UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

Annual Report

Western Asset High Income Fund II Inc.
(HIX)

Fund objectives

The Fund seeks to maximize current income by investing at least 80% of its net assets, plus any borrowings for investment purposes, in high-yield debt securities. As a secondary objective, the Fund seeks capital appreciation to the extent consistent with its objective of seeking to maximize current income.

What’s inside

Dear Shareholder,

We are pleased to provide the annual report of Western Asset High Income Fund II Inc. for the twelve-month reporting period ended April 30, 2013. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

I am pleased to introduce myself as the new Chairman, President and Chief Executive Officer of the Fund, succeeding R. Jay Gerken, as he embarks upon his retirement. Jay has most recently served as Chairman, President and Chief Executive Officer of the Fund and other funds in the Legg Mason complex. On behalf of all our shareholders and the Fund’s Board of Directors, I would like to thank Jay for his vision and guidance, and wish him all the best.

I am honored to have been appointed to my new role with the Fund. During my 23 year career in the financial industry, I have seen it evolve and expand. Despite these changes, keeping an unwavering focus on our shareholders and their needs remains paramount. This was a consistent focus of Jay’s, and I look forward to following his lead in the years to come.

Recent regulations adopted by the Commodity Futures Trading Commission (the “CFTC”) require operators of registered investment companies, including closed-end funds, to register as “commodity pool operators” unless the fund limits its investments in commodity interests. Effective December 31, 2012, your Fund’s manager has claimed the exclusion from the definition of “commodity pool operator.” More information about the CFTC rules and their effect on the Fund is included later in this report on page 55.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.lmcef.com.

Here you can gain immediate access to market and investment information, including:

·  Fund prices and performance,

·  Market insights and commentaries from our portfolio managers, and

·  A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 3, 2013

Investment commentary

Economic review

The U.S. economy expanded over the twelve months ended April 30, 2013, but it did so in an uneven pace. U.S. gross domestic product (“GDP”)i growth, as reported by the U.S. Department of Commerce, was a tepid 1.3% in the second quarter of 2012. Economic growth accelerated to 3.1% in the third quarter, partially due to increased private inventory investment, higher federal government spending and moderating imports. However, economic activity sharply moderated in the fourth quarter, with GDP expanding an anemic 0.4%. This was driven by a reversal of the above factors, as private inventory investment and federal government spending weakened. Economic growth then improved, as the U.S. Department of Commerce’s second estimate for first quarter 2013 GDP growth, released after the reporting period ended, was 2.4%. Accelerating growth was due, in part, to strengthening consumer spending, which rose 3.4% during the first quarter, versus a 1.8% increase during the previous quarter.

While there was some improvement in the U.S. job market, unemployment remained elevated throughout the reporting period. When the period began, unemployment, as reported by the U.S. Department of Labor, was 8.1%. Unemployment then generally declined and was 7.8% in September 2012. The unemployment rate then fluctuated between 7.8% and 7.9% over the next four months. Unemployment then fell to 7.7% in February, 7.6% in March and 7.5% in April, the lowest level since December 2008. In addition, the number of longer-term unemployed has declined in recent months. In February 2013, more than 40% of the people without a job had been out of work for more than six months. This fell to 37.4% in April 2013.

Meanwhile, the housing market brightened, as sales generally improved and home prices continued to rebound. According to the National Association of Realtors (“NAR”), existing-home sales rose 0.6% on a seasonally adjusted basis in April 2013 versus the previous month and were 9.7% higher than in April 2012. In addition, the NAR reported that the median existing-home price for all housing types was $192,800 in April 2013, up 11.0% from April 2012. This marked the fourteenth consecutive month that home prices rose compared to the same period a year earlier. While the inventory of homes available for sale rose in April to a 5.2 month supply at the current sales pace, it was 13.60% lower than in April 2012.

The manufacturing sector expanded during much of the reporting period, although it experienced several soft patches. Based on the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”)ii, after expanding 34 consecutive months, the PMI fell to 49.7 in June 2012, which represented the first contraction in the manufacturing sector since July 2009 (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). Manufacturing continued to contract in July and August before ticking up to 51.5 in September and 51.7 in October. The PMI fell back to contraction territory with a reading of 49.5 in November, its lowest level since July 2009. However, manufacturing again expanded over the next five months, with the PMI at 50.7 in April 2013.

