VAN KAMPEN HIGH INCOME TRUST II, N-30D, 1999-02-24

VAN KAMPEN HIGH INCOME TRUST II
N-30D, 1999-02-24

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<PAGE> 1

TABLE OF CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 6
Portfolio Highlights............................. 10
Portfolio of Investments......................... 11
Statement of Assets and Liabilities.............. 17
Statement of Operations.......................... 18
Statement of Changes in Net Assets............... 19
Financial Highlights............................. 20
Notes to Financial Statements.................... 22
Report of Independent Accountants................ 25
Dividend Reinvestment Plan....................... 26
</TABLE>

VLT ANR 2/99
<PAGE> 2

LETTER TO SHAREHOLDERS

January 20, 1999

Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your trust.

ECONOMIC OVERVIEW

Despite a stormy year in the global economy, the United States ended 1998
with only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was
quite unsettled in the third quarter, with the Asian financial crisis
contributing to slowing corporate profits in the United States. Given the
uncertainty surrounding emerging market nations and the near-collapse of a major
U.S. hedge fund, the stock and bond markets experienced significant volatility
during this period. With instability as a backdrop, American and foreign
investors alike pursued a flight to quality--seeking the relative safety of
large-company stocks and government bonds.
In the last few months of the year the global financial situation improved
in conjunction with the Federal Reserve's interest rate decreases. In response
to declining corporate profits and mounting international concerns, the Fed
lowered interest rates three times, with 0.25 percent cuts in September,
October, and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.

Continued on page 2

1
<PAGE> 3

MARKET REVIEW

The bond market continued to rally as interest rates fell during the year,
with U.S. Treasury securities outpacing corporate and municipal bonds in price
appreciation. Investors' desire for safer investments amid the global economic
storm led to strong demand for high-quality bonds. In fact, the U.S. Treasury
bond was considered one of the most attractive places to invest by both domestic
and international investors, propelling the 30-year Treasury yield to 4.71
percent in October--its lowest yield since the federal government began selling
these bonds in 1977. However, higher-yielding bonds suffered--primarily during
the third quarter--as investors' demand for quality increased. Corporate bond
prices, especially among lower-rated issues, fell in conjunction with concerns
about declining corporate profits.

OUTLOOK

Our outlook for the domestic economy is positive, and we anticipate
continued low inflation and healthy economic growth. However, the aftereffects
of the global economic slowdown may continue to put pressure on corporate
earnings in the first half of the year. Internationally, we anticipate that low
interest rates and declining inflation will lead to improvements in troubled
areas such as Asia and Latin America. With the successful launch of the euro,
the new European transnational currency, we believe that many foreign markets
will become increasingly attractive in 1999.
In the long term, we are optimistic that the stock market will continue its
record growth, although we could experience additional volatility in the months
ahead if concerns about high stock valuations and increasing earnings pressure
become more pronounced. Combined with growing questions about corporate and
government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid-year.
Additional details about your trust, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.

Sincerely,

[SIG]
Richard F. Powers III

Chairman
Van Kampen Investment Advisory Corp.

[SIG]
Dennis J. McDonnell

President
Van Kampen Investment Advisory Corp.

2
<PAGE> 4

PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1998

VAN KAMPEN HIGH INCOME TRUST II
(NYSE TICKER SYMBOL--VLT)

<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS

One-year total return on market price(1)................... (2.73%)
One-year total return based on NAV(2)...................... 1.22%

DISTRIBUTION RATE

Distribution rate as a % of closing common stock
price(3)................................................... 11.13%

SHARE VALUATIONS

Net asset value............................................ $ 7.59
Closing common stock price................................. $8.625
One-year high common stock price (03/10/98)................ $10.500
One-year low common stock price (09/01/98)................. $6.875
Preferred share rate(4).................................... 5.10%
</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.

Investing in high-yield, lower-rated securities involves certain risks, which
may include the potential for greater sensitivity to general economic downturns
and greater market price volatility.

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.

3
<PAGE> 5

GLOSSARY OF TERMS

CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's 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 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 net asset value. Typically, funds with shorter durations
perform better in rising rate environments, while funds 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 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 United States.

INFLATION: A persistent and measurable rise in the general level of 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.

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 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.

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.

4
<PAGE> 6

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 additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.

