UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5769
Van Kampen High Income Trust II
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
(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: 6/30/06
Item 1. Report to Shareholders.
The Trust's semiannual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen High
Income Trust II performed during the semiannual period. The portfolio
management team will provide an overview of the market conditions and
discuss some of the factors that affected investment performance during
the reporting period. In addition, this report includes the trust's
financial statements and a list of trust investments as of June 30, 2006.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND
THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST.
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary as of 6/30/06
HIGH INCOME TRUST II
SYMBOL: VLT
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AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (4/28/89) 5.27% 4.82%
10-year 4.01 2.25
5-year 4.78 -0.20
1-year -0.68 -12.91
6-month 0.07 -3.88
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PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET
ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
NAV per share is determined by dividing the value of the trust's portfolio
securities, cash and other assets, less all liabilities and preferred shares, by
the total number of common shares outstanding. The common share market price is
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. Total return assumes an investment 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 end of the period.
The J.P. Morgan Global 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. It is not possible to invest directly in an index.
The Lehman Brother U.S. Corporate High Yield 2% Issuer Cap Index is generally
representative of high-yield securities. Based on the Trust's asset composition,
the Trust's Investment Advisor, believes the Lehman Brothers U.S. Corporate High
Yield 2% Issuer Cap Index is the more appropriate broad-based benchmark for the
Trust than the J.P. Morgan Global High Yield Index. The Trust began using the
Lehman Brother's U.S. Corporate High Yield 2% Issuer Cap Index in April 2006.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006
MARKET CONDITIONS
The high-yield market performed well during the reporting period, especially in
the first quarter of the year, as continued economic strength, a strong equity
market and increased investor appetite for risk combined to support the market.
Gains in high yield came despite declining Treasury prices, tight credit
spreads, moderate new bond issuance and outflows from mutual funds. High-yield
market returns slowed in the second quarter as rising market volatility,
concerns about inflation and increased issuance dampened performance. The end
result was modestly positive returns for the six-month period.
In keeping with this performance pattern, high-yield credit spreads (a
reflection of investors' willingness to assume credit risk) tightened during the
first three months of the year, leveled off early in the second quarter, then
widened in June, closing the reporting period at 359 basis points over U.S.
Treasuries.
Within the high-yield asset class, the riskiest segment of the
market--securities rated CCC and below--outperformed high-rated securities
throughout the reporting period. Industry sector returns, however, varied
considerably. The strongest performing sectors included transportation (due to
strong gains by the auto component), manufacturing, telecommunication services,
retail and cable. The worst performers included the energy, broadcasting,
information technology, health care and utilities sectors. Forest products, the
leading sector in the first quarter, turned in poor performance in the second
quarter.
PERFORMANCE ANALYSIS
The trust's return can be calculated based upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the trust's portfolio securities, cash and other assets, less all
liabilities and preferred shares, by the total number of common shares
outstanding, while market price reflects the supply and demand for the shares.
As a result, the two returns may differ, as they did during the reporting
period. On an NAV and Market price basis, the trust underperformed both the
Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index and the J.P.
Morgan Global High Yield Index.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006
---------------------------------------------------------------------
LEHMAN BROTHERS
U.S. CORPORATE
BASED ON BASED ON J.P. MORGAN GLOBAL HIGH YIELD 2%
NAV MARKET PRICE HIGH YIELD INDEX ISSUER CAP INDEX
0.07% -3.88% 3.08% 2.53%
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Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. Investment return, net asset value and common share market price will
fluctuate and trust shares, when sold, may be worth more or less than their
original cost. See Performance Summary for additional performance information
and index definitions.
2
Early in the reporting period, we reduced risk in the trust's portfolio by
increasing its overall credit quality. This defensive positioning versus the
benchmark was the main reason for the trust's relative underperformance, as it
kept the trust from participating fully in the first quarter's rally of lower-
quality securities.
Security selection in the trust's portfolio provided more mixed results.
Selected issues in the forest products and food/tobacco sectors detracted from
returns. On a more positive note, security selection in transportation and
utilities contributed to overall returns during the period.
Over the course of the reporting period, we remained focused on maintaining a
balanced and well-diversified portfolio while also implementing strategic
overweights in securities and sectors that we believed offered the most
attractive risk profiles. As part of the trust's overall conservative
positioning, we added to its exposure to traditionally defensive sectors such as
food and tobacco and health care, and reduced the portfolio's exposure to what
we believed were riskier companies in the housing sector. We also added to the
portfolio's exposure to companies in the automotive sector. The trust ended the
period with lower exposure to manufacturing and wireless companies, where bonds
were either called or tendered.
The trust uses leverage to enhance its dividend to common shareholders. The
trust borrows money at short-term rates through the issuance of preferred
shares. The proceeds are reinvested in longer-term securities, taking advantage
of the difference between short- and longer-term rates. The Federal Open Market
Committee's policy of raising interest rates throughout the period made the
trust's borrowing activity more expensive, thereby tempering its benefits.
There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the trust in
the future.
CHANGES TO INVESTMENT POLICIES
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
Swaps. The Trust recently approved a change in its investment policies to allow
the Trust to enter into interest rate, index, total rate of return and credit
default swaps and the purchase or sale of related caps, floors and collars. The
Trust expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, as a duration
management technique or to protect against any increase in the price of
securities the Trust anticipates purchasing at a later date. The Trust intends
to use these transactions as hedges and not as speculative investments and will
not sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Trust may be obligated to pay.
3
Interest rate swaps involve the exchange by the Trust with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from the
party selling the interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the interest rate
floor. An interest rate collar combines the elements of purchasing a cap and
selling a floor. The collar protects against an interest rate rise above the
maximum amount but foregoes the benefit of an interest rate decline below the
minimum amount. An index swap is an agreement to swap cash flows on a notional
amount based on changes in the values of the reference indices. For example, the
Trust may agree to swap the return generated by a fixed-income index for the
return generated by a second fixed-income index. The purchase of a cap entitles
the purchaser to receive payments on a notional principal amount from the party
selling such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
A total rate of return swap is an agreement in which one party (total return
payer) transfers the total economic performance of a reference obligation to the
other party (total return receiver). Total economic performance includes income
from interest and fees, gains or losses from market movements, and credit
losses. The total return receiver assumes the entire economic exposure--that is,
both market and credit exposure--to the reference asset. The total return
payer--often the owner of the reference obligation--gives up economic exposure
to the performance of the reference asset and in return takes on counterparty
credit exposure to the total return receiver in the event of a default or fall
in value of the reference asset.