The Federal Reserve Board (“Fed”)iii took a number of actions as it sought to meet its dual mandate of fostering

maximum employment and price stability. As has been the case since December 2008, the Fed kept the federal funds rateiv at a historically low range between zero and 0.25%. At its June 2012 meeting, the Fed announced that it would continue its program of purchasing longer-term Treasury securities and selling an equal amount of shorter-term Treasury securities (often referred to as “Operation Twist”) until the end of 2012. In September, the Fed announced a third round of quantitative easing (“QE3”), which involves purchasing $40 billion each month of agency mortgage-backed securities (“MBS”) on an open-end basis. In addition, the Fed further extended the duration that it expects to keep the federal funds rate on hold, until at least mid-2015. At its meeting in December, the Fed announced that it would continue purchasing $40 billion per month of agency MBS, as well as initially purchasing $45 billion a month of longer-term Treasuries. The Fed also said that it would keep the federal funds rate on hold “...as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2% longer-run goal, and longer-term inflation expectations continue to be well anchored.” As expected, at its meeting that ended on May 1, 2013, after the reporting period ended, the Fed said it would continue its asset purchase program.

As always, thank you for your confidence in our stewardship of your assets.

Sincerely,

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 3, 2013

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results.

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Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund seeks to maximize current income. As a secondary objective, the Fund seeks capital appreciation to the extent consistent with its objective of seeking to maximize current income. Under normal market conditions, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in high-yield debt securities. The Fund may invest up to 35% of its total assets in debt securities of issuers located in emerging market countries. It may also invest up to 30% of its assets in zero coupon securities, pay-in-kind bonds and deferred payment securities, and up to 20% of its assets in equity securities. The Fund may utilize a variety of derivative instruments for investment or risk management purposes, such as options, futures contracts, swap agreements including credit default swaps. We employ an actively managed approach that is risk-controlled and assimilates top-down macroeconomic views with industry sector insights and bottom-up credit research to derive the general framework for the Fund’s predominantly non-investment grade credit mandate. This framework provides the foundation for how the portfolio is positioned with respect to risk (aggressive, neutral, conservative), as well as identifying sector overweights and underweights.

Risk and weightings are reviewed on a regular basis. Our bottom-up process provides the basis for populating the targeted industry weightings through individual credit selection. Analysts work closely with portfolio managers to determine which credits provide the best risk/reward relationship within their respective sectors. The research team focuses on key fundamental measures such as leverage, cash flow adequacy, liquidity, amortization schedule, underlying asset value and management integrity/track record.

At Western Asset Management Company (“Western Asset”), the Fund’s subadviser, we utilize a fixed-income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed-income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization. The individuals responsible for development of investment strategy, day-to-day portfolio management, oversight and coordination of the Fund are Stephen A. Walsh, Michael C. Buchanan and Christopher F. Kilpatrick. It is anticipated that Mr. Walsh will step down as a member of the Fund’s portfolio management team effective on or about March 31, 2014 and S. Kenneth Leech will join the Fund’s portfolio management team at that time. Mr. Leech has been employed by Western Asset as an investment professional for more than 20 years.

Q. What were the overall market conditions during the Fund’s reporting period?

A. The spread sectors (non-Treasuries) overcame several periods of heightened risk aversion and generally outperformed equal-durationi Treasuries over the twelve months ended April 30, 2013. Risk aversion was prevalent during the first month of the period given concerns that the economy may be experiencing a soft patch

Fund overview (cont’d)

and contagion fears from the European sovereign debt crisis. However, the spread sectors then generally rallied over much of the next seven months. Supporting the spread sectors were continued economic growth in the U.S. and overall robust investor demand as they looked to generate incremental yield in the low interest rate environment. Spread sector returns fluctuated over the last four months of the period as Treasury yields rose, global growth moderated and there were renewed concerns regarding the situation in Europe.

Both short- and long-term Treasury yields declined during the twelve months ended April 30, 2013. Two-year Treasury yields fell from 0.27% to 0.22% during the period. They were as high as 0.33% on June 29, 2012 and as low as 0.20% on April 29, 2013. Ten-year Treasury yields were 1.95% at the beginning of the period and peaked at 2.07% on March 11, 2013. On July 25, 2012, ten-year Treasuries closed at an all-time low of 1.43%. When the reporting period ended on April 30, 2013, ten-year Treasury yields were 1.70%.