5
<PAGE> 7

PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN HIGH INCOME TRUST II

We recently spoke with the management team of the Van Kampen High Income Trust
II about the key events and economic forces that shaped the markets during the
past year. The team includes Ellis S. Bigelow, portfolio manager, and Peter W.
Hegel, chief investment officer for fixed-income investments. Ms. Bigelow
assumed management responsibilities for the Trust on March 21, 1998. The
following comments reflect their views on the Trust's performance during the
year ended December 31, 1998.

Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE TRUST
OPERATED DURING THE REPORTING PERIOD?

A This year was a volatile environment for high-yield bonds. Early in the
year, these securities were in favor as investors were willing to assume
additional risk in exchange for higher yields. However, as the financial
problems in Asia came to light, investors began to seek the relative safety of
U.S. Treasury bonds. Despite this moderate level of instability, bond prices
generally moved higher during the first six months of the year as interest rates
declined.
In the third quarter, high-yield bonds suffered price declines as consumer
confidence plummeted in conjunction with disappointing corporate earnings.
Concerns about the economy, questionable hedge fund activity, and a lack of
action by the Fed led many institutional, foreign and individual investors to
sell their high-yield bonds. In fact, a record $2.9 billion was diverted from
high-yield bond funds in August.
This lack of demand led to unusually high yields in the marketplace as
investors demanded significant premiums in exchange for purchasing these
out-of-favor securities. The difference in yields between U.S. Treasury bonds
and high-yield bonds widened to as much as 7.79 percent in mid-October. The
high-yield market rebounded after the Fed's interest rate cuts in the fourth
quarter, but the after-effects of such an unsettled environment remain.

Q THESE SEEM LIKE EXTREME CONDITIONS. WAS THE MARKET UNDER AS MUCH PRESSURE
AS PRICE LEVELS SEEMED TO INDICATE?

A Absolutely not. The high-yield market was fundamentally sound during the
period. One of the most difficult months in the high-yield market was June
1991, when more than 11.5 percent of high-yield bonds were in default.
Compare that to a trailing 12-month default rate of about 2.7 percent in August
1998. In addition, we were about to enter a recession during that tough market
of the early 1990s, whereas we saw continued strong economic growth in 1998.

6
<PAGE> 8

Q WHAT FACTORS CONTRIBUTED TO THE HIGH-YIELD MARKET'S RECOVERY IN THE LAST
FEW WEEKS OF THE YEAR?

A The growth in consumer confidence was the most important factor. Investors
saw that Asia's financial situation was improving, troubled hedge funds
were bailed out, and the International Monetary Fund helped Brazil and
other countries with their economic difficulties. The Fed's rate cuts also had a
tremendous impact on consumer confidence because they reflected a change in
sentiment by the Federal Reserve. Investors saw that the Fed was willing to
respond to the international economic situation and provide the liquidity needed
to keep the economy growing, in addition to its traditional role in fighting
inflation.

Q HOW DID YOU MANAGE THE TRUST IN THIS ENVIRONMENT?

A The Trust was positioned somewhat less aggressively, and was weighted
heavily toward higher-quality bonds with shorter maturities. Both of these
characteristics provided some stability during the turbulent market. We
also emphasized higher-quality bonds in the telecommunications sector, which
performed well during the period. Continued positive growth for
telecommunications companies meant strong performance for many of our holdings
in this sector. Telecommunications remained the Trust's largest sector,
representing 14.6 percent of long-term investments at year-end.

Q DID YOU MAKE ANY MAJOR CHANGES TO THE TRUST?

A When the Trust came under new management in March, we made several changes
to its structure to take advantage of prevailing market conditions.
Traditionally, the Trust had maintained large cash reserves and also invested
heavily in short-term debt. By using the cash reserves, as well as proceeds from
bonds that were called, we purchased bonds with five- to eight-year maturities.
This move enhanced total return potential because the longer-term bonds
generally have higher yields and greater potential for price appreciation. It
also allowed us to extend the duration of the Trust, which made it more
sensitive to interest rate changes--and therefore better able to participate in
the upside of the market as rates declined.
In addition, we made a change that will help us to better manage the Trust
when the supply of attractive securities is limited, such as the situation that
occurred during the third quarter of 1998. The Board of Trustees approved a
resolution allowing the Trust to hold up to 35 percent of its net assets in
foreign securities, beginning April 1, 1999. The change allows us the
opportunity to purchase foreign securities to enhance the Trust's income and
structure. However, we do not anticipate making significant changes to the
portfolio immediately after the resolution takes effect. Keep in mind, though,
that investing in foreign securities presents certain risks that aren't normally
associated with investing in securities of U.S. issuers. For more information
about these risks, see the Important Trust Update on page 9.

