UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5382
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CIM High Yield Securities
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(Exact name of registrant as specified in charter)
400 W. Market Street, Suite 3300
Louisville, KY 40202
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(Address of principal executive offices) (Zip code)
Cindy Hayes
INVESCO Institutional, (N.A.) Inc.
400 W. Market Street, Suite 3300
Louisville, KY 40202
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(Name and address of agent for service)
Registrant's telephone number, including area code: 502-561-3210
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Date of fiscal year end: December 31, 2003
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Date of reporting period: December 31, 2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
(LOGO)
INVESCO
[GRAPHIC OMITTED]
CIM HIGH YIELD SECURITIES - 2003 ANNUAL REPORT
We are pleased to provide this annual report for CIM High Yield Securities
(the "Fund") as of December 31, 2003. The following pages contain a listing of
the Fund's holdings as well as the financial statements for the year.
MARKET REVIEW
The high yield market ended 2003 on a strong note with spreads versus
treasuries at historical lows of +330 bps. For the quarter ended December 31,
2003, the Merrill Master II Index returned 5.94% bringing performance for the
year to 28.15%. New issuance approached record levels ($121 billion for the
year) but was easily absorbed as investors pursued higher yielding, riskier
assets. Retail mutual inflows, for example, totaled approximately $5 billion for
the fourth quarter, bringing the total for 2003 to more than $25 billion. In
addition to this strong technical backdrop, the high yield market was supported
by improving credit fundamentals. At yearend, Moody's speculative grade default
rate had fallen to 5.19% from 8.42% in December 2002. Moody's one year forecast
now calls for default rates of 3.4% by December 2004.
For the year, the Fund's return at net asset value was 39.39% versus an
average return of 42.13% for its peer group (Lipper High Current Yield Leverage
Funds). On a market value basis, the Fund experienced a return of 46.15%.
OUTLOOK
Given our improving outlook for the global economy, the high yield market's
technical strength and growing investor demand for yield, we remain constructive
on the near term prospects for high yield. However, spreads are at historical
lows and there is a growing likelihood of a shift in Fed policy in 2004.
Consequently, we remain diligent about taking profits in the portfolio and we
continue to be selective on the credit front. Although the market should benefit
from a more sustained economic rebound, there is little margin for error. Credit
and sector selection remain essential as we expect return dispersion among
issuers going forward. Consequently we will maintain exposure to the more
cyclically exposed issuers while at the same time, continue to seek
opportunities to take profits in names that have outperformed.
INVESCO Institutional (N.A.), Inc.
INVESCO PRIVACY NOTICE
At INVESCO 1, we recognize that you have entrusted with us your personal and
financial data and we recognize our obligation to keep this information secure.
Maintaining your privacy is important to us and we have established a policy to
maintain the privacy of the information you share with us.
PERSONAL INFORMATION WE COLLECT
In the normal course of serving clients, we collect personal information about
you, which may include:
o Information we receive from you (such as your name and address) from your
account application, investment management agreement or other documents
you may deliver to us.
o Information about your investment transactions with us.
PERSONAL INFORMATION WE MAY DISCLOSE
We do not sell any information to any third parties. However, we occasionally
disclose nonpublic personal information about you to affiliates and
non-affiliates only as permitted by law or regulation. Specifically, we may
disclose nonpublic personal information including:
o Information to service providers in order to process your account
transactions.
o Your name and address to companies that assist us with mailing statements
to you.
o Information in connection with legal proceedings, such as responding to a
subpoena.
The organizations that receive client information act on our behalf and use the
information only to provide the services that we have asked them to perform for
you and us. As emphasized above, we do not provide client or former client
information including names, addresses, or client lists to outside companies
except in furtherance of our business relationship with you, or as otherwise
permitted by law.
Access to nonpublic personal information is restricted to employees who need to
access that information to provide products or services to clients. To guard our
clients' nonpublic personal information, physical, electronic, and procedural
safeguards are in place that comply with federal standards. A client's right to
privacy extends to all forms of contact with us, including telephone, written
correspondence, and electronic media.
We consider privacy a fundamental right of clients and take seriously the
obligation to safeguard client information. We will adhere to the policies and
practices above for both current and former clients.
1 This Privacy Notice applies to members of INVESCO Institutional (N.A.), Inc.
of AMVESCAP PLC's family of investment adviser subsidiaries: INVESCO
Institutional (N.A.), Inc., INVESCO Private Capital, Inc., INVESCO Senior
Secured Management, Inc., and INVESCO Global Asset Management (N.A.), Inc.