The Barclays U.S. Aggregate Indexii, returned 3.68% for the twelve months ended April 30, 2013. Comparatively, riskier fixed-income securities, including high-yield bonds and emerging market debt, produced strong results. Over the fiscal year, the Barclays U.S. Corporate High Yield – 2% Issuer Cap Indexiii (the “Index”) returned 13.95%. Elsewhere, the JPMorgan Emerging Markets Bond Index Global (“EMBI Global”)iv returned 11.60% for the twelve months ended April 30, 2013.

Q. How did we respond to these changing market conditions?

A. A number of adjustments were made to the Fund’s portfolio during the reporting period. We increased the Fund’s allocations to the Basic Industry1 and Energy sectors. In contrast, we reduced our exposure to the Consumer Cyclicals2 sector, as well as pared our allocation to emerging market sovereigns and quasi-sovereigns.

The Fund employed U.S. Treasury futures to manage its yield curvev positioning and duration. Currency forwards were used to hedge the Fund’s currency risk and manage our non-U.S. dollar currency exposures. These hedges contributed to performance and were intended to offset the decline or appreciation in the value of our euro bonds when translated back to U.S. dollars. Options on high-yield index swaps and high-yield index swaps were used to opportunistically manage the Fund’s exposure to the high-yield market. These “market hedges” were intended to protect the portfolio during periods of risk aversion, while maintaining the Fund’s exposure to higher betavi (and higher income) idiosyncratic investments. All told, these instruments detracted from performance during the period, but the strong performance of our cash bonds more than overshadowed the losses.

During the reporting period, we tactically utilized leverage in the Fund. We ended the period with leverage as a percentage of gross assets, of approximately 21.4%. The use of leverage was additive for results given the positive performance of high-yield bonds and emerging market debt.

Performance review

For the twelve months ended April 30, 2013, Western Asset High Income Fund II Inc. returned 20.03% based on its net asset value (“NAV”)vii and 11.68% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmarks, the Barclays U.S. Corporate High Yield – 2% Issuer Cap Index and the EMBI Global, returned 13.95% and 11.60%, respectively, for the same period. The Lipper High Yield (Leveraged) Closed-End Funds Category Averageviii returned 17.87% over the same time frame. Please note that Lipper performance returns are based on each fund’s NAV.

During the twelve-month period, the Fund made distributions to shareholders totaling $0.97 per share. The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of April 30, 2013. Past performance is no guarantee of future results.

Performance Snapshot as of April 30, 2013

All figures represent past performance and are not a guarantee of future results.

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was our selection of securities, in particular, our overweight exposures to Realogy Holdings Corp., Sprint Nextel Corp., Citigroup Inc. and VimpelCom. Realogy Corp. has a diversified business model that includes real estate franchising, brokerage, relocation and title services. Its business units include Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Sotheby’s International Realty and Title Resource Group. Investor sentiment for Realogy Holdings Corp. improved as there were signs of a sustainable recovery in the housing market. In addition, in October 2012 the company went public and raised more than $1 billion in additional capital, which will help support its debt obligations. Bonds issued by Sprint Nextel Corp. (and Sprint Capital Corp.) rallied given their attractive valuation, as well as an improved outlook for the wireless competitive landscape and the pricing environment. In addition, Japan’s investment grade rated Softbank made a bid to acquire B-rated Sprint Nextel during the reporting period, sending Sprint Nextel’s bonds higher. Our Citigroup Inc. exposure benefited performance as investor sentiment improved due to continued balance sheet and capital ratio improvement, as well as strengthening fundamentals. VimpelCom is the second largest mobile operator in Russia with an operating presence in numerous other markets. The company saw strong demand for its services

Fund overview (cont’d)

and posted consistent fundamental results. Despite the company being acquisitive of late, VimpelCom has indicated they would like to reduce leverage over the next couple years causing the bonds that we held to migrate higher during the period.

Our bias to U.S. high-yield issuers and emerging market corporates versus emerging market sovereign and quasi-sovereign debt was beneficial for the period given the outperformance of the former. The Fund’s emphasis on U.S. high-yield bonds was based on our belief that U.S. high-yield and emerging market corporate valuations were more attractive on a risk/reward basis. We also felt that the constituent holdings of the EMBI Global were much more sensitive to changes in interest rates compared to the less sensitive high-yield market.

