-CURRENT> 958,356
<APPREC-INCREASE-CURRENT> (1,146,705)
<NET-CHANGE-FROM-OPS> 4,616,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,114,036)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (497,423)
<ACCUMULATED-NII-PRIOR> 1,034,584
<ACCUMULATED-GAINS-PRIOR> (19,697,120)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 422,533
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 634,397
<AVERAGE-NET-ASSETS> 68,632,933
<PER-SHARE-NAV-BEGIN> 8.437
<PER-SHARE-NII> 0.593
<PER-SHARE-GAIN-APPREC> (0.024)
<PER-SHARE-DIVIDEND> (0.631)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 8.375
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