CIM HIGH YIELD SECURITIES
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- 120.1%
UTILITIES -- 9.0%
$104,000 AES Corporation, Sr. Notes, 8.750%, 06/15/08 ......................................... $ 112,060
200,000 AES Corporation, Sr. Notes, 9.000%, 05/15/15** ....................................... 227,000
400,000 Allegheny Energy Supply, Sr. Notes, 8.250%, 04/15/12** ............................... 379,000
300,000 Aquila, Inc., Sr. Notes, 14.875%, 07/01/12 ........................................... 402,750
100,000 Calpine Corp., Sr. Notes, 8.500%, 07/15/10** ......................................... 98,000
300,000 Calpine Corp., Sr. Notes, 8.625%, 08/15/10 ........................................... 235,500
250,000 CMS Energy Corp., Sr. Notes, 9.875%, 10/15/07 ........................................ 280,000
250,000 Dynegy Holding, Inc., Sr. Notes, 10.125%, 07/15/13** ................................. 288,750
50,000 Nevada Power Co., Sr. Notes, Series E, 10.875%, 10/15/09 ............................. 58,312
100,000 NRG Energy Inc., Sr. Notes, 8.000%, 12/15/13** ....................................... 105,625
175,000 PSEG Energy Holding, Sr. Notes, 10.000%, 10/01/09 .................................... 206,063
125,000 Sierra Pacific Resources, Sr. Notes, 8.750%, 05/15/05 ................................ 129,531
-----------
2,522,591
-----------
WIRELINE -- 8.4%
100,000 Cincinnati Bell, Inc., Sr. Sub. Notes, 8.375%, 01/15/14** ............................ 108,000
750,000 Level 3 Communications, Sr. Notes, 11.250%, 03/15/10 ................................. 723,750
875,000 Qwest Capital Funding, Sr. Notes, 7.000%, 08/03/09 ................................... 872,812
300,000 Qwest Capital Funding, Sr. Notes, 7.900%, 08/15/10 ................................... 306,000
100,000 Time Warner Telecommunications LLC, Sr. Notes, 9.750%, 07/15/08 ...................... 103,500
200,000 Time Warner Telecommunications, Inc., Sr. Notes, 10.125%, 02/01/11 ................... 214,000
-----------
2,328,062
-----------
LODGING AND CASINOS -- 7.9%
150,000 Extended Stay America, Sr. Sub. Notes, 9.875%, 06/15/11 .............................. 168,750
250,000 Felcor Lodging LP., Sr. Notes, 8.500%, 06/01/11 ...................................... 272,500
150,000 Gaylord Entertainment Co., Sr. Notes, 8.000%, 11/15/13** ............................. 159,000
100,000 Hard Rock Hotel, Inc., Sr. Notes, 8.875%, 06/01/13** ................................. 107,000
200,000 Host Marriott LP., Sr. Notes, 7.125%, 11/01/13** ..................................... 205,000
200,000 Jacobs Entertainment, Sr. Notes, 11.875%, 02/01/09 ................................... 225,000
75,000 Majestic Star Casino LLC., Sr. Notes, 9.500%, 10/15/10** ............................. 77,250
75,000 Penn National Gaming, Inc., Sr. Sub. Notes, 6.875%, 12/01/11** ....................... 74,625
200,000 Poster Financial Group, Sr. Notes, 8.750%, 12/01/11** ................................ 212,500
100,000 Prime Hospitality Corp., Sr. Sub. Notes, Series B, 8.375%, 05/01/12 .................. 103,750
150,000 Resort International Hotel/Casino, Sr. Notes, 11.500%, 03/15/09 ...................... 163,875
75,000 River Rock Entertainment , Sr Notes, 9.750%, 11/01/11** .............................. 81,000
140,000 Riviera Holdings Corp., Sr. Notes, 11.000%, 06/15/10 ................................. 145,950
200,000 Wheeling Island Gaming, Sr. Notes, 10.125%, 12/15/09 ................................. 213,000
-----------
2,209,200
-----------
See Notes to Financial Statements.
