UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-5769
Van Kampen High Income Trust II
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(Exact name of registrant as specified in charter)
1221 Avenue of the Americas NY NY 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas
New York, NY 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
-----------------------------
Date of fiscal year end: 12/31
-----------
Date of reporting period: 06/30/03
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Item 1. Report to Shareholders
Welcome, Shareholder
In this update, you'll learn about how your trust performed during the
reporting period. The portfolio management team will provide an overview
of the market climate, and discuss some of the factors that helped or
hindered performance during the reporting period. In addition, this
report includes the trust's financial statements and a list of
investments, as well as other information.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. The trust is subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and,
therefore, the value of the trust shares may be less than what you paid
for them. Accordingly, you can lose money investing in this trust.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
Performance Summary
NET ASSET VALUE AND COMMON SHARE MARKET PRICE
(based upon quarter-end values--June 1993 through June 2003)
(LINE GRAPH)
NET ASSET VALUE COMMON SHARE MARKET PRICE
--------------- -------------------------
6/93 8.84 10.13
8.74 10.25
8.98 9.75
8.49 9.88
6/94 8.12 9.75
7.75 8.88
7.32 7.50
7.67 8.25
6/95 7.97 8.63
8.03 8.63
8.12 8.75
8.09 8.88
6/96 7.94 8.75
8.12 9.13
8.31 9.38
8.13 9.38
6/97 8.32 9.81
8.47 10.06
8.38 9.94
8.40 10.19
8.44 9.81
8.54 10.13
8.48 10.38
8.50 10.00
8.45 9.63
8.41 9.81
6/98 8.38 9.56
8.39 9.56
7.74 7.81
7.64 8.50
7.32 8.75
7.74 9.19
7.59 8.63
7.60 8.75
7.34 8.63
7.37 8.44
7.40 8.00
7.23 8.13
6/99 7.09 8.31
6.98 8.13
6.82 7.63
6.65 7.19
6.46 7.00
6.51 7.13
6.55 5.75
6.51 6.25
6.44 6.31
6.21 6.38
6.17 6.31
5.95 6.44
6/00 6.09 6.81
6.13 7.13
6.14 6.88
5.99 6.44
5.68 5.56
5.33 5.19
5.40 5.69
5.82 7.00
5.87 6.19
5.74 6.40
5.62 6.06
5.66 6.40
6/01 5.40 6.40
5.37 6.45
5.28 6.61
4.76 5.99
4.74 5.36
4.86 5.96
4.77 5.75
4.71 6.08
4.54 5.74
4.56 5.87
4.58 5.95
4.47 6.07
6/02 4.05 5.05
3.69 4.19
3.73 4.65
3.61 4.11
3.52 3.95
3.79 4.25
3.79 4.07
3.83 4.50
3.92 4.58
4.01 4.69
4.24 4.92
4.25 4.83
6/03 4.34 4.89
The solid line above represents the trust's net asset value (NAV), which
indicates overall changes in value among the trust's underlying securities. The
trust's common share market price is represented by the dashed line, which
indicates the price the market is willing to pay for shares of the trust at a
given time. Common share market price is influenced by a range of factors,
including supply and demand and market conditions.
------------------------------------------
AVERAGE ANNUAL MARKET PRICE
TOTAL RETURNS since 04/28/89
Since Inception 5.69%
10-year 4.04
5-year -1.74
1-year 8.57
6-month 26.16
------------------------------------------
Past performance is no guarantee of future results. Investment return, common
share market price and net asset value will fluctuate and trust shares, when
sold, may be worth more or less than their original cost.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. Total return assumes an investment at the
common share market price at the beginning of the period, reinvestment of all
distributions for the period in accordance with the trust's dividend
reinvestment plan, and sale of all shares at the closing common share market
price at the end of the period. Distribution rate represents the monthly
annualized distributions of the trust at the end of the period and not the
earnings of the trust.
The Chase High Yield Index is generally representative of high-yield securities.
The index does not include any expenses, fees or sales charges, which would
lower performance. The index is unmanaged and should not be considered an
investment.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003
Van Kampen High Income Trust II is managed by the Adviser's High Yield
team. Current members include Gordon Loery, Executive Director; Josh
Givelber, Vice President and Chad Liu, Vice President.(1) The following
discussion reflects their views on the trust's performance.
Q. BEFORE YOU DISCUSS HOW THE TRUST PERFORMED, PLEASE DESCRIBE THE
OVERALL MARKET ENVIRONMENT.
A. The high-yield market roared ahead in the first half of 2003, posting its
best six-month return since 1991. High-yield mutual fund inflows during
the period were at their highest level ever, reflecting enormous demand
on the part of individual and institutional investors. The market was
also boosted by declining default rates and better earnings results from
many companies.
Overall, performance was inversely related to credit rating, with some
CCC credits strongly outperforming B and BB rated bonds. Sector
performance was dominated by industries such as wireless communications,
utilities, telecommunications and cable that were among the worst
performers in 2002.
Q. HOW DID THE TRUST PERFORM DURING THE REPORTING PERIOD?
A. The trust outperformed its benchmark.
-- The trust returned 26.16 percent for the six months ended June 30,
2003, based on common share market price.