The Trust may enter into credit default swap contracts or credit-linked notes
for hedging purposes or to gain exposure to a credit in which the Trust may
otherwise invest. A credit default swap is an agreement between two parties to
exchange the credit risk of an issuer (reference entity). A buyer of a credit
default swap is said to buy protection by paying periodic fees in return for a
contingent payment from the seller if the reference entity has a credit event
such as a bankruptcy, a failure to pay outstanding obligations or deteriorating
credit while the swap is outstanding. A seller of a credit default swap is said
to sell protection and thus collects the periodic fees and profits if the credit
of the reference entity remains stable or improves while the swap is outstanding
but the seller in a credit default swap contract would be required to pay an
agreed
4
upon amount to the buyer in the event of an adverse credit event of the
reference entity. A credit-linked note is a synthetic security, typically issued
by a special purpose vehicle, that trades like a bond issued by the reference
entity but with the economics of the credit default swap. For this security, the
buyer of protection sells the note. The buyer of protection (note seller) will
pay periodic payments and profit if the reference entity defaults. Unlike the
swap, the buyer of protection in a credit-linked note will receive money at the
time of transaction from the sale of the note, and will return this money at the
contract's maturity if no credit event occurs. Conversely, the seller of
protection purchases the notes. As with a credit default swap, the note
purchaser (protection seller) receives periodic payments. Unlike the swap
transaction, the protection seller must pay for the note at the time of the
transaction and will collect this money at the contract's maturity if no credit
event occurs.
The Trust will enter into swap, cap or floor transactions only with
counterparties approved by the Adviser in accordance with guidelines established
by the Trust's Board of Trustees. The Adviser will monitor the creditworthiness
of counterparties to the Trust's swap, cap, floor and collar transactions on an
ongoing basis. If there is a default by the other party to such a transaction,
the Trust will have contractual remedies pursuant to the agreements related to
the transaction. The Trust may enter into swaps on either an asset-based or
liability-based basis, and will usually enter into swaps on a net basis, i.e.,
the two payment streams are netted out, with the Trust receiving or paying, as
the case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Trust's obligations over its entitlements with respect to
each swap will be accrued on a daily basis and the Trust segregates an amount of
cash and/or liquid securities having an aggregate net asset value at least equal
to the accrued excess. If the Trust enters into a swap transaction on other than
a net basis, the Trust would segregate the full amount accrued on a daily basis
of the Trust's obligations with respect to the swap. To the extent the Trust
sells (i.e. writes) caps, floors and collars, it will segregate cash and/or
liquid securities having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Trust's net obligations with respect to
the caps, floors or collars.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of the
market values, interest rates and other applicable factors, the investment
performance of the Trust would diminish compared with what it would have been if
these investment techniques were not used. The use of swaps may also have the
effect of shifting the recognition of income between current and future periods.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities. The
Trust may invest in collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC
5
certificates, but also may be collateralized by whole loans or private pass-
through securities (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in a
trust composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs deemed to be U.S.
government securities are those issued or guaranteed as to principal and
interest by a person controlled or supervised by and acting as an agency or
instrumentality of the U.S. government. The issuer of a series of CMOs may elect
to be treated as a Real Estate Mortgage Investment Conduit (a "REMIC").
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable ways.
The Trust may invest in, among others, parallel pay CMOs and Planned
Authorization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes. Substantially
all of the CMOs in which the Trust invests are PAC Bonds.
6
RATINGS ALLOCATIONS AS OF 6/30/06
A/A 1.3%
BBB/Baa 6.6
BB/Ba 47.2
B/B 42.0
CCC/Caa 2.9
CC/Ca 0.0
Non-Rated 0.0
-----
100.0%
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION AS OF 6/30/06
Healthcare 11.4%
Gaming & Leisure 8.0
Energy 7.9
Food & Tobacco 7.7
Chemicals 5.8
Transportation 5.7
Utility 5.6
Cable 5.4
Telecommunications 4.6
Forest Products 3.9
Diversified Media 3.7
Retail 3.7
Metals 3.6
Consumer Products 3.5
Food & Drug 3.2
Services 3.2
Wireless Communications 2.0
Manufacturing 1.8
Aerospace 1.5
Housing 1.3
Broadcasting 1.1
Financial 1.0
Information Technology 1.0
Apparel, Accessories & Luxury Goods 0.5
Integrated Telecommunication Services 0.0
IT Consulting & Other Services 0.0
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Total Long-Term Investments 97.1%
Short-Term Investments 2.9
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Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Ratings allocation percentages are as a
percentage of long-term investments. Summary of investments by industry
classification percentages are as a percentage of total investments. Securities
are classified by sectors that represent broad groupings of related industries.
Ratings allocations based upon ratings as issued by Standard and Poor's and
Moody's, respectively. Van Kampen is a wholly owned subsidiary of a global
securities firm which is engaged in a wide range of financial services
including, for example, securities trading and brokerage activities, investment
banking, research and analysis, financing and financial advisory services.
7
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters. The semiannual reports and the
annual reports are filed electronically with the Securities and Exchange
Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Van Kampen
also delivers the semiannual and annual reports to trust shareholders,
and makes these reports available on its public Web site,
www.vankampen.com. In addition to the semiannual and annual reports that
Van Kampen delivers to shareholders and makes available through the Van
Kampen public Web site, each trust files a complete schedule of portfolio
holdings with the SEC for the trust's first and third fiscal quarters on
Form N-Q. Van Kampen does not deliver the reports for the first and third
fiscal quarters to shareholders, nor are the reports posted to the Van
Kampen public Web site. You may, however, obtain the Form N-Q filings (as
well as the Form N-CSR and N-CSRS filings) by accessing the SEC's Web
site, http://www.sec.gov. You may also review and copy them at the SEC's
Public Reference Room in Washington, DC. Information on the operation of
the SEC's Public Reference Room may be obtained by calling the SEC at
(800) SEC-0330. You can also request copies of these materials, upon
payment of a duplicating fee, by electronic request at the SEC's e-mail
address (publicinfo@sec.gov) or by writing the Public Reference section
of the SEC, Washington, DC 20549-0102.
You may obtain copies of a trust's fiscal quarter filings by contacting
Van Kampen Client Relations at (800) 847-2424.
8
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
You may obtain a copy of the trust's Proxy Voting Policy and Procedures
without charge, upon request, by calling toll free (800) 847-2424 or by
visiting our Web site at www.vankampen.com. It is also available on the
Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the trust voted proxies relating
to portfolio securities during the most recent twelve-month period ended
June 30 without charge by visiting our Web site at www.vankampen.com.