3
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
CHEMICALS AND PLASTICS -- 7.9%
$375,000 Equistar Chemical Funding, Sr. Notes, 10.625%, 05/01/11** ............................ $ 416,250
500,000 Huntsman ICI Chemicals Ltd., Sr. Sub. Notes, 10.125%, 07/01/09 ....................... 517,500
400,000 Lyondell Chemical Co., Sr. Sub. Notes, 10.875%, 05/01/09 ............................. 412,000
100,000 Nalco Company, Sr. Sub Notes, 8.875%, 11/15/13** ..................................... 106,500
275,000 OM Group, Inc., Sr. Sub. Notes, 9.250%, 12/15/11 ..................................... 287,375
100,000 Polyone Corp., Sr. Notes, 10.625%, 05/15/10 .......................................... 100,500
100,000 Rockwood Specialties, Sr. Sub. Notes, 10.625%, 05/15/11** ............................ 112,000
250,000 Sovereign Specialty Chemicals, Sr. Sub. Notes, 11.875%, 03/15/10 ..................... 251,250
-----------
2,203,375
-----------
WIRELESS COMMUNICATIONS -- 7.8%
100,000 Acc Escrow Corp., Sr. Notes, 10.000%, 08/01/11** ..................................... 112,000
100,000 American Tower Corp., Sr. Sub Notes, 7.250%, 12/01/11** .............................. 102,250
275,000 Crown Castle International Corp., Sr. Notes, 7.500%, 12/01/13** ...................... 277,750
200,000 Dobson Communications CP., Sr. Notes, 8.875%, 10/01/13** ............................. 203,500
600,000 Nextel Communications, Sr. Notes, 7.375%, 08/01/15 ................................... 648,000
171,000 Nextel Partners, Inc., Sr. Notes, 12.500%, 11/15/09 .................................. 199,215
50,000 Nextel Partners, Inc., Sr. Notes, 8.125%, 07/01/11 ................................... 53,500
250,000 Rural Cellular Corp., Sr. Notes, 9.875%, 02/01/10 .................................... 267,500
150,000 Triton PCS, Inc., Sr. Sub. Notes, 9.375%, 02/01/11 ................................... 153,750
150,000 Western Wireless Corp., Sr. Notes, 9.250%, 07/15/13** ................................ 159,000
-----------
2,176,465
-----------
CABLE AND SATELLITE TELEVISION -- 6.6%
400,000 Charter Communications Holdings, Sr. Notes, 10.750%, 10/01/09 ........................ 369,000
350,000 Charter Communications Holdings, Sr. Notes, 10.250%, 01/15/10 ........................ 315,000
2,000 CSC Holdings, Inc., Series H, Preferred Shares, 11.750%, 10/01/07 .................... 208,000
200,000 CSC Holdings, Inc., Sr. Notes, 7.250%, 07/15/08 ...................................... 209,000
125,000 Insight Midwest, Sr. Notes, 10.500%, 11/01/10 ........................................ 136,562
150,000 Lodgenet Entertainment, Inc., Sr. Sub. Notes, 9.500%, 06/15/13 ....................... 165,000
250,000 Mediacom LLC, Sr. Notes, 9.500%, 01/15/13 ............................................ 266,250
150,000 Panamsat Corp., Sr. Notes, 8.500%, 02/01/12 .......................................... 167,250
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1,836,062
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BUILDING AND DEVELOPMENT -- 6.2%
200,000 Associated Materials, Inc., Sr. Sub. Notes, 9.750%, 04/15/12 ......................... 220,000
275,000 Atrium Companies, Inc., Sr. Sub. Notes, Series B, 10.500%, 05/01/09 .................. 295,625
100,000 Euramax International PLC., Sr. Sub. Notes, 8.500%, 08/15/11** ....................... 107,250
400,000 Nortek Holdings, Inc., Sr. Sub. Notes, Series B, 9.875%, 06/15/11 .................... 443,000
100,000 North American Energy Partner, Sr. Notes, 8.750%, 12/01/11** ......................... 105,500
300,000 WCI Communities, Inc., Sr. Sub. Notes, 9.125%, 05/01/12 .............................. 331,500
200,000 William Lyon Homes, Sr. Notes, 10.750%, 04/01/13 ..................................... 228,500
-----------
1,731,375
-----------
See Notes to Financial Statements.
4
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
INDUSTRIAL MACHINERY/COMPONENTS -- 5.7%
$200,000 Case New Holland Inc., Sr. Notes, 9.250%, 08/01/11** ................................. $ 225,000
150,000 Dresser, Inc., Sr. Sub. Notes, 9.375%, 04/15/11 ...................................... 163,875
275,000 Eagle Picher, Inc., Sr Notes, 9.750%, 09/01/13** ..................................... 298,375
100,000 JLG Industries, Inc., Sr. Sub Notes, 8.375%, 06/15/12 ................................ 103,625
100,000 Sensus Metering Systems, Sr. Sub. Notes, 8.625%, 12/15/13** .......................... 103,125
150,000 Terex Corp., Sr. Sub. Notes, Series B, 10.375%, 04/01/11 ............................. 168,750
200,000 Trimas Corp. Sr. Sub. Notes, 9.875%, 06/15/12 ........................................ 209,500
300,000 Wesco Distribution, Inc., Sr. Sub. Notes, Series B, 9.125%, 06/01/08 ................. 312,000
-----------
1,584,250
-----------
PIPE LINES/NATURAL GAS -- 5.6%
200,000 El Paso CGP. Co., Sr. Notes, 7.625%, 09/01/08 ........................................ 193,250
450,000 El Paso Corp., Sr. Notes, 7.875%, 06/15/12 ........................................... 427,500