-- By comparison, the trust's benchmark, the Chase High Yield Index,
returned 16.75 percent.
-- The trust's monthly dividend of $0.037 translated to a distribution
rate of 9.08 percent, based on the trust's common share market price
as of June 30, 2003.
See Performance Summary for additional information and index definition.
Q. WHAT HELPED PERFORMANCE DURING THE REPORTING PERIOD?
A. -- Strong security selection in the wireless sector helped the trust's
performance. American Cellular performed especially well, rebounding
strongly from a low valuation on the basis of its solid
fundamentals.
-- Housing companies such as CB Richard Ellis and Technical Olympic
performed well as housing activity remained one of the economy's few
bright spots.
(1)Team members may change at any time without notice.
2
-- Our analysts found few compelling opportunities in the consumer-
products sector, which led us to underweight the group relative to
the benchmark. The sector's subsequent underperformance relative to
the rest of the market supported their views.
Q. WHAT FACTORS HINDERED PERFORMANCE?
A. -- The portfolio's relatively high aggregate credit quality did not
allow it to capitalize on the strong performance of some of the
lowest-rated credits.
-- The lack of compelling opportunities in the airline and utilities
sectors led us to underweight those sectors, both of which enjoyed
rallies coming off of their 2002 lows.
Q. PLEASE WALK US THROUGH HOW YOU POSITIONED THE PORTFOLIO, HIGHLIGHTING
KEY THEMES.
A. -- Strong performance in the energy sector led us to take some profits
there, though we maintained the portfolio's overweight position.
-- Many of the transportation holdings are automobile
parts-manufacturers; we reduced the portfolio's holdings in the
sector because of concerns about the health of these companies going
forward.
-- We increased the portfolio's holdings of utilities to keep it in
line with that sector's rapidly growing weighting in the benchmark.
TOP 5 SECTORS AS OF 6/30/03 RATINGS ALLOCATION AS OF 6/30/03
Gaming & Leisure 13.0% AA/Aa 0.5
Energy 9.6 A/A 0.6
Housing 7.0 BBB/Baa 12.0
Forest Products 6.9 BB/Ba 48.7
Cable 6.5 B/B 35.4
CCC/Caa & below 2.5
Non Rated 0.3
Subject to change daily. Sector percentages are as a percentage of long-term
investments. Ratings allocation percentages are as a percentage of long-term
debt investments. Provided for informational purposes only and should not be
deemed as a recommendation to buy securities in the sectors shown above.
Securities are classified by sectors that represent broad groupings of related
industries. Ratings allocation based upon ratings as issued by Standard and
Poor's and Moody's respectively. Morgan Stanley is a full-service securities
firm engaged in securities trading and brokerage activities, investment banking,
research and analysis, financing and financial advisory services.
3
-- Through selective purchases, we added to the portfolio's cable
holdings when our analysts were able to identify attractive
companies.
Q. NOW THAT YOU'VE PROVIDED AN OVERVIEW OF THE TRUST, DO YOU HAVE ANY
CLOSING THOUGHTS FOR THE SHAREHOLDERS?
A. After the strong rally of the past six months, we believe future gains in
the high-yield market are more likely to come from yield than from price
improvements. If this proves to be the case, security selection will
assume increasing importance as a driver of total returns. We hope to see
ongoing improvement in the economy, which should be supportive of the
high-yield market, and will continue monitoring the market for
opportunities to capture value.
PROXY VOTING POLICIES AND PROCEDURES
A description of the fund's policies and procedures with respect to the
voting of proxies relating to the Fund's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
4
BY THE NUMBERS
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR TRUST'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CORPORATE BONDS 163.9%
BROADCASTING 3.1%
$ 555 Nextmedia Operating, Inc. ...................... 10.750% 07/01/11 $ 624,375
465 TV Azteca S.A. (Mexico)......................... 10.500 02/15/07 461,512
------------
1,085,887
------------
CABLE 10.8%
1,075 British Sky Broadcasting (United Kingdom)....... 7.300 10/15/06 1,205,066
755 Charter Communication Holdings LLC.............. 8.250 04/01/07 585,125
110 CSC Holdings, Inc. ............................. 7.250 07/15/08 110,550
340 CSC Holdings, Inc. ............................. 8.125 07/15/09 352,750
140 CSC Holdings, Inc. ............................. 9.875 02/15/13 147,000
445 DirecTV Holdings, LLC, 144A--Private Placement
(a)............................................. 8.375 03/15/13 498,400
700 Echostar DBS Corp. ............................. 9.375 02/01/09 749,875
165 Rogers Cable, Inc.,
144A--Private Placement (Canada) (a)............ 6.250 06/15/13 165,412
------------
3,814,178
------------
CHEMICALS 9.2%
270 Acetex Corp. (Canada)........................... 10.875 08/01/09 301,387
460 Equistar Chemicals LP........................... 10.125 09/01/08 476,100
180 FMC Corp. ...................................... 10.250 11/01/09 203,400
145 Huntsman Advanced Materials LLC, 144A--Private
Placement (a)................................... 11.000 07/15/10 151,525
145 ISP Chemco, Inc. ............................... 10.250 07/01/11 164,575
675 ISP Holdings, Inc. ............................. 10.625 12/15/09 720,562
250 Lyondell Chemical Co. .......................... 9.875 05/01/07 246,250
195 Lyondell Chemical Co. .......................... 9.500 12/15/08 186,225
320 Millennium America, Inc. ....................... 9.250 06/15/08 345,600
57 PCI Chemicals Canada, Inc. (Canada)............. 10.000 12/31/08 49,586
18 Pioneer Cos., Inc. (g).......................... 4.790 12/31/06 15,387
365 Rhodia S.A., 144A--Private Placement (France)
(a)............................................. 8.875 06/01/11 379,600
------------
3,240,197
------------
See Notes to Financial Statements 5
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
CONSUMER PRODUCTS 1.1%
$ 200 Elizabeth Arden, Inc. .......................... 11.750% 02/01/11 $ 224,000