7
<PAGE> 9

Q HOW DID THE TRUST PERFORM DURING THE YEAR?

A For the 12-month period ended December 31, 1998, the Trust generated a
-2.73 percent(1) total return based on market price. This reflects a
decrease in market price per common share from $9.8125 on December 31,
1997, to $8.625 on December 31, 1998, plus reinvestment of dividends. The
monthly dividend of $0.08 per share translates to a distribution rate of 11.13
percent based on the closing common stock price on December 31, 1998. (Editor's
Note: Effective with the January 1999 distribution, the Trust's monthly dividend
has been reduced to $0.0765 per share.) The chart on page 3 provides additional
performance information.

Q WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?

A We believe the slower-growth economic environment will continue, and that
we'll see a lot of money coming into the stock and bond markets in January
as people invest year-end bonuses. The Trust should benefit from this
"January effect," as demand for higher-yielding investments grows in the first
few months of the year. The first quarter has traditionally been a strong one
for high-yield bonds, and we anticipate that this trend will continue.
With this in mind, we are positioning the Trust more aggressively for the
first few months of the year to take advantage of the potential for a strong
high-yield market. We will also keep a close eye on the dividend because the
lower interest rate environment may put pressure on the Trust's income stream.

[SIG]
Ellis S. Bigelow

Portfolio Manager

[SIG]
Peter W. Hegel

Chief Investment Officer
Fixed Income Investments

Please see footnotes on page 3

8
<PAGE> 10

- --------------------------------------------------------------------------------
IMPORTANT TRUST UPDATE
As you may have read on page 7 of the Portfolio Management Review, the Board
of Trustees approved a resolution that will allow the Trust to invest in
foreign securities. This change will allow the portfolio management team to
select from a greater number of available securities, particularly when the
supply of attractive U.S. securities is limited. As of April 1, 1999, the
Trust may invest up to 35 percent of its total assets in U.S. dollar
denominated securities of foreign issuers.

Investments in foreign securities present certain risks not ordinarily
associated with investments in securities of U.S. issuers. These risks
include fluctuations in foreign exchange rates, political and economic
developments (including war or other instability, expropriation of assets,
nationalization and confiscatory taxation), the imposition of foreign
exchange limitations, withholding taxes on income or capital transactions or
other restrictions, higher transaction costs and difficulty in taking
judicial action. In addition, there generally is less publicly available
information about many foreign issuers, and auditing, accounting, and
financial reporting requirements are less stringent and less uniform in many
foreign countries. Such securities may be less liquid than the securities of
U.S. corporations or the U.S. government. Such securities may also be
subject to greater fluctuations in price than securities of U.S.
corporations or the U.S. government. There is generally less government
regulation of stock exchanges, brokers and listed companies abroad than in
the U.S., and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there
is usually less supervision and governmental regulation of exchanges,
brokers, and dealers than there is in the U.S., the Trust may experience
settlement difficulties or delays not usually encountered in the U.S. The
risks of foreign investments should be considered carefully by an investor
in the Trust.
- --------------------------------------------------------------------------------

9
<PAGE> 11

PORTFOLIO HIGHLIGHTS

VAN KAMPEN HIGH INCOME TRUST II
TOP TEN PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
<S> <C>
Telecommunications.......... 14.6%
Hotel, Motel, Inns, &
Gaming.................... 10.1%
Printing, Publishing, &
Broadcasting.............. 8.3%
Oil & Gas................... 8.1%
Health Care................. 6.7%
Grocery..................... 5.3%
Mining, Steel, Iron &
Non-Precious Metal........ 4.9%
Retail...................... 4.7%
Chemical.................... 4.4%
Containers, Packaging &
Glass..................... 4.3%
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
Printing, Publishing &
Broadcasting.............. 15.4%
Oil & Gas................... 10.1%
Telecommunications.......... 9.6%
Health Care................. 6.5%
Finance..................... 6.2%
Leisure..................... 5.4%
Aerospace & Defense......... 5.3%
Hotel, Motel, Inns, &
Gaming.................... 4.8%
Grocery..................... 3.9%
Utilities................... 3.6%
</TABLE>

PORTFOLIO COMPOSITION BY CREDIT QUALITY AS
A PERCENTAGE OF LONG-TERM DEBT SECURITIES

AS OF DECEMBER 31, 1998 AS OF DECEMBER 31, 1997
<S> <C> <C> <C>
A to AAA 2.7% A 1.4%
BBB..................... 7.5% BBB..................... 6.7%
BB...................... 33.3% BB...................... 28.4%
B....................... 54.7% [PIE CHART] B....................... 62.7% [PIE CHART]
CCC & Below............. 0.3% Non-Rated............... 0.8%
Non-Rated............... 1.5%
</TABLE>

Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's.