200,000 El Paso Production Holding, Sr. Notes, 7.750%, 06/01/13** ............................ 198,000
100,000 Gulfterra Energy Partner LP, Sr. Sub. Notes, Series B, 8.500%, 06/01/11 .............. 113,000
150,000 Sonat, Inc., Sr. Notes, 7.625%, 07/15/11 ............................................. 139,687
150,000 William Co., Inc., Sr. Notes, 6.500%, 12/01/08 ....................................... 155,813
300,000 William Co., Inc., Sr. Notes, 8.125%, 03/15/12 ....................................... 334,500
-----------
1,561,750
-----------
FOOD/DRUG RETAILERS -- 4.1%
200,000 Di Giorgio Corp., Sr. Notes, Series B, 10.000%, 06/15/07 ............................. 189,000
350,000 Great Atlantic & Pacific Tea Co., Sr. Notes, 9.125%, 12/15/11 ........................ 322,000
100,000 Ingles Markets, Inc., Sr. Sub. Notes, 8.875%, 12/01/11 ............................... 101,000
100,000 Rite Aid Corp., Sr. Notes, 6.875%, 08/15/13 .......................................... 96,500
400,000 Stater Brothers Holdings, Sr. Notes, 10.750%, 08/15/06 ............................... 423,500
-----------
1,132,000
-----------
OFFICE/BUSINESS EQUIPMENT -- 3.8%
200,000 Danka Business Systems, Sr. Notes, 11.000%, 06/15/10 ................................. 199,500
100,000 Mail-Well I, Corp., Sr. Notes, 9.625%, 03/15/12** .................................... 111,500
300,000 Mail-Well I Corp., Sr. Sub. Notes, Series B, 8.750%, 12/15/08 ........................ 300,750
60,000 Von Hoffmann Corporation, Sr. Notes, 10.250%, 03/15/09 ............................... 64,200
40,000 Von Hoffmann Corporation, Sr. Notes, 10.250%, 03/15/09** ............................. 42,800
300,000 Xerox Corp., Sr. Notes, 9.750%, 01/15/09 ............................................. 352,500
-----------
1,071,250
-----------
See Notes to Financial Statements.
5
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
PUBLISHING -- 3.6%
$ 75,000 American Color Graphics, Sr. Notes, 10.000%, 06/15/10** .............................. $ 77,250
200,000 Dex Media Inc., Sr. Notes, 8.000%, 11/15/13** ........................................ 211,000
150,000 Dex Media West , Sr. Sub. Notes, 9.875%, 08/15/13** .................................. 175,125
200,000 Houghton Mifflin Co., Sr. Sub. Notes, 9.875%, 02/01/13 ............................... 221,000
50,000 RH Donnelly Financial Corp., Sr. Sub. Notes, 10.875%, 12/15/12** ..................... 59,562
250,000 Vertis, Inc., Sr. Notes, 10.875%, 06/15/09 ........................................... 266,875
-----------
1,010,812
-----------
AUTO PARTS & ACCESSORIES -- 3.6%
200,000 Delco Remy International, Inc., Sr. Sub. Notes, 11.000%, 05/01/09 .................... 208,000
100,000 Dura Operating Corp., Sr. Notes, 8.625%, 04/15/12** .................................. 107,000
175,000 Dura Operating Corp., Sr. Sub. Notes, Series D, 9.000%, 05/01/09 ..................... 175,875
175,000 Tenneco Automotive, Inc., Sr. Notes, 10.250%, 07/15/13** ............................. 199,937
125,000 Tenneco Automotive, Inc., Sr. Sub. Notes,Series B, 11.625%, 10/15/09 ................. 135,625
150,000 TRW Automotive, Inc., 11.000%, 02/15/13 .............................................. 177,375
200,000 Venture Holdings Trust, Sr. Notes, 11.000%, 06/01/07+ ................................ 6,000
-----------
1,009,812
-----------
CONTAINERS/GLASS PRODUCTS -- 3.6%
200,000 Anchor Glass Container, Sr. Notes, 11.000%, 02/15/13 ................................. 233,000
200,000 Berry Plastic, Sr. Sub. Notes, 10.750%, 07/15/12 ..................................... 231,250
150,000 Graham Packaging GPC., Sr. Sub. Notes, 8.750%, 01/15/08** ............................ 154,125
200,000 Plastipak Holdings, Inc., Sr. Notes, 10.750%, 09/01/11 ............................... 223,500
150,000 Tekni-Plex, Inc., Sr. Sub. Notes, Series B, 12.750%, 06/15/10 ........................ 164,250
-----------
1,006,125
-----------
LEISURE GOODS, ACTIVITIES, MOVIES -- 3.1%
285,000 Six Flags, Inc., Sr. Notes, 9.750%, 06/15/07 ......................................... 298,894
525,000 Six Flags, Inc., Sr. Notes, 9.625%, 06/01/14** ....................................... 551,250
-----------
850,144
-----------
FOOD SERVICE -- 3.0%
350,000 Buffets, Inc., Sr. Sub. Notes, 11.250%, 07/15/10** ................................... 377,125
300,000 Friendly Ice Cream Corp., Sr. Notes, 10.500%, 12/01/07 ............................... 312,375
200,000 Sbarro, Inc., Sr. Notes, 11.000%, 09/15/09 ........................................... 159,000
-----------
848,500
-----------
ELECTRONICS/ELECTRIC -- 3.0%
300,000 Amkor Technologies, Inc., Sr. Notes, 7.750%, 05/15/13 ................................ 323,250
375,000 SCG Holding & Semiconductor Co., Sr. Sub. Notes, 12.000%, 08/01/09 ................... 405,000
100,000 Viasystems Inc., Sr. Sub. Notes, 10.500%, 01/15/11** ................................. 107,250
-----------
835,500
-----------
See Notes to Financial Statements.