This information is also available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
9
Investment Advisory Agreement Approval
Both the Investment Company Act of 1940 and the terms of the Fund's investment
advisory agreement require that the investment advisory agreement between the
Fund and its investment adviser be approved annually both by a majority of the
Board of Trustees and by a majority of the independent trustees voting
separately.
On May 22, 2006, the Board of Trustees, and the independent trustees voting
separately, determined that the terms of the investment advisory agreement are
fair and reasonable and approved the continuance of the investment advisory
contract as being in the best interests of the Fund and its shareholders. In
making its determination, the Board of Trustees considered materials that were
specifically prepared by the investment adviser at the request of the Board and
Fund counsel, and by an independent provider of investment company data
contracted to assist the Board, relating to the contract review process. The
Board also considered information received periodically about the portfolio,
performance, the investment strategy, portfolio management team and fees and
expenses of the Fund. The Board of Trustees considered the contract over a
period of several months and the non-management trustees held sessions both with
the investment adviser and separate from the investment adviser in reviewing and
considering the contract.
In approving the investment advisory agreement, the Board of Trustees
considered, among other things, the nature, extent and quality of the services
provided by the investment adviser, the performance, fees and expenses of the
Fund compared to other similar funds and other products, the investment
adviser's expenses in providing the services and the profitability of the
investment adviser and its affiliated companies. The Board of Trustees
considered the extent to which any economies of scale experienced by the
investment adviser are shared with the Fund's shareholders, and the propriety of
breakpoints in the Fund's investment advisory fee schedule. The Board of
Trustees considered comparative advisory fees of the Fund and other investment
companies and/or other products at different asset levels, and considered the
trends in the industry. The Board of Trustees evaluated other benefits the
investment adviser and its affiliates derive from their relationship with the
Fund. The Board of Trustees reviewed information about the foregoing factors and
considered changes, if any, in such information since its previous approval. The
Board of Trustees discussed the financial strength of the investment adviser and
its affiliated companies and the capability of the personnel of the investment
adviser, and specifically the strength and background of its portfolio
management personnel. The Board of Trustees reviewed the statutory and
regulatory requirements for approval and disclosure of investment advisory
agreements. The Board of Trustees, including the independent trustees, evaluated
all of the foregoing and does not believe any single factor or group of factors
control or dominate the review process, and, after considering all factors
together, has determined, in the exercise of its business judgment, that
approval
10
of the investment advisory agreement is in the best interests of the Fund and
its shareholders. The following summary provides more detail on certain matters
considered but does not detail all matters considered.
Nature, Extent and Quality of the Services Provided. On a regular basis, the
Board of Trustees considers the roles and responsibilities of the investment
adviser as a whole and for those specific portfolio management, support and
trading functions servicing the Fund. The trustees discuss with the investment
adviser the resources available and used in managing the Fund and changes made
in the Fund's portfolio management team over time. The trustees also discuss
certain other services which are provided on a cost-reimbursement basis by the
investment adviser or its affiliates to the Van Kampen funds including certain
accounting, administrative and legal services. The Board has determined that the
nature, extent and quality of the services provided by the investment adviser
support its decision to approve the investment advisory contract.
Performance, Fees and Expenses of the Fund. On a regular basis, the Board of
Trustees reviews the performance, fees and expenses of the Fund compared to its
peers and to appropriate benchmarks. In addition, the Board spends more focused
time on the performance of the Fund and other funds in the Van Kampen complex,
paying specific attention to underperforming funds. The trustees discuss with
the investment adviser the performance goals and the actual results achieved in
managing the Fund. When considering a fund's performance, the trustees and the
investment adviser place emphasis on trends and longer-term returns (focusing on
one-year, three-year and five-year performance with special attention to
three-year performance) and, when a fund's weighted performance is under the
fund's benchmark, they discuss the causes and where necessary seek to make
specific changes to investment strategy or investment personnel. The Fund
discloses more information about its performance elsewhere in this report. The
trustees discuss with the investment adviser the level of advisory fees for this
Fund relative to comparable funds and other products advised by the adviser and
others in the marketplace. The trustees review not only the advisory fees but
other fees and expenses (whether paid to the adviser, its affiliates or others)
and the Fund's overall expense ratio. The Board has determined that the
performance, fees and expenses of the Fund support its decision to approve the
investment advisory contract.
Investment Adviser's Expenses in Providing the Service and Profitability. At
least annually, the trustees review the investment adviser's expenses in
providing services to the Fund and other funds advised by the investment adviser
and the profitability of the investment adviser. These profitability reports are
put together by the investment adviser with the oversight of the Board. The
trustees discuss with the investment adviser its revenues and expenses,
including among other things, revenues for advisory services, portfolio
management-related expenses, revenue sharing arrangement costs and allocated
expenses both on an aggregate basis and per fund. The Board has determined that
the analysis of the
11
investment adviser's expenses and profitability support its decision to approve
the investment advisory contract.
Economies of Scale. On a regular basis, the Board of Trustees considers the size
of the Fund and how that relates to the Fund's expense ratio and particularly
the Fund's advisory fee rate. In conjunction with its review of the investment
adviser's profitability, the trustees discuss with the investment adviser how
more (or less) assets can affect the efficiency or effectiveness of managing the
Fund's portfolio and whether the advisory fee level is appropriate relative to
current asset levels and/or whether the advisory fee structure reflects
economies of scale as asset levels change. The Board has determined that its
review of the actual and potential economies of scale of the Fund support its
decision to approve the investment advisory contract.
Other Benefits of the Relationship. On a regular basis, the Board of Trustees
considers other benefits to the investment adviser and its affiliates derived
from its relationship with the Fund and other funds advised by the investment
adviser. These benefits include, among other things, fees for transfer agency
services provided to the funds, in certain cases research received by the
adviser generated from commission dollars spent on funds' portfolio trading, and
in certain cases distribution or service related fees related to funds' sales.
The trustees review with the investment adviser each of these arrangements and
the reasonableness of its costs relative to the services performed. The Board
has determined that the other benefits received by the investment adviser or its
affiliates support its decision to approve the investment advisory contract.