DIVIDEND HISTORY

FOR THE PERIOD ENDED DECEMBER 31, 1998

[BAR GRAPH]

DISTRIBUTION PER COMMON SHARE
-----------------------------

The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.

10
<PAGE> 12

PORTFOLIO OF INVESTMENTS

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS 92.2%
AEROSPACE & DEFENSE 3.6%
$1,350 Dyncorp. ...................................... 9.500% 03/01/07 $ 1,353,375
1,950 Sequa Corp. ................................... 9.625 10/15/99 1,998,750
450 Sequa Corp. ................................... 9.375 12/15/03 468,000
------------
3,820,125
------------
AUTOMOBILE 1.3%
300 Aetna Industries, Inc. ........................ 11.875 10/01/06 315,000
450 MCII Holdings, Inc. (a)........................ 12.0/15.0 11/15/02 391,500
400 Venture Holdings, Inc. ........................ 9.750 04/01/04 394,000
300 Venture Holdings, Inc. ........................ 9.500 07/01/05 298,500
------------
1,399,000
------------
BUILDINGS & REAL ESTATE 2.8%
1,900 American Standard, Inc. ....................... 10.875 05/15/99 1,933,250
450 Kevco, Inc. ................................... 10.375 12/01/07 407,250
675 Webb (Del E.) Corp. ........................... 9.375 05/01/09 659,812
------------
3,000,312
------------
CHEMICAL 4.1%
800 Acetex Corp.................................... 9.750 10/01/03 796,000
540 American Pacific Corp. ........................ 9.250 03/01/05 554,850
1,694 ISP Holdings, Inc. ............................ 9.750 02/15/02 1,804,110
1,500 Pioneer Americas Acquisition Corp. ............ 9.250 06/15/07 1,185,000
------------
4,339,960
------------
CONTAINERS, PACKAGING & GLASS 4.0%
1,150 Fonda Group, Inc. ............................. 9.500 03/01/07 960,250
870 Printpack, Inc. ............................... 10.625 08/15/06 856,950
1,100 Radnor Holdings, Inc. ......................... 10.000 12/01/03 1,111,000
950 S.D. Warren Co. ............................... 12.000 12/15/04 1,035,500
300 Sweetheart Cup, Inc. .......................... 9.625 09/01/00 273,000
------------
4,236,700
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING 1.0%
1,050 Communications & Power Industries, Inc. ....... 12.000 08/01/05 1,094,625
------------
ECOLOGICAL 0.6%
400 Envirosource, Inc. ............................ 9.750 06/15/03 376,000
200 Norcal Waste Systems, Inc. .................... 13.500 11/15/05 220,000
------------
596,000
------------
</TABLE>

See Notes to Financial Statements

11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ELECTRONICS 2.1%
$1,575 Advanced Micro Devices, Inc. .................. 11.000% 08/01/03 $ 1,685,250
1,050 DecisionOne Corp. ............................. 9.750 08/01/07 504,000
------------
2,189,250
------------
FINANCE 2.2%
1,650 Americredit Corp............................... 9.250 02/01/04 1,600,500
1,000 Contifinancial Corp. .......................... 8.375 08/15/03 710,000
------------
2,310,500
------------
GROCERY 4.9%
200 Aurora Foods, Inc. ............................ 9.875 02/15/07 218,500
850 Fleming Cos., Inc. ............................ 10.500 12/01/04 807,500
250 Fleming Cos., Inc. ............................ 10.625 07/31/07 235,000
1,050 Jitney Jungle Stores America, Inc. ............ 12.000 03/01/06 1,173,375
1,329 Pantry, Inc. .................................. 12.000 11/15/00 1,385,482
900 Pantry, Inc. .................................. 10.250 10/15/07 943,875
435 Shoppers Food Warehouse, Inc. ................. 9.750 06/15/04 475,238
------------
5,238,970
------------
HEALTHCARE 6.1%
1,350 Columbia HCA Healthcare Corp. ................. 6.910 06/15/05 1,323,000
450 Fisher Scientific International, Inc. ......... 7.125 12/15/05 423,000
1,050 Fresenius Medical Care Capital Trust........... 9.000 12/01/06 1,097,250
500 Mariner Post Acute Network, Inc. .............. 9.500 11/01/07 390,000
1,500 Sun Healthcare Group, Inc. .................... 9.500 07/01/07 1,200,000
1,100 Tenet Healthcare Corp. ........................ 8.625 12/01/03 1,157,750
900 Tenet Healthcare Corp. ........................ 8.625 01/15/07 947,250
------------
6,538,250
------------
HOTEL, MOTEL, INNS & GAMING 9.3%
1,650 Argosy Gaming Co. ............................. 13.250 06/01/04 1,848,000
300 Booth Creek Ski Holdings, Inc. ................ 12.500 03/15/07 298,500
652 Boyd Gaming Corp. ............................. 9.250 10/01/03 678,080
1,070 Casino America, Inc. .......................... 12.500 08/01/03 1,187,700
675 Casino Magic Louisiana......................... 13.000 08/15/03 764,438
800 Coast Hotels & Casinos, Inc. .................. 13.000 12/15/02 904,000
1,100 Grand Casinos, Inc. ........................... 9.000 10/15/04 1,232,000
</TABLE>