155 Oxford Industrials, Inc., 144A--Private
Placement (a)................................... 8.875 06/01/11 163,525
------------
387,525
------------
DIVERSIFIED MEDIA 6.0%
485 Alliance Atlantis Communications, Inc.
(Canada)........................................ 13.000 12/15/09 555,325
170 Houghton Mifflin Co., 144A--Private Placement
(a)............................................. 8.250 02/01/11 180,200
140 Houghton Mifflin Co., 144A--Private Placement
(a)............................................. 9.875 02/01/13 152,600
160 PEI Holdings, Inc., 144A--Private Placement
(a)............................................. 11.000 03/15/10 177,200
40 Primedia, Inc. ................................. 8.875 05/15/11 42,300
235 RH Donnelley Finance Corp. I, 144A--Private
Placement (a)................................... 10.875 12/15/12 274,950
380 Salem Communications Corp. ..................... 7.750 12/15/10 395,200
310 Vivendi Universal S.A., 144A--Private Placement
(France) (a).................................... 9.250 04/15/10 354,175
------------
2,131,950
------------
ENERGY 16.2%
685 BRL Universal Equipment......................... 8.875 02/15/08 746,650
430 Chesapeake Energy Corp. ........................ 7.875 03/15/04 446,125
260 Chesapeake Energy Corp. ........................ 8.125 04/01/11 281,450
160 Citgo Petroleum Corp., 144A--Private Placement
(a)............................................. 11.375 02/01/11 179,200
100 El Paso Energy Partners LP, 144A--Private
Placement (a)................................... 8.500 06/01/10 107,500
315 El Paso Production Holding Co., 144A--Private
Placement (a)................................... 7.750 06/01/13 315,787
910 Frontier Oil Corp. ............................. 11.750 11/15/09 1,005,550
425 GulfTerra Energy Partners LP.................... 10.625 12/01/12 493,000
330 Hanover Equipment Trust......................... 8.500 09/01/08 348,150
160 Hanover Equipment Trust......................... 8.750 09/01/11 168,800
215 Magnum Hunter Resources, Inc. .................. 9.600 03/15/12 237,575
65 MSW Energy Holdings LLC, 144A--Private Placement
(a)............................................. 8.500 09/01/10 67,112
266 Port Arthur Finance Corp. ...................... 12.500 01/15/09 312,139
235 Tesoro Petroleum Corp. ......................... 9.000 07/01/08 213,850
6 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
ENERGY (CONTINUED)
$ 135 Tesoro Petroleum Corp. ......................... 9.625% 04/01/12 $ 124,200
605 Vintage Petroleum, Inc. ........................ 7.875 05/15/11 651,887
------------
5,698,975
------------
FINANCIAL 3.2%
240 Banco Nacional de Comercio Exterior (Mexico).... 7.250 02/02/04 247,943
320 Health Net, Inc. ............................... 8.375 04/15/11 389,532
435 Istar Financial, Inc. .......................... 8.750 08/15/08 476,325
------------
1,113,800
------------
FOOD & DRUG 3.6%
310 Ahold Finance USA, Inc. ........................ 8.250 07/15/10 319,300
510 Delhaize America, Inc. ......................... 8.125 04/15/11 561,000
200 Dominos, Inc., 144A--Private Placement (a)...... 8.250 07/01/11 207,500
1,180 Jitney-Jungle Stores America, Inc. (b) (c)
(d)............................................. 12.000 03/01/06 0
170 Merisant Co., 144A--Private Placement (a) (h)... 9.500 07/15/13 176,800
------------
1,264,600
------------
FOOD & TOBACCO 6.1%
550 Constellation Brands, Inc. ..................... 8.000 02/15/08 606,375
220 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 235,950
465 Smithfield Foods, Inc. ......................... 7.625 02/15/08 480,112
760 Smithfield Foods, Inc. ......................... 8.000 10/15/09 826,500
------------
2,148,937
------------
FOREST PRODUCTS 11.5%
390 Abitibi-Consolidated, Inc. (Canada)............. 6.000 06/20/13 372,004
445 Georgia-Pacific Corp., 144A--Private Placement
(a)............................................. 8.875 02/01/10 485,050
460 MDP Acquisitions PLC (Ireland).................. 9.625 10/01/12 510,600
175 Norampac, Inc., 144A--Private Placement (Canada)
(a)............................................. 6.750 06/01/13 184,625
460 Norske Skog Canada Ltd. (Canada)................ 8.625 06/15/11 483,000
1,020 Owens-Brockway Glass Containers, Inc. .......... 8.875 02/15/09 1,111,800
135 Pacifica Papers, Inc. (Canada).................. 10.000 03/15/09 144,450
790 Tembec Industries, Inc. (Canada)................ 7.750 03/15/12 770,250
------------
4,061,779
------------
GAMING & LEISURE 21.8%
690 Harrahs Operating Co., Inc. .................... 7.875 12/15/05 752,100
345 Hilton Hotels Corp. ............................ 7.950 04/15/07 372,600
170 Hilton Hotels Corp. ............................ 7.625 12/01/12 187,000
600 HMH Properties, Inc. ........................... 7.875 08/01/05 613,500
560 Horseshoe Gaming LLC............................ 8.625 05/15/09 596,400
1,075 International Game Technology................... 7.875 05/15/04 1,130,528
See Notes to Financial Statements 7
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
GAMING & LEISURE (CONTINUED)
$ 180 LodgeNet Entertainment Corp. ................... 9.500% 06/15/13 $ 185,400
1,100 Mohegan Tribal Gaming Authority................. 8.125 01/01/06 1,199,000
380 Park Place Entertainment Corp. ................. 7.875 12/15/05 406,125
325 Park Place Entertainment Corp. ................. 8.875 09/15/08 359,125
800 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.375 05/01/07 846,000