6
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
RAILROAD INDUSTRIES -- 2.9%
$700,000 Railamerica Transport, Sr. Sub. Notes, 12.875%, 08/15/10 ............................. $ 816,375
-----------
OIL AND GAS -- 2.7%
250,000 Sesi LLC, Sr. Notes, 8.875%, 05/15/11 ................................................ 273,750
150,000 Swift Energy Co., Sr. Sub. Notes, 9.375%, 05/01/12 ................................... 165,750
300,000 Transmontaigne, Inc., Sr. Sub. Notes, 9.125%, 06/01/10** ............................. 323,250
-----------
762,750
-----------
PAPER/FOREST PRODUCTS -- 2.5%
375,000 Fibermark, Inc., Sr. Notes, 10.750%, 04/15/11 ........................................ 234,375
100,000 Graphic Packaging International, Sr. Sub. Notes, 9.500%, 08/15/13** .................. 111,000
125,000 Millar Western Forest, Sr. Notes, 7.750%, 11/15/13** ................................. 130,313
200,000 Tembec Industries, Inc., Sr. Notes, 8.500%, 02/01/11 ................................. 208,000
-----------
683,688
-----------
ECOLOGICAL SERVICES AND EQUIPMENT -- 2.5%
500,000 Allied Waste North America, Inc., Sr. Notes, Series B, 9.250%, 09/01/12 .............. 570,000
100,000 Casella Waste Systems, Sr. Sub. Notes, 9.750%, 02/01/13 .............................. 112,500
-----------
682,500
-----------
CONSUMER PRODUCTS -- 2.3%
175,000 Chattem, Inc., Sr. Sub Notes, Series B, 8.875%, 04/01/08 ............................. 181,125
200,000 Holmes Group, Inc., Sr. Sub. Notes, Series B, 9.875%, 11/15/07 ....................... 207,500
150,000 Playtex Products, Inc., Sr. Sub Notes, 9.375%, 06/01/11 .............................. 152,250
100,000 Rayovac Corp., Sr. Sub. Notes, 8.500%, 10/01/13 ...................................... 106,500
-----------
647,375
-----------
HEALTH CARE -- 2.2%
200,000 Alpharma, Inc., Sr. Notes, 8.625%, 05/01/11** ........................................ 203,500
300,000 Insight Health Services, Sr. Sub. Notes, 9.875%, 11/01/11 ............................ 319,500
100,000 Triad Hospitals, Inc., Sr. Sub. Notes, 7.000%, 11/15/13** ............................ 101,250
-----------
624,250
-----------
FINANCIAL INTERMEDIARIES -- 2.1%
350,000 Americredit Corp., Sr. Notes, 9.250%, 05/01/09 ....................................... 369,250
200,000 Western Financial Bank, Sr. Sub. Notes, 9.625%, 05/15/12 ............................. 224,000
-----------
593,250
-----------
AEROSPACE -- 2.1%
250,000 B/E Aerospace, Sr. Sub. Notes, 9.500%, 11/01/08 ...................................... 244,375
300,000 K & F Industries, Sr. Sub Notes, Series B, 9.625%, 12/15/10 .......................... 337,875
-----------
582,250
-----------
See Notes to Financial Statements.