12
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
CORPORATE BONDS 176.4%
AEROSPACE 2.7%
$1,005 Hexcel Corp. ................................... 6.750% 02/01/15 $ 944,700
1,175 K & F Acquisition, Inc. ........................ 7.750 11/15/14 1,163,250
------------
2,107,950
------------
BROADCASTING 2.1%
835 Lin Television Corp. ........................... 6.500 05/15/13 766,112
335 Lin Television Corp., Ser B..................... 6.500 05/15/13 307,362
515 Salem Communications Corp. ..................... 7.750 12/15/10 513,712
------------
1,587,186
------------
CABLE 9.9%
1,175 Cablevision Systems Corp. (Floating Rate)....... 9.620 04/01/09 1,251,375
410 CCH I LLC....................................... 11.000 10/01/15 360,800
495 Echostar DBS Corp. ............................. 5.750 10/01/08 485,100
1,740 Echostar DBS Corp. ............................. 6.375 10/01/11 1,670,400
785 Echostar DBS Corp. ............................. 6.625 10/01/14 739,862
80 Intelsat Bermuda Ltd. (Bermuda)................. 8.250 01/15/13 79,800
2,195 Intelsat Bermuda Ltd. (Floating Rate)
(Bermuda)....................................... 9.614 01/15/12 2,227,925
145 NTL Cable Plc (United Kingdom).................. 8.750 04/15/14 144,637
693 PanAmSat Corp. ................................. 9.000 08/15/14 706,860
------------
7,666,759
------------
CHEMICALS 10.6%
1,070 Equistar Chemicals LP........................... 10.125 09/01/08 1,131,525
600 Equistar Chemicals LP........................... 10.625 05/01/11 647,250
740 Innophos, Inc. ................................. 8.875 08/15/14 732,600
380 Koppers, Inc. .................................. 9.875 10/15/13 409,450
1,350 Lyondell Chemical Co. .......................... 10.500 06/01/13 1,491,750
905 Millennium America, Inc. ....................... 9.250 06/15/08 932,150
1,450 Nalco Co. ...................................... 7.750 11/15/11 1,453,625
762 Rockwood Specialties Group, Inc. ............... 10.625 05/15/11 818,197
610 Westlake Chemicals Corp. ....................... 6.625 01/15/16 566,537
------------
8,183,084
------------
CONSUMER PRODUCTS 6.4%
1,200 Case New Holland, Inc., 144A--Private Placement
(a)............................................. 7.125 03/01/14 1,152,000
365 Oxford Industrials, Inc. ....................... 8.875 06/01/11 366,825
2,150 Phillips Van-Heusen Corp. ...................... 7.250 02/15/11 2,139,250
740 Steinway Musical Instruments, Inc.,
144A--Private Placement (a)..................... 7.000 03/01/14 719,650
544 Tempur Pedic, Inc. ............................. 10.250 08/15/10 576,640
------------
4,954,365
------------
DIVERSIFIED MEDIA 6.8%
740 AMC Entertainment, Inc. (Floating Rate)......... 9.420 08/15/10 765,900
1,425 CanWest Media, Inc. (Canada).................... 8.000 09/15/12 1,417,875
685 Dex Media West Finance Corp. ................... 9.875 08/15/13 745,790
685 Houghton Mifflin Co. ........................... 8.250 02/01/11 696,987
See Notes to Financial Statements 13
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA (CONTINUED)
$ 760 Houghton Mifflin Co. ........................... 9.875% 02/01/13 $ 792,300
940 Quebecor World Cap Corp., 144A--Private
Placement (Canada) (a).......................... 8.750 03/15/16 862,450
------------
5,281,302
------------
ENERGY 14.4%
1,440 CHC Helicopter Corp. (Canada)................... 7.375 05/01/14 1,389,600
1,825 Chesapeake Energy Corp. ........................ 6.625 01/15/16 1,706,375
350 Chesapeake Energy Corp. ........................ 7.500 09/15/13 352,625
330 Compagnie Generale de Geophysique, SA
(France)........................................ 7.500 05/15/15 324,225
1,500 Frontier Oil Corp. ............................. 6.625 10/01/11 1,443,750
160 Hanover Compressor Co. ......................... 8.625 12/15/10 166,400
670 Hanover Compressor Co. ......................... 9.000 06/01/14 703,500
288 Hanover Equipment Trust......................... 8.500 09/01/08 296,640
280 Hanover Equipment Trust......................... 8.750 09/01/11 289,800
1,250 Hilcorp Energy Finance Corp., 144A--Private
Placement (a)................................... 7.750 11/01/15 1,200,000
467 Hilcorp Energy Finance Corp., 144A--Private
Placement (a)................................... 10.500 09/01/10 505,527
1,100 Kinder Morgan, Inc. ............................ 6.500 09/01/12 1,046,509
328 Magnum Hunter Resources, Inc. .................. 9.600 03/15/12 347,680
650 Pacific Energy Partners......................... 7.125 06/15/14 659,750
750 Pogo Producing Co. ............................. 6.875 10/01/17 698,437
------------
11,130,818
------------
FINANCIAL 1.9%
1,455 Residential Capital Corp. ...................... 6.375 06/30/10 1,436,441
------------
FOOD & DRUG 5.8%
1,070 Albertson's, Inc. .............................. 7.250 05/01/13 1,023,456
405 Albertson's, Inc. .............................. 7.500 02/15/11 402,193
1,200 Delhaize America, Inc. ......................... 8.125 04/15/11 1,268,021
710 Jean Coutu Group (PJC), Inc. (Canada)........... 7.625 08/01/12 692,250
2,750 Jitney-Jungle Stores America, Inc. (b) (c)
(d)............................................. 12.000 03/01/49 0
1,105 Rite Aid Corp. ................................. 8.125 05/01/10 1,116,050
------------
4,501,970
------------
FOOD & TOBACCO 14.0%
1,300 Constellation Brands, Inc. ..................... 8.000 02/15/08 1,329,250
595 Michael Foods, Inc. ............................ 8.000 11/15/13 587,563
930 Pilgrim's Pride Corp. .......................... 9.250 11/15/13 932,325
1,635 Pilgrim's Pride Corp. .......................... 9.625 09/15/11 1,708,575
1,930 RJ Reynolds Tobacco Holdings, Inc., 144A--
Private Placement (a)........................... 6.500 07/15/10 1,876,925
685 Smithfield Foods, Inc. ......................... 7.000 08/01/11 666,163
380 Smithfield Foods, Inc. ......................... 7.625 02/15/08 383,800
14 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
FOOD & TOBACCO (CONTINUED)
$1,810 Smithfield Foods, Inc. ......................... 8.000% 10/15/09 $ 1,837,150
1,500 Tyson Foods, Inc. .............................. 6.600 04/01/16 1,468,787
------------
10,790,538
------------
FOREST PRODUCTS 7.1%
570 Abitibi-Consolidated, Inc. (Canada)............. 6.000 06/20/13 464,550
1,270 Crown Americas LLC, 144A--Private Placement
(a)............................................. 7.625 11/15/13 1,254,125
1,000 Graphic Packaging International, Inc. .......... 9.500 08/15/13 995,000
2,370 Owens-Brockway Glass Containers, Inc. .......... 8.875 02/15/09 2,452,950
320 P.H. Glatfelter Co., 144A--Private Placement
(a)............................................. 7.125 05/01/16 317,478
------------
5,484,103
------------
GAMING & LEISURE 14.6%
750 Caesars Entertainment, Inc. .................... 8.875 09/15/08 789,375
965 Host Marriott LP................................ 6.375 03/15/15 911,925
1,135 Host Marriott LP................................ 7.125 11/01/13 1,136,419
1,475 Isle of Capri Casinos, Inc. .................... 7.000 03/01/14 1,399,406