595 Station Casinos, Inc. .......................... 8.375 02/15/08 645,575
350 Station Casinos, Inc. .......................... 9.875 07/01/10 386,750
------------
7,680,103
------------
HEALTHCARE 10.7%
470 Amerisourcebergen Corp. ........................ 8.125 09/01/08 519,350
130 Apogent Technologies, Inc., 144A--Private
Placement (a)................................... 6.500 05/15/13 134,875
450 Fisher Scientific International, Inc. .......... 7.125 12/15/05 472,500
105 Fisher Scientific International, Inc.,
144A--Private Placement (a)..................... 8.125 05/01/12 112,875
410 Fresenius Medical Care Capital Trust II......... 7.875 02/01/08 432,550
180 Fresenius Medical Care Capital Trust IV......... 7.875 06/15/11 190,800
800 HCA, Inc. ...................................... 6.910 06/15/05 849,101
35 Manor Care, Inc. ............................... 7.500 06/15/06 38,081
115 Manor Care, Inc. ............................... 8.000 03/01/08 129,950
95 Manor Care, Inc., 144A--Private Placement (a)... 6.250 05/01/13 98,800
195 Omnicare, Inc. ................................. 8.125 03/15/11 212,550
500 Tenet Healthcare Corp. ......................... 6.500 06/01/12 466,250
120 Tenet Healthcare Corp. ......................... 7.375 02/01/13 116,400
------------
3,774,082
------------
HOUSING 11.8%
405 CB Richard Ellis Service, Inc. ................. 11.250 06/15/11 436,388
90 CBRE Escrow, Inc., 144A--Private Placement
(a)............................................. 9.750 05/15/10 95,063
350 KB Home......................................... 7.750 02/01/10 380,188
455 LNR Property Corp., 144A--Private Placement
(a)............................................. 7.625 07/15/13 461,825
265 Louisiana Pacific Corp. ........................ 10.875 11/15/08 303,425
150 Meritage Corp., 144A--Private Placement (a)..... 9.750 06/01/11 166,500
80 Nortek Holdings, Inc. .......................... 9.250 03/15/07 82,800
410 Schuler Homes, Inc. ............................ 9.375 07/15/09 465,350
130 Technical Olympic USA, Inc. .................... 9.000 07/01/10 141,050
170 Technical Olympic USA, Inc. .................... 9.000 07/01/10 182,750
270 Technical Olympic USA, Inc. .................... 10.375 07/01/12 288,900
8 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
HOUSING (CONTINUED)
$ 25 Technical Olympic USA, Inc., 144A--Private
Placement (a)................................... 10.375% 07/01/12 $ 26,750
345 Toll Corp. ..................................... 8.250 02/01/11 386,400
675 Webb (Del E.) Corp. ............................ 10.250 02/15/10 739,125
------------
4,156,514
------------
INFORMATION TECHNOLOGY 5.7%
415 Avaya, Inc. .................................... 11.125 04/01/09 456,500
325 Fairchild Semiconductor Corp. .................. 10.500 02/01/09 367,250
570 Iron Mountain, Inc. ............................ 8.625 04/01/13 612,750
215 Xerox Capital Europe PLC (United Kingdom)....... 5.875 05/15/04 217,150
365 Xerox Corp. .................................... 7.125 06/15/10 366,369
------------
2,020,019
------------
MANUFACTURING 8.3%
315 ABB Finance, Inc. .............................. 6.750 06/03/04 308,910
555 Communications & Power Industries, Inc. ........ 12.000 08/01/05 561,938
115 Flowserve Corp. ................................ 12.250 08/15/10 134,550
395 Johnsondiversey, Inc. .......................... 9.625 05/15/12 443,388
500 Manitowoc, Inc. ................................ 10.500 08/01/12 557,500
390 Trimas Corp. ................................... 9.875 06/15/12 401,700
495 Tyco Intl Group S.A. (Luxembourg)............... 6.375 02/15/06 518,513
------------
2,926,499
------------
METALS 2.8%
134 Doe Run Resources Corp., 144A--Private Placement
(a) (d) (e)..................................... 11.750 11/01/08 47,028
900 GS Technologies Operating, Inc. (b) (c) (d)..... 12.250 10/01/05 40,500
295 Oregon Steel Mills, Inc. ....................... 10.000 07/15/09 266,975
325 UCAR Finance, Inc. ............................. 10.250 02/15/12 320,125
295 United States Steel Corp. ...................... 9.750 05/15/10 300,900
------------
975,528
------------
RETAIL 3.4%
165 Big 5 Corp. .................................... 10.875 11/15/07 174,281
100 Gap, Inc. ...................................... 6.900 09/15/07 108,250
180 Gap, Inc. ...................................... 10.550 12/15/08 219,600
60 Penney JC Co., Inc. ............................ 7.600 04/01/07 63,300
235 Penney JC Co., Inc. ............................ 8.000 03/01/10 247,338
345 Penney JC Co., Inc. ............................ 9.000 08/01/12 376,050
------------
1,188,819
------------
See Notes to Financial Statements 9
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
SERVICES 6.0%
$1,140 Allied Waste North America, Inc. ............... 8.875% 04/01/08 $ 1,242,600
750 Waste Management, Inc. ......................... 7.125 10/01/07 861,259
------------
2,103,859
------------
TELECOMMUNICATIONS 1.2%
184 Exodus Communications, Inc. (b) (c) (d)......... 11.250 07/01/08 11,067
650 Frontier Corp. (b) (c).......................... 6.000 10/15/03 47,125
85 Globix Corp., 144A--Private Placement (a) (e)... 11.000 05/01/08 64,402
1,045 WorldCom, Inc. (b) (c).......................... 7.750 04/01/07 310,888
------------
433,482
------------
TRANSPORTATION 9.0%
1,150 Aetna Industries, Inc. (b) (c) (d).............. 11.875 10/01/06 5,750
335 Autonation, Inc. ............................... 9.000 08/01/08 373,525