7
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
AIRLINES -- 1.4%
$150,000 Continental Airlines, Inc., Sr. Notes, 8.000%, 12/15/05 .............................. $ 146,625
150,000 Delta Airlines, Sr. Notes, 7.700%, 12/15/05 .......................................... 142,313
100,000 Northwest Airlines, Inc., Sr. Notes, 9.875%, 03/15/07 ................................ 91,500
-----------
380,438
-----------
PROPERTY - CASUALTY INSURANCE -- 1.2%
300,000 Crum & Forster Holding Corp., Sr. Notes, 10.375%, 06/15/13** ......................... 334,875
-----------
RETAIL -- 1.0%
250,000 Mothers Work, Inc., Sr. Notes, 11.250%, 08/01/10 ..................................... 279,063
-----------
INSURANCE -- 0.9%
250,000 Fairfax Financial Holding, Sr. Notes, 8.250%, 10/01/15 ............................... 245,625
-----------
AGRICULTURAL PRODUCTION - CROPS -- 0.8%
200,000 Hines Nurseries, Inc., Sr. Notes, 10.250%, 10/01/11** ................................ 219,000
-----------
PERSONAL SERVICES -- 0.8%
100,000 Service Corp. International, Sr. Notes, Series, 7.700%, 04/15/09 ..................... 107,250
100,000 Service Corp. International, Sr. Notes, Series, 7.700%, 04/15/09 ..................... 107,250
-----------
214,500
-----------
EQUIPMENT LEASING -- 0.6%
150,000 United Rentals N.A., Sr. Sub Notes, 7.750%, 11/15/13** ............................... 153,938
-----------
APPAREL MANUFACTURERS -- 0.5%
130,000 William Carter, Sr. Sub. Notes, Series B, 10.875%, 08/15/11 .......................... 150,800
-----------
MARINE TRANSPORTATION -- 0.4%
100,000 General Maritime, Sr. Notes, 10.000%, 03/15/13 ....................................... 113,375
-----------
STEEL -- 0.3%
100,000 AK Steel Corp. Sr. Notes, 7.875%, 02/15/09 ........................................... 88,250
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $31,210,579) ................................................................. 33,489,575
-----------
See Notes to Financial Statements.
8
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
FOREIGN BONDS -- 7.1%
CHEMICALS AND PLASTICS -- 1.9%
$150,000 Acetex Corp., Sr. Notes, 10.875%, 08/01/09 (Canada) .................................. $ 167,250
400,000 Avecia Group PLC, Sr. Notes, 11.000%, 07/01/09 (Great Britain) ....................... 362,000
-----------
529,250
-----------
UTILITIES -- 1.7%
600,000 Calpine Corp., Sr. Notes, 8.500%, 05/01/08** (Canada) ................................ 481,500
-----------
CONTAINERS/GLASS PRODUCTS -- 1.3%
300,000 Crown Euro Holdings S.A., Sr. Notes, 10.875%, 03/01/13 (France) ...................... 354,375
-----------
PAPER/FOREST PRODUCTS -- 1.1%
300,000 Kappa Beheer BV, Sr. Sub. Notes, 10.625%, 07/15/09 (Netherlands) ..................... 322,500
-----------
WIRELESS COMMUNICATIONS -- 0.6%
150,000 Rogers Cantel, Inc., Sr. Notes, 9.375%, 06/01/08 (Canada) ............................ 157,688
-----------
CABLE AND SATELLITE TELEVISION -- 0.5%
200,000 Telewest Communications PLC, Sr. Notes, 11.250%, 11/01/08+ (Great Britain) ........... 129,500
-----------
TOTAL FOREIGN BONDS
(Cost $1,991,359) .................................................................. 1,974,813
-----------
FOREIGN GOVERNMENT SECURITIES -- 1.8%
FOREIGN SOVEREIGN -- 1.8%
110,827 Republic of Brazil, Series C, 8.000%, 04/15/14 ....................................... 109,361
70,000 Republic of Brazil, 12.250%, 03/06/30 ................................................ 87,500
120,000 Republic of Colombia, 9.750%, 04/23/09 ............................................... 132,960
70,000 Republic of Peru, 4.500%, 03/07/17 ................................................... 62,886
100,000 Republic of Turkey, 10.500%, 01/13/08 ................................................ 118,000
-----------
510,707
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Cost $445,305) .................................................................... 510,707
-----------
See Notes to Financial Statements.
9
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- -----------
SHORT TERM OBLIGATION -- 1.6%
$440,000 United States Treasury Bill, 0.700%, 01/02/04*** ..................................... $ 439,991
-----------
TOTAL SHORT TERM OBLIGATION
(Cost $439,991) .................................................................... 439,991
-----------
TOTAL INVESTMENTS (Cost $34,087,234*) ................................................. 130.6% 36,415,086
LIABILITIES LESS OTHER ASSETS ......................................................... (30.6)% (8,532,506)
------ -----------
NET ASSETS ............................................................................ 100.0% $27,882,580
====== ===========
<FN>
* Aggregate cost for Federal income tax purposes.
** Security purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers. The market value of these securities is $8,881,800.
*** Rate represents annualized yield at date of purchase.
+ Securities in default.
</FN>
At December 31, 2003, the Fund's credit quality allocation was as follows:
STANDARD & POOR'S CREDIT RATING (UNAUDITED)
-------------------------------
BB ................................................................. 9.87%
B .................................................................. 63.41%
CCC ................................................................ 20.19%
CC ................................................................. 2.01%
C .................................................................. 0.36%
Not Rated .......................................................... 4.16%
See Notes to Financial Statements.