See Notes to Financial Statements

12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PAR
AMOUNT
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOTEL, MOTEL, INNS & GAMING (CONTINUED)
$ 870 Hollywood Casino, Inc. ........................ 12.750% 11/01/03 $ 926,550
875 Horseshoe Gaming............................... 12.750 09/30/00 934,062
1,090 Majestic Star Casino........................... 12.750 05/15/03 1,136,325
------------
9,909,655
------------
LEISURE 2.1%
2,100 Selmer, Inc. .................................. 11.000 05/15/05 2,257,500
------------
MINING, STEEL, IRON & NON-PRECIOUS METAL 4.5%
870 AK Steel Corp. ................................ 10.750 04/01/04 906,975
900 GS Technologies Operating, Inc. ............... 12.250 10/01/05 612,000
870 Kaiser Aluminum & Chemical, Inc. .............. 10.875 10/15/06 887,400
250 Renco Steel Holdings, Inc. .................... 10.875 02/01/05 220,000
2,150 WCI Steel, Inc. ............................... 10.000 12/01/04 2,144,625
------------
4,771,000
------------
OIL & GAS 7.5%
1,200 Benton Oil & Gas, Inc. ........................ 11.625 05/01/03 756,000
870 Chesapeake Energy Corp. ....................... 9.625 05/01/05 661,200
800 Frontier Oil Corp. ............................ 9.125 02/15/06 740,000
1,053 Giant Industries, Inc. ........................ 9.750 11/15/03 1,042,470
1,600 Giant Industries, Inc. ........................ 9.000 09/01/07 1,492,000
1,760 KCS Energy, Inc. .............................. 11.000 01/15/03 1,619,200
500 Petroleum Heat & Power, Inc. .................. 12.250 02/01/05 490,000
800 Pride Petroleum Services, Inc. ................ 9.375 05/01/07 752,000
700 Universal Compression, Inc. (a)................ 0/9.875 02/15/08 413,000
------------
7,965,870
------------
PAPER 0.5%
650 Doman Industries............................... 9.250 11/15/07 484,250
------------
PERSONAL & NON-DURABLE 1.2%
1,210 Cole National Group, Inc. ..................... 9.875 12/31/06 1,258,400
------------
PRINTING, PUBLISHING & BROADCASTING 7.7%
350 CSC Holdings, Inc. ............................ 8.125 08/15/09 375,375
900 CSC Holdings, Inc. ............................ 10.500 05/15/16 1,062,000
900 Grupo Televisa, Inc. .......................... 11.875 05/15/06 900,000
870 Helicon Group L.P. ............................ 11.000 11/01/03 904,800
850 International Cabletel, Inc. (a)............... 0/12.750 04/15/05 769,250
400 International Cabletel, Inc. (a)............... 0/11.500 02/01/06 328,000
</TABLE>