235 Collins & Aikman Products Co. .................. 10.750 12/31/11 207,975
345 General Motors Acceptance Corp. ................ 7.500 07/15/05 369,892
320 Intermet Corp. ................................. 9.750 06/15/09 308,800
360 Laidlaw International, Inc., 144A--Private
Placement (a)................................... 10.750 06/15/11 379,800
605 Lear Corp. ..................................... 8.110 05/15/09 695,750
255 Metaldyne Corp. ................................ 11.000 06/15/12 212,925
185 Sonic Automotive, Inc. ......................... 11.000 08/01/08 197,025
385 TRW Automotive, Inc., 144A--Private Placement
(a)............................................. 9.375 02/15/13 419,650
------------
3,171,092
------------
UTILITY 9.0%
54 AES Corp. ...................................... 9.375 09/15/10 54,540
18 AES Corp. ...................................... 8.875 02/15/11 17,685
135 Allegheny Energy, Inc. ......................... 7.750 08/01/05 135,675
250 Calpine Corp. .................................. 8.625 08/15/10 188,750
50 CMS Energy Corp. ............................... 7.500 01/15/09 49,688
295 CMS Energy Corp. ............................... 8.500 04/15/11 309,381
405 Dynegy Holdings, Inc. .......................... 6.875 04/01/11 342,225
170 IPALCO Enterprises, Inc. ....................... 8.625 11/14/11 187,000
350 Monongahela Power Co. .......................... 5.000 10/01/06 349,563
475 PSEG Energy Holdings, Inc. ..................... 9.125 02/10/04 489,336
165 PSEG Energy Holdings, Inc. ..................... 8.625 02/15/08 177,578
165 Southern California Edison Co., 144A--Private
Placement (a)................................... 8.000 02/15/07 181,706
145 Southern Natural Gas Co., 144A--Private
Placement (a)................................... 8.875 03/15/10 158,775
10 See Notes to Financial Statements
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
UTILITY (CONTINUED)
$ 305 TNP Enterprises, Inc. .......................... 10.250% 04/01/10 $ 306,525
200 Transcontinental Gas Pipe Line Corp. ........... 8.875 07/15/12 227,000
------------
3,175,427
------------
WIRELESS COMMUNICATIONS 3.4%
215 American Cellular Corp. (b)..................... 9.500 10/15/09 108,575
845 Nextel Communications, Inc. .................... 9.375 11/15/09 911,544
143 Telecorp PCS, Inc. ............................. 10.625 07/15/10 173,388
------------
1,193,507
------------
TOTAL CORPORATE BONDS 163.9%................................................. 57,746,759
------------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 3.1%
405 Federal Republic of Brazil (Brazil)............. 11.250 07/26/07 423,225
550 United Mexican States (Mexico).................. 8.625 03/12/08 660,825
------------
TOTAL GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS............................ 1,084,050
------------
EQUITIES 0.8%
DecisionOne Corp. (2,450 common shares) (d) (f)............................... 0
DecisionOne Corp. (5,386 common stock warrants) (d) (f)....................... 0
Globix Corp. (8,945 common shares) (f)........................................ 25,940
HCI Direct, Inc. (30,357 common shares) (d) (f)............................... 236,785
Hosiery Corp. of America, Inc. (500 common shares) (d) (f).................... 0
McLeodUSA, Inc. (1,087 common stock warrants) (f)............................. 446
McLeodUSA, Inc. (490 preferred shares) (f).................................... 3,547
Pioneer Cos., Inc. (3,675 common shares) (f).................................. 13,414
VS Holdings, Inc. (8,891 common shares) (d) (f)............................... 1,660
XO Communications, Inc. (1,691 common stock warrants Series A) (d) (f)........ 1,691
XO Communications, Inc. (1,268 common stock warrants Series B) (d) (f)........ 0
XO Communications, Inc. (1,268 common stock warrants Series C) (d) (f)........ 0
XO Communications, Inc. (845 common shares) (f)............................... 6,126
------------
TOTAL EQUITIES................................................................ 289,609
------------
TOTAL LONG-TERM INVESTMENTS 167.8%
(Cost $62,531,170).......................................................... 59,120,418
See Notes to Financial Statements 11
YOUR TRUST'S INVESTMENTS
June 30, 2003 (Unaudited)
MARKET
DESCRIPTION VALUE
REPURCHASE AGREEMENT 7.1%
UBS Securities ($2,514,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 06/30/03, to be sold on 07/01/03 at
$2,514,077) (Cost $2,514,000).............................................. $ 2,514,000
------------
TOTAL INVESTMENTS 174.9%
(Cost $65,045,170)......................................................... 61,634,418
OTHER ASSETS IN EXCESS OF LIABILITIES 4.0%.................................. 1,405,583
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (78.9%).................. (27,810,508)
------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%............................... $ 35,229,493
============
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(b) Non-income producing as security is in default.
(c) This borrower has filed for protection in federal bankruptcy court.
(d) Market value is determined in accordance with procedures established in good
faith by the Board of Trustees.
(e) Payment-in-kind security.
(f) Non-income producing security.
(g) Variable rate security. Interest rate shown is that in effect at June 30,
2003.
(h) Securities purchased on a when-issued or delayed delivery basis.