10
CIM HIGH YIELD SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS:
Investments, at value (Cost $34,087,234) ............................... $ 36,415,086
Cash ................................................................... 216,620
Interest receivable .................................................... 820,093
Dividend receivable .................................................... 5,875
Prepaid expenses ....................................................... 1,323
------------
Total Assets ........................................................ 37,458,997
------------
LIABILITIES:
Notes payable (including accrued interest of $40,070) .................. $9,300,070
Distributions payable .................................................. 213,217
Investment advisory fee payable ........................................ 11,989
Administration fee payable ............................................. 3,413
Custodian fees payable ................................................. 1,300
Accrued expenses and other payables .................................... 46,428
----------
Total Liabilities ................................................... 9,576,417
------------
NET ASSETS .................................................................. $ 27,882,580
============
NET ASSETS consist of:
Shares of beneficial interest, $0.01 per share par value,
issued and outstanding 6,091,924 .................................... $ 60,919
Paid-in capital in excess of par value ................................. 45,385,323
Accumulated undistributed net investment income ........................ 4,243
Accumulated net realized loss on investments sold ...................... (19,895,757)
Unrealized appreciation of investments ................................. 2,327,852
------------
Total Net Assets .................................................... $ 27,882,580
============
NET ASSET VALUE PER SHARE
($27,882,580 / 6,091,924 shares of beneficial interest outstanding) ...... $ 4.58
============
MARKET VALUE PER SHARE ...................................................... $ 4.77
============
See Notes to Financial Statements.
11
CIM HIGH YIELD SECURITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
INVESTMENT INCOME:
Interest ............................................................... $3,430,971
Dividends .............................................................. 23,500
----------
Total Investment Income ............................................. $3,454,471
----------
EXPENSES:
Interest expense ....................................................... 159,325
Investment advisory fee ................................................ 126,294
Legal and audit fees ................................................... 69,985
Miscellaneous .......................................................... 66,519
Trustees' fees and expenses ............................................ 44,000
Administration fee ..................................................... 40,019
Shareholder servicing agent fees ....................................... 37,857
Custodian fees ......................................................... 14,392
----------
Total Expenses ...................................................... 558,391
----------
NET INVESTMENT INCOME ....................................................... 2,896,080
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments sold .................................. 41,526
Net change in unrealized appreciation/depreciation
of investments ...................................................... 5,412,063
----------
5,453,589
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................................ $8,349,669
==========
See Notes to Financial Statements.
12
CIM HIGH YIELD SECURITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2003
NET INCREASE IN CASH:
Cash flows from operating activities:
Interest received ...................................................... $ 3,152,826
Dividends received ..................................................... 17,625
Operating expenses paid ................................................ (384,566)
Increase in short-term securities, net ................................. (281,781)
Purchases of long-term securities ...................................... (24,419,532)
Proceeds from sales of long-term securities ............................ 22,786,041
Interest payments on notes payable ..................................... (160,316)
------------
Net cash provided by operating activities ................................... 710,297
-----------
Cash flows from financing activities:
Principal withdrawal on loan ........................................... 1,860,000
Distributions paid ..................................................... (2,365,127)
------------
Net cash used in financing activities ....................................... (505,127)
-----------
Net increase in cash ........................................................ 205,170
Cash -- beginning of year ................................................... 11,450
-----------
Cash -- end of year ......................................................... $ 216,620
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net increase in net assets resulting from operations ........................ $ 8,349,669
Decrease in interest receivable ........................................ 26,687
Increase in dividend receivable ........................................ (5,875)
Increase in prepaid expenses ........................................... (1,323)
Decrease in accrued interest ........................................... (991)
Increase in investment advisory fee payable ............................ 2,549
Increase in administration fee payable ................................. 18
Increase in custodian fee payable ...................................... 400
Increase in accrued expenses and other payables ........................ 12,854
Amortization of discount/premium ....................................... (304,830)
Increase in short-term securities, net ................................. (281,781)
Purchases of long-term securities ...................................... (24,419,532)
Proceeds from sales of long-term securities ............................ 22,786,041
Net realized gain on investments sold .................................. (41,526)
Net change in unrealized appreciation/depreciation of investments ...... (5,412,063)
------------
Total adjustments ................................................. (7,639,372)
-----------
Net cash provided by operating activities ................................... $ 710,297
===========
See Notes to Financial Statements.