1,370 Las Vegas Sands Corp. .......................... 6.375 02/15/15 1,277,525
265 MGM Mirage, Inc. ............................... 5.875 02/27/14 238,831
2,420 MGM Mirage, Inc. ............................... 6.000 10/01/09 2,365,550
1,510 Mohegan Tribal Gaming Authority................. 7.125 08/15/14 1,468,475
395 Starwood Hotels & Resorts Worldwide, Inc. ...... 7.875 05/01/12 414,256
1,160 Station Casinos, Inc. .......................... 6.000 04/01/12 1,091,850
175 Station Casinos, Inc. .......................... 6.875 03/01/16 164,063
------------
11,257,675
------------
HEALTHCARE 20.8%
1,875 Amerisourcebergen Corp., 144A--Private Placement
(a)............................................. 5.625 09/15/12 1,800,000
1,510 Community Health Systems, Inc. ................. 6.500 12/15/12 1,440,163
1,525 Davita, Inc. ................................... 6.625 03/15/13 1,456,375
1,985 Extendicare Health Services, Inc. .............. 6.875 05/01/14 2,084,250
1,485 Fisher Scientific International, Inc. .......... 6.125 07/01/15 1,438,594
97 Fresenius Medical Care Capital Trust II......... 7.875 02/01/08 986,975
965 Fresenius Medical Care Capital Trust IV......... 7.875 06/15/11 979,475
700 HCA, Inc. ...................................... 6.300 10/01/12 661,865
895 HCA, Inc. ...................................... 6.375 01/15/15 833,736
882 HCA, Inc. ...................................... 8.750 09/01/10 934,272
735 Omnicare, Inc. ................................. 6.750 12/15/13 703,763
750 Res-Care, Inc. ................................. 7.750 10/15/13 748,125
575 Tenet Healthcare Corp. ......................... 9.875 07/01/14 577,875
1,405 Ventas Realty LP................................ 6.750 06/01/10 1,397,975
------------
16,043,443
------------
See Notes to Financial Statements 15
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
HOUSING 2.4%
$1,090 Interface, Inc. ................................ 9.500% 02/01/14 $ 1,130,875
385 Technical Olympic USA, Inc. .................... 9.000 07/01/10 376,338
340 Technical Olympic USA, Inc. .................... 10.375 07/01/12 328,100
------------
1,835,313
------------
INFORMATION TECHNOLOGY 1.7%
1,340 Iron Mountain, Inc. ............................ 8.625 04/01/13 1,346,700
------------
MANUFACTURING 3.3%
365 General Cable Corp. ............................ 9.500 11/15/10 388,725
925 JohnsonDiversey, Inc. .......................... 9.625 05/15/12 925,000
764 Manitowoc, Inc. ................................ 10.500 08/01/12 832,760
460 Propex Fabrics, Inc. ........................... 10.000 12/01/12 423,200
------------
2,569,685
------------
METALS 6.6%
245 Foundation, PA Coal Co. ........................ 7.250 08/01/14 240,100
1,310 Massey Energy Co. .............................. 6.875 12/15/13 1,224,850
1,950 Novelis, Inc.,144A--Private Placement (Canada)
(a)............................................. 7.250 02/15/15 1,881,750
1,035 GrafTech Finance, Inc. ......................... 10.250 02/15/12 1,097,100
585 United States Steel Corp. ...................... 9.750 05/15/10 625,950
------------
5,069,750
------------
RETAIL 6.8%
830 Brown Shoe Co., Inc. ........................... 8.750 05/01/12 856,975
1,400 JC Penney Corp., Inc. .......................... 8.000 03/01/10 1,492,742
865 Limited Brands, Inc. ........................... 6.125 12/01/12 850,667
1,050 Linens 'n Things, Inc., 144A--Private Placement
(Floating Rate) (a)............................. 10.702 01/15/14 1,000,125
1,025 Petro Stopping Center Financial................. 9.000 02/15/12 1,022,438
------------
5,222,947
------------
SERVICES 5.8%
1,530 Allied Waste North America, Inc. ............... 6.375 04/15/11 1,476,450
45 Allied Waste North America, Inc. ............... 7.875 04/15/13 45,225
950 Allied Waste North America, Inc. ............... 8.500 12/01/08 988,000
295 Buhrmann US, Inc. .............................. 7.875 03/01/15 292,788
790 Buhrmann US, Inc. .............................. 8.250 07/01/14 790,000
700 MSW Energy Holdings II LLC...................... 7.375 09/01/10 703,500
150 MSW Energy Holdings LLC......................... 8.500 09/01/10 155,250
------------
4,451,213
------------
TELECOMMUNICATIONS 8.4%
861 Axtel SA (Mexico)............................... 11.000 12/15/13 947,100
500 Exodus Communications, Inc. (b) (c) (d)......... 11.250 07/01/08 0
290 Nordic Tel Co.Holdings,144A--Private Placement
(Denmark) (a)................................... 8.875 05/01/16 299,425
1,000 Qwest Corp. .................................... 7.875 09/01/11 1,017,500
16 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
$3,000 Qwest Corp. (Floating Rate)..................... 8.579% 06/15/13 $ 3,187,500
940 Wind Acquisition Finance SA, 144A--Private
Placement (Luxembourg) (a)...................... 10.750 12/01/15 1,003,450
------------
6,454,975
------------
TRANSPORTATION 10.5%
340 Arvin Meritor, Inc. ............................ 8.750 03/01/12 333,200
1,720 Ford Motor Credit Co. .......................... 5.800 01/12/09 1,572,224
1,175 General Motors Acceptance Corp. ................ 4.375 12/10/07 1,127,449
1,165 General Motors Acceptance Corp. ................ 6.875 09/15/11 1,112,782
710 General Motors Corp. ........................... 7.125 07/15/13 587,525
2,250 Sonic Automotive, Inc. ......................... 8.625 08/15/13 2,238,750
1,055 TRW Automotive, Inc. ........................... 9.375 02/15/13 1,126,213
------------
8,098,143
------------
UTILITY 10.2%
850 AES Corp. ...................................... 7.750 03/01/14 858,500
41 AES Corp. ...................................... 8.875 02/15/11 43,255
127 AES Corp. ...................................... 9.375 09/15/10 136,525
615 CMS Energy Corp. ............................... 6.300 02/01/12 584,250
465 CMS Energy Corp. ............................... 7.500 01/15/09 473,138
700 CMS Energy Corp. ............................... 8.500 04/15/11 733,250
600 Colorado Interstate Gas Co. .................... 6.800 11/15/15 581,307
465 IPALCO Enterprises, Inc. ....................... 8.375 11/14/08 480,113
405 IPALCO Enterprises, Inc. ....................... 8.625 11/14/11 431,325
835 Monongahela Power Co. .......................... 5.000 10/01/06 833,083
510 Nevada Power Co. ............................... 8.250 06/01/11 547,700
552 Nevada Power Co. ............................... 9.000 08/15/13 600,215
1,185 PSEG Energy Holdings............................ 8.625 02/15/08 1,220,550
340 Southern Natural Gas Co. ....................... 8.875 03/15/10 360,826
------------
7,884,037
------------
WIRELESS COMMUNICATIONS 3.6%
1,775 Nextel Communications, Inc. .................... 6.875 10/31/13 1,787,368
1,000 Rural Cellular Corp. ........................... 8.250 03/15/12 1,031,250
------------
2,818,618
------------
TOTAL CORPORATE BONDS 176.4%
136,177,015
------------
EQUITIES 1.0%
DecisionOne Corp. (5,483 common shares) (d) (e).............................. 0
Doe Run Resources Corp. (1 common stock warrant) (d) (e)..................... 5,465