12 See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2003 (Unaudited)
ASSETS:
Total Investments (Cost $65,045,170)........................ $ 61,634,418
Cash........................................................ 601
Receivables:
Interest.................................................. 1,234,927
Investments Sold.......................................... 1,047,845
Other....................................................... 480
------------
Total Assets............................................ 63,918,271
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 629,025
Investment Advisory Fee................................... 36,207
Affiliates................................................ 6,259
Trustees' Deferred Compensation and Retirement Plans........ 156,162
Accrued Expenses............................................ 50,617
------------
Total Liabilities....................................... 878,270
Preferred Shares (including accrued distributions).......... 27,810,508
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $ 35,229,493
============
NET ASSET VALUE PER COMMON SHARE ($35,229,493 divided by
8,109,000 shares outstanding)............................. $ 4.34
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 8,109,000 shares issued and
outstanding).............................................. $ 81,090
Paid in Surplus............................................. 66,761,242
Accumulated Net Investment Income........................... (982,463)
Net Unrealized Depreciation................................. (3,410,752)
Accumulated Net Realized Loss............................... (27,219,624)
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $ 35,229,493
============
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 1,112 issued with liquidation preference of
$25,000 per share)........................................ $ 27,800,000
============
NET ASSETS INCLUDING PREFERRED SHARES....................... $ 63,029,493
============
See Notes to Financial Statements 13
Statement of Operations
For the Six Months Ended June 30, 2003 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 2,484,144
Other....................................................... 7,275
------------
Total Income............................................ 2,491,419
------------
EXPENSES:
Investment Advisory Fee..................................... 210,646
Preferred Share Maintenance................................. 40,224
Trustees' Fees and Related Expenses......................... 26,274
Audit....................................................... 20,341
Legal....................................................... 10,076
Custody..................................................... 6,314
Other....................................................... 65,115
------------
Total Expenses.......................................... 378,990
------------
NET INVESTMENT INCOME....................................... $ 2,112,429
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (3,198,511)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (11,068,264)
End of the Period......................................... (3,410,752)
------------
Net Unrealized Appreciation During the Period............... 7,657,512
------------
NET REALIZED AND UNREALIZED GAIN............................ $ 4,459,001
============
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (177,215)
============
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 6,394,215
============
14 See Notes to Financial Statements
Statements of Changes in Net Assets
(Unaudited)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, 2002
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 2,112,429 $ 4,855,716
Net Realized Loss..................................... (3,198,511) (8,628,105)
Net Unrealized Appreciation During the Period......... 7,657,512 1,421,734
Distributions to Preferred Shareholders:
Net Investment Income............................... (177,215) (526,962)
Return of Capital Distribution...................... -0- (38,780)
----------- -----------
Change in Net Assets Applicable to Common Shares from
Operations.......................................... 6,394,215 (2,916,397)
Distributions to Common Shareholders:
Net Investment Income............................... (1,880,979) (4,682,374)
Return of Capital Distribution...................... -0- (344,582)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES.......................... 4,513,236 (7,943,353)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period............................... 30,716,257 38,659,610
----------- -----------
End of the Period (Including accumulated net
investment income of ($982,463) and ($1,036,698),
respectively)....................................... $35,229,493 $30,716,257
=========== ===========
See Notes to Financial Statements 15
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX
MONTHS
ENDED
JUNE 30, -------------------
2003 2002 2001 (c)
-------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $ 3.79 $ 4.77 $ 5.40
------- ------- -------
Net Investment Income.................................. .26 .60 .90
Net Realized and Unrealized Gain/Loss.................. .54 (.89) (.61)
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income.................................. (.02) (.07) (.18)
Return of Capital Distributions........................ -0- -0-** -0-**
------- ------- -------
Total from Investment Operations........................... .78 (.36) .11