The portfolio’s overweight to lower-rated CCC-rated securities and underweight to higher-rated BB-rated securities were rewarded. During this period as a whole, as measured by the Barclays U.S. Corporate High Yield – 2% Issuer Cap Index, lower-quality CCC-rated bonds outperformed higher-quality BB-rated securities, as they returned 16.80% and 12.65%, respectively.

From a sector allocation perspective, the Fund benefited from its overweights to the strong performing Financials and Communications1 sectors.

Q. What were the leading detractors from performance?

A. Although the Fund outperformed both its benchmarks during the reporting period, its relative performance was negatively impacted by our exposure to several sectors. In particular, an overweight to Transportation2, the worst performing sector in the Index, returning 10.76%, was a negative for results. Our overweight to the Energy sector was also detrimental to performance as it lagged the Barclays U.S. Corporate High Yield – 2% Issuer Cap Index.

A number of individual holdings, including overweight positions in Petroplus Finance, Cengage Learning and Axtel, were negative for performance. Petroplus Finance was unable to avoid bankruptcy as it reduced its output and closed several refineries. Cengage Learning, a text book publisher, posted weak fundamental results during the period that sent our position in senior secured bonds lower. After the Fund’s reporting period the company posted first quarter 2013 fundamental results that the market interpreted as “improving” and we used the strength to exit the position. Axtel is Mexico’s second largest fixed line, integrated telecommunication company, with services in local and long distance telephone, Internet, data and consulting services. Axtel was negatively impacted by the sharp decline in the Mexican peso, which weakened its credit metrics due to its U.S. dollar-denominated debt. It was also impacted by the competitive telecommunication landscape and a volatile market environment which led to a general sell-off in many lower rated bonds. In addition, Axtel’s bonds were downgraded by Moody’s to Caa2 from B3, by S&P to B- from B, and by Fitch to B+ from BB-. In January 2013, a creditor group said it would reject the company’s restructuring offer.

Looking for additional information?

The Fund is traded under the symbol “HIX” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available on-line under the symbol “XHGIX” on most financial websites. Barron’s and the Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.lmcef.com.

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

Thank you for your investment in Western Asset High Income Fund II Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Western Asset Management Company

May 17, 2013

RISKS: The Fund’s investments are subject to credit risk, inflation risk and interest rate risk. As interest rates rise, bond prices fall generally, reducing the value of the Fund’s holdings. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. High-yield bonds involve greater credit and liquidity risks than investment grade bonds. Foreign securities are subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditions which could result in significant fluctuations. These risks are magnified in emerging markets. Leverage may result in greater volatility of NAV and the market price of common shares and increases a shareholder’s risk of loss.

Portfolio holdings and breakdowns are as of April 30, 2013 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 10 through 29 for a list and percentage breakdown of the Fund’s holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of April 30, 2013 were: Industrials (22.2%), Consumer Discretionary (21.9%), Energy (17.4%), Materials (15.9%) and Financials (13.7%). The Fund’s portfolio composition is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

Fund overview (cont’d)

Fund at a glance† (unaudited)

Investment breakdown (%) as a percent of total investments

Spread duration (unaudited)

Economic Exposure — April 30, 2013

Total Spread Duration

Spread duration measures the sensitivity to changes in spreads. The spread over Treasuries is the annual risk-premium demanded by investors to hold non-Treasury securities. Spread duration is quantified as the % change in price resulting from a 100 basis points change in spreads. For a security with positive spread duration, an increase in spreads would result in a price decline and a decline in spreads would result in a price increase. This chart highlights the market sector exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.

Effective duration (unaudited)

Interest Rate Exposure — April 30, 2013

Total Effective Duration

Effective duration measures the sensitivity to changes in relevant interest rates. Effective duration is quantified as the % change in price resulting from a 100 basis points change in interest rates. For a security with positive effective duration, an increase in interest rates would result in a price decline and a decline in interest rates would result in a price increase. This chart highlights the interest rate exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.

Schedule of investments

April 30, 2013

Western Asset High Income Fund II Inc.

See Notes to Financial Statements.

Western Asset High Income Fund II Inc.

See Notes to Financial Statements.

Schedule of investments (cont’d)

April 30, 2013

Western Asset High Income Fund II Inc.

See Notes to Financial Statements.

Western Asset High Income Fund II Inc.

See Notes to Financial Statements.

Schedule of investments (cont’d)

April 30, 2013

Western Asset High Income Fund II Inc.

See Notes to Financial Statements.

Western Asset High Income Fund II Inc.