See Notes to Financial Statements

13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PRINTING, PUBLISHING & BROADCASTING (CONTINUED)
$1,100 K-III Communications Corp. .................... 10.250% 06/01/04 $ 1,166,000
550 Northland Cable Television, Inc. .............. 10.250 11/15/07 581,625
1,100 United International Holdings, Inc. (a)........ 0/10.750 02/15/08 605,000
550 Valassis Communications, Inc. ................. 9.550 12/01/03 629,750
800 Young Broadcasting, Inc. ...................... 11.750 11/15/04 856,000
------------
8,177,800
------------
PRODUCER MANUFACTURING 0.8%
150 Associated Materials, Inc. .................... 9.250 03/01/08 150,750
500 Carpenter W.R., Inc. .......................... 10.625 06/15/07 508,750
250 Numatics, Inc. ................................ 9.625 04/01/08 236,250
------------
895,750
------------
RETAIL 4.3%
200 Big 5 Corp. ................................... 10.875 11/15/07 203,000
500 Community Distributors, Inc. .................. 10.250 10/15/04 475,000
500 Hosiery Corp. of America, Inc.................. 13.750 08/01/02 515,000
900 K Mart Corp. .................................. 8.250 11/21/06 954,000
675 Musicland Group, Inc. ......................... 9.875 03/15/08 668,250
1,610 United Stationers Supply Co. .................. 12.750 05/01/05 1,795,150
------------
4,610,400
------------
TELECOMMUNICATIONS 13.4%
950 Capstar Broadcasting Partners.................. 9.250 07/01/07 990,375
1,410 Centennial Cellular Corp. ..................... 8.875 11/01/01 1,498,125
1,004 Centennial Cellular Corp. ..................... 10.125 05/15/05 1,244,960
400 Century Communications Corp. .................. * 03/15/03 299,500
200 Century Communications Corp. .................. 9.500 03/01/05 224,250
1,100 Century Communications Corp. .................. 8.875 01/15/07 1,219,625
950 EZ Communications, Inc. ....................... 9.750 12/01/05 1,040,250
950 Gray Communications Systems, Inc. ............. 10.625 10/01/06 1,016,500
400 Intermedia Communications of Florida, Inc...... 13.500 06/01/05 457,000
150 Intermedia Communications, Inc. ............... 8.875 11/01/07 145,500
940 Intermedia Communications, Inc. ............... 8.600 06/01/08 897,700
900 McLeod USA, Inc. .............................. 9.250 07/15/07 934,875
</TABLE>

See Notes to Financial Statements

14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

See Notes to Financial Statements

15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

Description Market Value
- --------------------------------------------------------------------------------------------
<S> <C>
EQUITIES 0.0%
Hosiery Corp. of America, Inc., (500 common shares) 144A Private Placement
(b)........................................................................... $ 26,250
Intermedia Communications of Florida, Inc., (400 common stock warrants) 144A
Private Placement (b)......................................................... 19,833
NTL, Inc., (1,188 common stock warrants) 144A Private Placement (b)........... 14,844
Petroleum Heat & Power, Inc., (1,687 convertible preferred shares)............ 1,771
Urohealth Systems, Inc., (525 common stock warrants) 144A Private Placement
(b)......................................................................... 5
------------
TOTAL EQUITIES................................................................ 62,703
------------
TOTAL LONG-TERM INVESTMENTS 92.2%
(Cost $101,965,146)......................................................... 98,294,979
REPURCHASE AGREEMENT 6.2%
State Street Bank & Trust (Collateralized by U.S. Treasury Bond, $5,405,000
par, 6.875% coupon, due 08/15/25, dated 12/31/98, to be sold on 01/04/99 at
$6,566,845 (Cost $6,566,000)................................................ 6,566,000
------------
TOTAL INVESTMENTS 98.4%
(Cost $108,531,146)......................................................... 104,860,979
OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%................................... 1,715,637
------------
NET ASSETS 100.0%............................................................ $106,576,616
============
</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.

See Notes to Financial Statements

16
<PAGE> 18

STATEMENT OF ASSETS AND LIABILITIES

December 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $108,531,146).......................... $104,860,979
Cash........................................................... 843
Interest Receivable............................................ 2,290,807
Other.......................................................... 1,852
------------
Total Assets............................................. 107,154,481
------------
LIABILITIES:
Payables:
Income Distributions - Common and Preferred Shares........... 249,948
Investment Advisory Fee...................................... 68,074
Affiliates................................................... 9,803
Accrued Expenses............................................... 156,804
Trustees' Deferred Compensation and Retirement Plans........... 93,236
------------
Total Liabilities........................................ 577,865
------------
NET ASSETS..................................................... $106,576,616
============
NET ASSETS CONSIST OF:
Preferred Shares ($.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................................................ 79,412,381
Accumulated Undistributed Net Investment Income................ 165,091
Net Unrealized Depreciation.................................... (3,670,167)
Accumulated Net Realized Loss.................................. (14,411,779)
------------
Net Assets Applicable to Common Shares................... 61,576,616
------------
NET ASSETS..................................................... $106,576,616
============
NET ASSET VALUE PER COMMON SHARE ($61,576,616 divided by
8,109,000 shares outstanding)................................ $ 7.59
============
</TABLE>