Distributions Paid to Common Shareholders:
Net Investment Income.................................... (.23) (.58) (.73)
Return of Capital Distributions.......................... -0- (.04) (.01)
------- ------- -------
NET ASSET VALUE, END OF THE PERIOD......................... $ 4.34 $ 3.79 $ 4.77
======= ======= =======
Common Share Market Price at End of the Period............. $ 4.89 $ 4.07 $ 5.75
Total Return (a)........................................... 26.16%* -19.86% 13.57%
Net Assets Applicable to Common Shares at End of the Period
(In millions)............................................ $ 35.2 $ 30.7 $ 38.7
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (b)........................................ 2.32% 2.28% 2.14%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (b).......................... 12.95% 14.50% 16.83%
Portfolio Turnover......................................... 44%* 81% 63%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including Preferred
Shares (b)............................................... 1.26% 1.18% 1.15%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d).......................... 11.87% 12.93% 13.40%
SENIOR SECURITIES:
Total Preferred Shares Outstanding......................... 1,112 1,112 1,360
Asset Coverage Per Preferred Share (e)..................... $56,691 $52,652 $53,426
Involuntary Liquidating Preference Per Preferred Share..... $25,000 $25,000 $25,000
Average Market Value Per Preferred Share................... $25,000 $25,000 $25,000
* Non-Annualized
** Amount is less than $.01.
(a) Total return assumes an investment at the common share market price at the
beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale
of all shares at the closing common share market price at the end of the
period indicated.
(b) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(c) As required, effective January 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on fixed income securities. The effect of this change for
the period ended December 31, 2001 was to decrease net investment income per
share by $.02, increase net realized and unrealized gains and losses per
share by $.02 and decrease the ratio of net investment income to average net
assets applicable to common shares by .40%. Per share, ratios and
supplemental data for periods prior to December 31, 2001 have not been
restated to reflect this change in presentation.
(d) Ratios reflect the effect of dividend payments to preferred shareholders.
(e) Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
16
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993
----------------------------------------------------------------------------------------
$ 6.56 $ 7.59 $ 8.44 $ 8.31 $ 8.12 $ 7.32 $ 8.98 $ 7.92
------- ------- -------- -------- -------- -------- -------- --------
1.10 1.14 1.18 1.20 1.23 1.27 1.28 1.42
(1.11) (1.00) (.77) .18 .21 .81 (1.53) 1.02
(.33) (.27) (.30) (.29) (.29) (.32) (.23) (.18)
-0-** -0- -0- -0- -0- -0- -0- -0-
------- ------- -------- -------- -------- -------- -------- --------
(.34) (.13) .11 1.09 1.15 1.76 (.48) 2.26
(.76) (.90) (.96) (.96) (.96) (.96) (1.18) (1.20)
(.06) -0- -0- -0- -0- -0- -0- -0-
------- ------- -------- -------- -------- -------- -------- --------
$ 5.40 $ 6.56 $ 7.59 $ 8.44 $ 8.31 $ 8.12 $ 7.32 $ 8.98
======= ======= ======== ======== ======== ======== ======== ========
$ 5.69 $ 5.75 $ 8.625 $ 9.8125 $ 9.375 $ 8.75 $ 7.50 $ 9.75
12.13% -25.28% -2.73% 15.34% 18.91% 30.33% -12.94% 17.01%
$ 43.8 $ 53.2 $ 61.6 $ 68.4 $ 67.4 $ 65.8 $ 59.4 $ 72.8
2.03% 1.97% 1.92% 1.83% 1.89% 1.96% 1.97% 1.72%
18.16% 16.32% 14.54% 14.43% 15.19% 16.19% 15.75% 16.46%
40% 56% 65% 98% 94% 124% 125% 140%
1.07% 1.10% 1.14% 1.10% 1.12% 1.15% 1.17% 1.05%
12.66% 12.41% 10.85% 10.93% 11.58% 12.09% 12.87% 14.41%
1,520 1,800 900 900 900 900 900 900
$53,812 $54,557 $118,418 $126,015 $124,849 $123,135 $115,957 $130,926
$25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 17
NOTES TO
FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Income Trust II (the "Trust") is registered as a diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Trust's investment objective is to provide high current
income, while seeking to preserve shareholders' capital through investment in a
professionally managed diversified portfolio of high yield, fixed income
securities. The Trust commenced investment operations on April 28, 1989.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Investments are stated at value using market quotations or
indications of value obtained from an independent pricing service. For those
securities where quotations or prices are not available, valuations are obtained
from yield data relating to instruments or securities with similar
characteristics in accordance with procedures established in good faith by the
Board of Trustees. Short-term securities with remaining maturities of 60 days or
less are valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Trust may invest in repurchase agreements, which are short-term
investments in which the Trust acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Trust may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Investment Advisory Corp. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Trust will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Trust.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
discount is accreted and premium is amortized over the expected life of each
applicable security.