HCI Direct, Inc. (60,714 common shares) (d) (e).............................. 728,568
Hosiery Corp. of America, Inc., Class A (1,000 common shares) (d) (e)........ 0
VS Holdings, Inc. (20,207 common shares) (d) (e)............................. 0
XO Holdings, Inc. (681 common shares) (e).................................... 2,996
XO Holdings, Inc., Ser A (1,364 common stock warrants) (e)................... 1,173
See Notes to Financial Statements 17
VAN KAMPEN HIGH INCOME TRUST II
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) continued
DESCRIPTION VALUE
------------------------------------------------------------------------------------------------
EQUITIES (CONTINUED)
XO Holdings, Inc., Ser B (1,022 common stock warrants) (e)....................... $ 501
XO Holdings, Inc., Ser C (1,022 common stock warrants) (e)....................... 373
------------
TOTAL EQUITIES 1.0%............................................................. 739,076
------------
TOTAL LONG-TERM INVESTMENTS 177.4%
(Cost $144,322,139).............................................................. 136,916,091
REPURCHASE AGREEMENT 5.2%
State Street Bank & Trust Co. ($4,053,000 par collateralized by U.S. Government
obligations in a pooled cash account, interest rate of 5.10%, dated 06/30/06, to
be sold on 07/03/06 at $4,054,723)
(Cost $4,053,000)................................................................ 4,053,000
------------
TOTAL INVESTMENTS 182.6%
(Cost $148,375,139).............................................................. 140,969,091
OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%...................................... 1,716,022
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (84.8%)...................... (65,472,012)
------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................... $ 77,213,101
============
Percentages are calculated as a percentage of net assets applicable to common
shares.
(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) Non-income producing security.
18 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME TRUST II
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2006 (Unaudited)
ASSETS:
Total Investments (Cost $148,375,139)....................... $140,969,091
Cash........................................................ 988
Interest Receivable......................................... 2,822,764
------------
Total Assets............................................ 143,792,843
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 366,771
Investment Advisory Fee................................... 82,441
Income Distributions--Common Shares....................... 49,268
Other Affiliates.......................................... 11,722
Trustees' Deferred Compensation and Retirement Plans........ 524,854
Accrued Expenses............................................ 72,674
------------
Total Liabilities....................................... 1,107,730
Preferred Shares (including accrued distributions).......... 65,472,012
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $ 77,213,101
============
NET ASSET VALUE PER COMMON SHARE ($77,213,101 divided by
18,893,621 shares outstanding)............................ $ 4.09
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 18,893,621 shares issued and
outstanding).............................................. $ 188,936
Paid in Surplus............................................. 147,793,704
Accumulated Undistributed Net Investment Income............. (1,370,574)
Net Unrealized Depreciation................................. (7,406,048)
Accumulated Net Realized Loss............................... (61,992,917)
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $ 77,213,101
============
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 2,616 issued with liquidation preference of
$25,000 per share)........................................ $ 65,400,000
============
NET ASSETS INCLUDING PREFERRED SHARES....................... $142,613,101
============
See Notes to Financial Statements 19
VAN KAMPEN HIGH INCOME TRUST II
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended June 30, 2006 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 5,341,296
Other....................................................... 26,662
-----------
Total Income............................................ 5,367,958
-----------
EXPENSES:
Investment Advisory Fee..................................... 504,590
Preferred Share Maintenance................................. 85,526
Trustees' Fees and Related Expenses......................... 43,036
Legal....................................................... 19,485
Custody..................................................... 9,904
Other....................................................... 152,405
-----------
Total Expenses.......................................... 814,946
-----------
NET INVESTMENT INCOME....................................... $ 4,553,012
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(1,481,521)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (5,814,953)
End of the Period......................................... (7,406,048)
-----------
Net Unrealized Depreciation During the Period............... (1,591,095)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(3,072,616)
===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(1,451,667)
===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 28,729
===========
20 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME TRUST II
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, 2005
-------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................. $ 4,553,012 $ 6,676,951
Net Realized Loss..................................... (1,481,521) (465,425)
Net Unrealized Depreciation During the Period......... (1,591,095) (5,972,386)
Distributions to Preferred Shareholders:
Net Investment Income............................... (1,451,667) (1,484,853)
----------- -----------
Change in Net Assets Applicable to Common Shares from
Operations.......................................... 28,729 (1,245,713)
Distributions to Common Shareholders:
Net Investment Income............................... (3,646,421) (5,595,543)
----------- -----------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES.......................... (3,617,692) (6,841,256)
FROM CAPITAL TRANSACTIONS:
Proceeds from Common Shares Acquired Through Merger... -0- 49,072,045
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS APPLICABLE TO
COMMON SHARES....................................... (3,617,692) 42,230,789
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period............................... 80,830,793 38,600,004
----------- -----------
End of the Period (Including accumulated undistributed
net investment income of ($1,370,574) and
($825,498), respectively)........................... $77,213,101 $80,830,793
=========== ===========
See Notes to Financial Statements 21
VAN KAMPEN HIGH INCOME TRUST II
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------
2006 2005 2004 2003 2002 2001