See Notes to Financial Statements

17
<PAGE> 19

STATEMENT OF OPERATIONS

For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------

INVESTMENT INCOME:
Interest.................................................... $10,484,891
Dividends................................................... 70,930
Other....................................................... 287,192
-----------
Total Income.......................................... 10,843,013
-----------
EXPENSES:
Investment Advisory Fee..................................... 831,618
Preferred Share Maintenance................................. 114,336
Trustees' Fees and Expenses................................. 18,153
Legal....................................................... 14,344
Custody..................................................... 14,253
Other....................................................... 270,233
-----------
Total Expenses........................................ 1,262,937
-----------
NET INVESTMENT INCOME....................................... $ 9,580,076
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 219,158
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,752,247
End of the Period......................................... (3,670,167)
-----------
Net Unrealized Depreciation During the Period............... (6,422,414)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(6,203,256)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,376,820
===========
</TABLE>

See Notes to Financial Statements

18
<PAGE> 20

STATEMENT OF CHANGES IN NET ASSETS

For Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 9,580,076 $ 9,743,548
Net Realized Gain.................................... 219,158 1,859,915
Net Unrealized Depreciation During the Period........ (6,422,414) (407,134)
------------ ------------
Change in Net Assets from Operations................. 3,376,820 11,196,329
------------ ------------
Distributions from Net Investment Income:
Common Shares...................................... (7,783,535) (7,783,356)
Preferred Shares................................... (2,430,458) (2,362,959)
------------ ------------
Total Distributions.................................. (10,213,993) (10,146,315)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES......................................... (6,837,173) 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 $165,091 and
$1,034,584, respectively).......................... $106,576,616 $113,413,789
============ ============
</TABLE>

See Notes to Financial Statements

19
<PAGE> 21

FINANCIAL HIGHLIGHTS

The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------

---------------------------------------------
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................. 1.182 1.202 1.228 1.273 1.283
Net Realized and Unrealized
Gain/Loss........................... (.765) .179 .214 .806 (1.530)
------ ------- ------ ------ --------
Total from Investment Operations........ .417 1.381 1.442 2.079 (.247)
------ ------- ------ ------ --------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders......... .960 .960 .960 .960 1.180
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders...................... .300 .291 .292 .322 .235
Return of Capital Paid to Common
Shareholders........................ -0- -0- -0- -0- -0-
------ ------- ------ ------ --------
Total Distributions..................... 1.260 1.251 1.252 1.282 1.415
------ ------- ------ ------ --------
Net Asset Value, End of the Period...... $7.594 $ 8.437 $8.307 $8.117 $ 7.320
====== ======= ====== ====== ========
Market Price Per Share at End of the
Period................................ $8.625 $9.8125 $9.375 $8.750 $ 7.500
Total Investment Return at Market
Price (b)............................. (2.73%) 15.34% 18.91% 30.33% (12.94%)
Total Return at Net Asset Value (c)..... 1.22% 13.90% 15.15% 25.19% (5.70%)
Net Assets at End of the Period (In
millions)............................. $106.6 $ 113.4 $112.4 $110.8 $104.4
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**......... 1.92% 1.83% 1.89% 1.96% 1.97%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)..................... 10.85% 10.93% 11.58% 12.09% 12.87%
Portfolio Turnover...................... 65% 98% 94% 124% 125%
* Non-Annualized
** Ratio of Expenses to Average Net
Assets Including Preferred Shares.... 1.14% 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

20
<PAGE> 22

- --------------------------------------------------------------------------------

<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

21
<PAGE> 23

NOTES TO FINANCIAL STATEMENTS

December 31, 1998
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES

Van Kampen High Income Trust II, formerly known as 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. 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 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. At December 31, 1998, there were no
when issued or delayed delivery purchase commitments.

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

22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

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.

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, 1998, the Trust had an accumulated capital loss
carryforward for tax purposes of $14,398,528 which expires between December 31,
1999 and December 31, 2003, respectively. Of this amount, $11,048,002 will
expire in 1999. Net realized gains or losses differ for financial reporting and
tax purposes as a result of losses from wash sales.

At December 31, 1998, for federal income tax purposes, cost for long- and
short-term investments is $108,544,396, the aggregate gross unrealized
appreciation is $1,986,030 and the aggregate gross unrealized depreciation is
$5,669,447, resulting in net unrealized depreciation on long- and short-term
investments of $3,683,417.