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.
18
NOTES TO
FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
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, 2002, the Trust had an accumulated capital loss
carryforward for tax purposes of $22,397,747 which expires between December 31,
2003 and December 31, 2010. Of this amount, $2,448,303 will expire on December
31, 2003.
At June 30, 2003, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $65,328,526
===========
Gross tax unrealized appreciation........................... $ 3,677,797
Gross tax unrealized depreciation........................... (7,371,905)
-----------
Net tax unrealized depreciation on investments.............. $(3,694,108)
===========
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually to common shareholders. Distributions from net
realized gains for book purposes may include short-term capital gains which are
included in ordinary income for tax purposes.
The tax character of distributions paid during the year ended December 31,
2002 was as follows:
2002
Distributions paid from:
Ordinary income........................................... $5,224,881
Return of capital......................................... 383,362
----------
$5,608,243
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .70% of the average daily net assets of the Trust.
For the six months ended June 30, 2003, the Trust recognized expenses of
approximately $2,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the six months ended June
30, 2003, the Trust recognized expenses of approximately $13,900 representing
Van Kampen Investment Inc.'s or its affiliates (collectively "Van Kampen") cost
of providing accounting and legal services to the Trust, which are reported as
part of "Other" and "Legal" expenses, respectively, in the Statement of
Operations.
19
NOTES TO
FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each trustee's years of service to the Trust.
The maximum annual benefit per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments were $25,169,825 and $26,417,571, respectively.
4. AUCTION PREFERRED SHARES
As of June 30, 2003, the Trust has outstanding 1,112 Auction Preferred
Shares ("APS"). Dividends are cumulative and the dividend rate is currently
reset every 28 days through an auction process. The rate in effect on June 30,
2003 was 1.150%. During the six months ended June 30, 2003, the rates ranged
from 1.140% to 1.600%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
20
DIVIDEND REINVESTMENT PLAN
The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have all distributions
of dividends and capital gains automatically reinvested in Common Shares of the
Trust. All Common Shareholders are deemed to be participants in the Plan unless
they specifically elect not to participate. Common Shareholders who elect not to
participate in the Plan will receive all distributions of dividends and capital
gains in cash paid by check mailed directly to the Common Shareholder by the
Trust's dividend disbursing agent.
HOW THE PLAN WORKS
State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Common Shares in the open market, on the New York Stock Exchange or elsewhere,
for the participants' accounts. The Trust will not issue any new Common Shares
in connection with the Plan. All reinvestments are in full and fractional Common
Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or capital gains distribution paid subsequent to written
notice of the change sent to all Common Shareholders of the Trust at least 90
days before the record date for the dividend or distribution. The Plan also may
be amended or terminated by the Plan Agent, with the written consent of the
Trust, by providing at least 90 days written notice to all Participants in the
Plan.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
21
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
22
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
VAN KAMPEN HIGH INCOME TRUST II
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN(1)
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*(1)
THEODORE A. MYERS
JACK E. NELSON(1)
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
(1) Appointed to the Board of Trustees effective July 23, 2003.
* "Interested persons" of the Fund, as defined in the Investment Company Act
of 1940, as amended.
23
RESULTS OF
SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 24, 2003, where
shareholders voted on the election of trustees and the amendment to the
Declaration of Trust.
With regard to the election of the following trustees by common shareholders of
the Trust:
# OF SHARES
-----------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
Jerry D. Choate............................................ 6,714,576 188,846
Linda Hutton Heagy......................................... 6,688,609 214,813
R. Craig Kennedy........................................... 6,711,783 191,639
Wayne W. Whalen............................................ 6,716,583 186,839
Suzanne H. Woolsey......................................... 6,684,099 219,323
With regards to the election of the following trustees by preferred shareholders
of the Trust:
# OF SHARES
----------------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------------
Rod Dammeyer................................................ 1,048 64
The other trustees of the Trust whose terms did not expire in 2003 are David C.
Arch, Howard J Kerr, Theodore A. Myers, Richard F. Powers, III and Hugo F.
Sonnenschein
With regard to the vote for the amendment to the Declaration of Trust by the
common shareholders of the Trust, 6,461,502 shares voted in favor of the
proposal, 289,716 shares voted against and 152,203 shares abstained.
With regard to the vote for the amendment to the Declaration of Trust by the
preferred shareholders of the Trust, 1,048 shares voted in favor of the proposal
and 64 shares abstained.
24
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp.,
Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen
Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc.,
Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many
Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2003 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC. 920, 913, 100
VLT SAR 8/03 11616H03-AS-8/03
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. [Reserved.]
Item 9.
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen High Income Trust II
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By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
By: /s/ John L. Sullivan
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Name: John L. Sullivan
Title: Principal Financial Officer
Date: August 19, 2003