------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $ 4.28 $ 4.76 $ 4.57 $ 3.79 $ 4.77 $ 5.40
------- ------- ------- ------- ------- -------
Net Investment Income................ .24(a) .52 .52 .52 .60 .90
Net Realized and Unrealized
Gain/Loss.......................... (.16) (.45) .16 .75 (.89) (.61)
Common Share Equivalent of
Distributions Paid to Preferred
Shareholders:
Net Investment Income.............. (.08) (.11) (.05) (.04) (.07) (.18)
Return of Capital Distributions.... -0- -0- -0- -0-* -0-* -0-*
------- ------- ------- ------- ------- -------
Total from Investment Operations...... (.00) (.04) .63 1.23 (.36) .11
Distributions Paid to Common
Shareholders:
Net Investment Income.............. (.19) (.44) (.44) (.44) (.58) (.73)
Return of Capital Distributions.... -0- -0- -0- (.01) (.04) (.01)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE PERIOD.... $ 4.09 $ 4.28 $ 4.76 $ 4.57 $ 3.79 $ 4.77
======= ======= ======= ======= ======= =======
Common Share Market Price at End of
the Period........................... $ 3.80 $ 4.14 $ 5.14 $ 5.08 $ 4.07 $ 5.75
Total Return (b)...................... -3.88%** -11.46% 10.83% 37.20% -19.86% 13.57%
Net Assets Applicable to Common Shares
at End of the Period (In millions)... $ 77.2 $ 80.8 $ 38.6 $ 37.1 $ 30.7 $ 38.7
Ratio of Expenses to Average Net
Assets Applicable to Common Shares
(c).................................. 2.06% 2.43% 2.12% 2.25% 2.28% 2.14%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (c).................... 11.48% 11.89% 11.51% 12.29% 14.50% 16.83%
Portfolio Turnover.................... 30%** 62% 86% 74% 81% 63%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net
Assets Including Preferred Shares
(c).................................. 1.13% 1.37% 1.21% 1.24% 1.18% 1.15%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d).................... 7.82% 9.24% 10.40% 11.34% 12.93% 13.40%
SENIOR SECURITIES:
Total Preferred Shares Outstanding.... 2,616 2,616 1,112 1,112 1,112 1,360
Asset Coverage Per Preferred Share
(e).................................. $54,543 $55,933 $59,715 $58,320 $52,652 $53,426
Involuntary Liquidating Preference Per
Preferred Share...................... $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
Average Market Value Per Preferred
Share................................ $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
* Amount is less than $.01.
** Non-Annualized
(a)Based on average shares outstanding.
(b)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.
(c)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(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.
22 See Notes to Financial Statements
VAN KAMPEN HIGH INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (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 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
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
after payment is made. At June 30, 2006, the Trust had no when-issued and
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.
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 Asset Management (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. Other income is comprised primarily of consent fees.
Consent fees are earned as compensation for agreeing to changes in the terms of
debt instruments.
23
VAN KAMPEN HIGH INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (UNAUDITED) continued
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of Subchapter M 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, 2005, the Trust had an accumulated capital loss
carryforward for tax purposes of $60,509,040 which will expire according to the
following table:
AMOUNT EXPIRATION
$ 1,986,400................................................. December 31, 2006
6,008,551................................................. December 31, 2007
9,851,557................................................. December 31, 2008
17,412,110................................................. December 31, 2009
17,027,138................................................. December 31, 2010
6,782,916................................................. December 31, 2011
875,105................................................. December 31, 2012
565,263................................................. December 31, 2013
A portion of the capital loss carryforward above was acquired due to a
merger with another regulated investment company, please see Footnote 3 for
details. Furthermore, the utilization of the capital loss carryforward amount
above may be limited due to the merger.
At June 30, 2006, the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $148,877,141
============
Gross tax unrealized appreciation........................... $ 1,602,935
Gross tax unrealized depreciation........................... (9,510,985)
------------
Net tax unrealized depreciation on investments.............. $ (7,908,050)
============
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,
2005 were as follows:
Distributions paid from:
Ordinary income........................................... $6,971,990
Long-term capital gain.................................... -0-
----------
$6,971,990
==========
24
VAN KAMPEN HIGH INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (UNAUDITED) continued
As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income............................... $227,255
Long-term capital gain...................................... -0-
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
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 0.70% of the average daily net assets of the Trust. Effective July 1,
2006, the Adviser has voluntary agreed to waive investment advisory fees equal
to 0.05% of the average daily net assets of the Trust. This waiver is voluntary
in nature and can be discontinued at the Advisor's discretion.
For the six months ended June 30, 2006, the Trust recognized expenses of
approximately $3,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Trust is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Trust.
Under separate Legal Services, Accounting Services and Chief Compliance
Officer (CCO) Employment agreements, the Adviser provides accounting and legal
services and the CCO provides compliance services to the Trust. The costs of
these services are allocated to each trust. For the six months ended June 30,
2006, the Trust recognized expenses of approximately $26,300 representing Van
Kampen Investments Inc.'s or its affiliates (collectively "Van Kampen") cost of
providing accounting and legal services to the Trust, as well as, the salary,
benefits and related costs of the CCO and related support staff paid by Van
Kampen. Services provided pursuant to the Legal Services agreement are reported
as part of "Legal" expenses on the Statement of Operations. Services provided
pursuant to the Accounting Services and CCO Employment agreement are reported as
part of "Other" expenses on the Statement of Operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
also 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.