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.

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 financial and tax basis
reporting for the 1998 fiscal year have been identified and appropriately
reclassified. Permanent differences relating to expenses which are not
deductible for tax purposes totaling $15,815 were reclassified from accumulated
undistributed net investment income to capital, $4,634,610 relating to a portion
of the capital loss carryforward that expired during the period was reclassified
from accumulated net realized loss to capital, $431,573 relating to fee income
was reclassified from accumulated undistributed net investment income to
accumulated net realized gains/losses and $180,182 relating to differences
associated with income were reclassified to accumulated undistributed net
investment income from capital.

23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

December 31, 1998
- --------------------------------------------------------------------------------

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 year ended December 31, 1998, the Fund recognized expenses of
approximately $5,700 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 year ended December 31, 1998, the Trust recognized expenses of
approximately $68,700 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.

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 $70,312,536 and $65,735,461, 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 December 31, 1998, was 5.10%. During
the year ended December 31, 1998, the rates ranged from 5.10% 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.

24
<PAGE> 26

REPORT OF INDEPENDENT ACCOUNTANTS

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, 1998, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian. 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, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.

KPMG LLP
Chicago, Illinois
February 4, 1999

25
<PAGE> 27

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

26
<PAGE> 28

VAN KAMPEN 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

JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer

CURTIS W. MORELL*
Vice President and Chief Accounting Officer

TANYA M. LODEN*
Controller

PETER W. HEGEL*
EDWARD C. WOOD, III*
Vice Presidents

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
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 LLP
303 East Wacker Drive
Chicago, Illinois 60601

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

(SM) denotes a service mark of
Van Kampen Funds Inc.

27
<PAGE> 29

RESULTS OF SHAREHOLDER VOTES

The Annual Meeting of Shareholders of the Trust was held on July 28, 1998,
where shareholders voted on the election of trustees and the selection of
independent public accountants.

1) With regard to the election of the following trustees by the preferred
shareholders of the Trust:

<TABLE>
<CAPTION>
# OF SHARES
-------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
Theodore A. Myers................................... 711 0
</TABLE>

2) With regard to the election of the following trustees by the common
shareholders of the Trust:

<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C>
Don G. Powell..................................... 6,709,080 98,237
Hugo F. Sonnenschein.............................. 6,691,515 115,802
</TABLE>

The other trustees of the Trust whose terms did not expire in 1998 are David C.
Arch, Rod Dammeyer, Howard J Kerr, Dennis J. McDonnell, Steven Muller and Wayne
W. Whalen.

3) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 6,690,657 shares voted in favor of the proposal,
49,418 shares voted against and 67,953 shares abstained.

28
<PAGE> 30

YEAR 2000 READINESS DISCLOSURE

Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.

<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> HIGH INCOME TRUST II

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 108,531,146
<INVESTMENTS-AT-VALUE> 104,860,979
<RECEIVABLES> 2,290,807
<ASSETS-OTHER> 1,852
<OTHER-ITEMS-ASSETS> 843
<TOTAL-ASSETS> 107,154,481
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 577,865
<TOTAL-LIABILITIES> 577,865
<SENIOR-EQUITY> 45,000,000
<PAID-IN-CAPITAL-COMMON> 79,493,471
<SHARES-COMMON-STOCK> 8,109,000
<SHARES-COMMON-PRIOR> 8,109,000
<ACCUMULATED-NII-CURRENT> 165,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,411,779)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,670,167)
<NET-ASSETS> 106,576,616
<DIVIDEND-INCOME> 70,930
<INTEREST-INCOME> 10,484,891
<OTHER-INCOME> 287,192
<EXPENSES-NET> (1,262,937)
<NET-INVESTMENT-INCOME> 9,580,076
<REALIZED-GAINS-CURRENT> 219,156
<APPREC-INCREASE-CURRENT> (6,422,414)
<NET-CHANGE-FROM-OPS> 3,376,820
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,213,993)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,837,173)
<ACCUMULATED-NII-PRIOR> 1,034,584
<ACCUMULATED-GAINS-PRIOR> (19,697,120)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 831,618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,262,937
<AVERAGE-NET-ASSETS> 65,883,511
<PER-SHARE-NAV-BEGIN> 8.437
<PER-SHARE-NII> 1.182
<PER-SHARE-GAIN-APPREC> (0.765)
<PER-SHARE-DIVIDEND> (1.260)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 7.594
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>