25
VAN KAMPEN HIGH INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (UNAUDITED) continued
3. CAPITAL TRANSACTIONS
For the six months ended June 30, 2006 and the year ended December 31, 2005,
transactions in common shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, 2005
Beginning Shares...................................... 18,893,621 8,109,000
Shares Acquired Through Merger........................ -0- 10,784,621
---------- ----------
Ending Shares......................................... 18,893,621 18,893,621
========== ==========
On July 29, 2005 the Trust acquired all of the assets and liabilities of Van
Kampen High Income Trust (ticker symbol VIT) through a tax free reorganization
approved by VIT shareholders on July 22, 2005. The Trust issued 10,784,621
common shares with a net asset value of $49,072,045 and 1,504 Auction Preferred
Shares (APS) with a liquidation value of $37,600,000 in exchange for VIT's net
assets. The shares of VIT were converted into Trust shares at a ratio of
0.786581 to 1 and 1 to 4, for common shares and APS, respectively. Net
unrealized depreciation of VIT as of July 29, 2005 was $1,265,478. The Trust
assumed VIT book to tax accretion differences, which resulted in a $263,880
increase to accumulated undistributed net investment income and a corresponding
decrease to net unrealized appreciation. Combined net assets applicable to
common shares on the day of reorganization were $85,969,581 and combined net
assets including preferred shares were $151,369,581. Included in these net
assets was a capital loss carryforward of $33,329,662, of which all can be
utilized by the acquiring Trust, deferred compensation and retirement plan
balance of $229,390 and non-accrual interest income of $16,968, all carried
forward from VIT. The Trust incurred merger expenses of $213,360, which
represent costs related to the preparation, printing, and distribution of the
Proxy Statement/Prospectus, Reorganization Agreement and registration statements
as well as legal, audit, and filing fees.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $43,363,343 and $41,099,915,
respectively.
5. PREFERRED SHARES
As of June 30, 2006, the Trust has outstanding 2,616 Auction Preferred Shares
(APS). Series A contains 1,112 shares and Series B contains 1,504 shares.
Dividends are cumulative and the dividend rates are currently reset every 28
days through an auction process. The average rate in effect on June 30, 2006 was
5.016%. During the six months ended June 30, 2006, the rates ranged from 2.750%
to 5.360%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of "Preferred Share
Maintenance" expense on the Statement of Operations.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
26
VAN KAMPEN HIGH INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (UNAUDITED) continued
6. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
27
VAN KAMPEN HIGH INCOME TRUST II
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
Computershare Trust Company, N.A. 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 30
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 30 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.
28
VAN KAMPEN HIGH INCOME TRUST II
DIVIDEND REINVESTMENT PLAN continued
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 Computershare Trust
Company, N.A. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan, and a cash payment will be made for any fractional
Common Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Closed End Funds
c/o Computershare Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
To obtain a complete copy of the Dividend Reinvestment Plan, please call our
Client Relations department at 1-800-341-2929.
29
VAN KAMPEN HIGH INCOME TRUST II
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
JACK E. NELSON
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RONALD E. ROBISON
President and Principal Executive Officer
DENNIS SHEA
Vice President
J. DAVID GERMANY
Vice President
AMY R. DOBERMAN
Vice President
STEFANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
PHILLIP G. GOFF
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
One Lincoln Street
Boston, Massachusetts 02111
TRANSFER AGENT
COMPUTERSHARE TRUST COMPANY, N.A.
c/o Computershare Investor Services
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER, & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
111 South Wacker Drive
Chicago, Illinois 60606-4301
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
30
VAN KAMPEN HIGH INCOME TRUST II
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of the Shareholders of the Trust was held on June 23, 2006,
where shareholders voted on the election of trustees.
With regard to the election of the following trustees by common shareholders of
the Trust:
# OF SHARES
----------------------
IN FAVOR WITHHELD
------------------------------------------------------------------------------------
Linda Hutton Heagy.......................................... 16,312,472 665,704
Wayne W. Whalen............................................. 16,322,899 655,278
With regard to the election of the following trustees by preferred shareholders
of the Trust:
# OF SHARES
--------------------
IN FAVOR WITHHELD
----------------------------------------------------------------------------------
Rod Dammeyer................................................ 2,346 26
The other trustees of the Trust whose terms did not expire in 2006 are David C.
Arch, Jerry D. Choate, R. Craig Kennedy, Howard J Kerr, Jack E. Nelson, Hugo F.
Sonnenschein, and Suzanne H. Woolsey.
31
Van Kampen High Income Trust II
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors
Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van
Kampen Exchange Corp., as well as current and former individual investors in
Van Kampen mutual funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised
by us. This Policy is, however, applicable to individuals who select us to
be a custodian of securities or assets in individual retirement accounts,
401(k) accounts, 529 Educational Savings Accounts, accounts subject to the
Uniform Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we
help you achieve your financial objectives. This Policy describes what
non-public personal information we collect about you, why we collect it, and
when we may share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies
you or your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect
and maintain accurate information about you. We may obtain this information
from applications and other forms you submit to us, from your dealings with
us, from consumer reporting agencies, from our Web sites and from third
parties and other sources.
(continued on next page)
Van Kampen High Income Trust II
An Important Notice Concerning Our U.S. Privacy Policy continued
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser, your use of our Web
sites and your product and service preferences, through the use of
"cookies." "Cookies" recognize your computer each time you return to
one of our sites, and help to improve our sites' content and
personalize your experience on our sites by, for example, suggesting
offerings that may interest you. Please consult the Terms of Use of
these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you
better and to manage our business, we may disclose personal information we
collect about you to our affiliated companies and to non-affiliated third
parties as required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise
required or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except
to enable them to provide services on our behalf, to perform joint marketing
agreements with
(continued on back)
Van Kampen High Income Trust II
An Important Notice Concerning Our U.S. Privacy Policy continued
other financial institutions, or as otherwise required or permitted by law.
For example, some instances where we may disclose information about you to
non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against
fraud, for institutional risk control, to respond to judicial process or to
perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal
information to the particular purpose for which it was shared and they are
not allowed to share personal information with others except to fulfill that
limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL
INFORMATION WE COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties
that provide support or marketing services on our behalf may also receive
personal information, and we require them to adhere to confidentiality
standards with respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2006 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
902, 911, 104
VLT SAR 8/06
(VAN KAMPEN INVESTMENTS SHINE LOGO) RN06-02155P-Y06/06
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. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual reports.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures
(a) 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-CSRS 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.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(1) Code of Ethics - Not applicable for semi-annual reports.
(2)(a) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(2)(b) A certification for the Principal Financial Officer of the registrant is
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
By: /s/ Ronald E. Robison
----------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 10, 2006
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
---------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 10, 2006
By: /s/ Phillip G. Goff
---------------------------------
Name: Phillip G. Goff
Title: Principal Financial Officer
Date: August 10, 2006