13
CIM HIGH YIELD SECURITIES
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------- -----------------
Increase/(decrease) in net assets from operations:
Net investment income ......................................... $ 2,896,080 $ 2,846,501
Net realized gain/(loss) on investments sold during the year .. 41,526 (1,971,724)
Net change in unrealized appreciation/(depreciation) of
investments during the year .............................. 5,412,063 (1,479,336)
----------- -----------
Net increase/(decrease) in net assets resulting from operations 8,349,669 (604,559)
----------- -----------
Distributions to shareholders from:
Net investment income .................................... (2,891,837) (2,846,501)
Return of capital ........................................ -- (11,936)
----------- -----------
Total distributions ................................... (2,891,837) (2,858,437)
----------- -----------
Fund share transactions:
Shares issued as reinvestment of dividends ............... 313,493 281,261
----------- -----------
Net increase in net assets from Fund share transactions ....... 313,493 281,261
----------- -----------
Net increase/(decrease) in net assets ......................... 5,771,325 (3,181,735)
NET ASSETS:
Beginning of year ............................................. 22,111,255 25,292,990
----------- -----------
End of year ................................................... $27,882,580 $22,111,255
=========== ===========
See Notes to Financial Statements.
14
CIM HIGH YIELD SECURITIES
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- -------- --------- -------- -------- -------- --------
Operating performance:
Net asset value, beginning
of year .................... $ 3.68 $ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income ........ 0.48 0.48 0.51 0.69 0.72 0.71 0.78 0.78 0.77 0.82
Net realized and
unrealized gain/(loss)
on investments ............. 0.90 (0.57) (0.46) (1.82) (0.39) (1.07) 0.30 0.36 0.23 (0.89)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase/(decrease)
in net assets resulting
from investment
operations ................. 1.38 (0.09) 0.05 (1.13) 0.33 (0.36) 1.08 1.14 1.00 (0.07)
Distributions:
Dividends from net
investment income .......... (0.48) (0.48) (0.51) (0.63) (0.71) (0.69) (0.78) (0.77) (0.79) (0.84)
Return of capital ............ -- --# --# (0.06) -- -- (0.03) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions ..... (0.48) (0.48) (0.51) (0.69) (0.71) (0.69) (0.81) (0.77) (0.79) (0.84)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year ....................... $ 4.58 $ 3.68 $ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Market value, end of year .... $ 4.77 $ 3.64 $ 4.29 $ 4.87 $ 5.25 $ 7.19 $ 8.31 $ 8.12 $ 7.87 $ 7.12
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment return
(net asset value) .......... 39.39% (2.06)% 0.72% (18.76)% 4.93% (4.95)% 14.50% 16.46% 14.31% (0.86)
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total investment return
(market value) ............. 46.15% (4.12)% (1.78)% 4.58% (18.89)% (5.45)% 13.31% 14.38% 22.72% 0.99%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's) ................. $27,883 $22,111 $25,293 $27,707 $38,389 $40,567 $45,848 $43,495 $40,636 $38,678
Ratio of net investment
income to average
net assets ................. 11.47% 12.22% 11.11% 11.10% 10.76% 9.37% 10.08% 10.46% 10.32% 10.82%
Ratio of operating expenses
to average net assets (2) .. 1.58% 1.55% 1.44% 1.22% 1.02% 1.02% 1.06% 1.10% 1.14% 0.95%
Portfolio turnover rate (1) .. 70.1% 40.2% 75.2% 118.8% 98.0% 62.4% 154.5% 172.2% 79.9% 50.6%
<FN>
- ---------------
(1) This rate is, in general, the percentage computed by taking the lesser of the cost of purchases or proceeds from the sales of
portfolio securities for a period and dividing it by the monthly average value of such securities during the last 13 months,
excluding short term securities.
(2) The annualized operating expense ratio excludes interest expense. The annualized ratios including interest expense were
2.21%, 2.37%, 3.17%, 3.89%, 3.13%, 2.98%, 3.06%, 3.19%, 3.52% and 2.80% for the years ended December 31, 2003, 2002, 2001,
2000, 1999, 1998, 1997, 1996, 1995 and 1994, respectively.
* On May 29, 1998 the Fund entered into a new investment advisory agreement with INVESCO (NY), Inc. (now known as INVESCO
Institutional (N.A.), Inc.) due to the acquisition of Chancellor LGT Asset Management, Inc. by AMVESCAP PLC.
# Amount rounds to less than $0.005 per share.
</FN>
See Notes to Financial Statements.
15
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
1. SIGNIFICANT ACCOUNTING POLICIES
CIM High Yield Securities (the "Fund") was organized under the laws of the
Commonwealth of Massachusetts on September 11, 1987 and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified, closed-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
PORTFOLIO VALUATION: Fixed-income securities (other than short-term
obligations, but including listed issues) are valued based on prices obtained by
one or more of the independent pricing services approved by the Board of
Trustees. Such securities are valued at the mean of the closing bid and closing
ask prices on the exchange where primarily traded.
Securities (other than fixed-income securities) for which the principal
market is one or more securities exchanges are valued at the last reported sale
price (or if there has been no current sale, at the closing bid price) on the
primary exchange on which such securities are traded. If a securities exchange
is not the principal market for a security, such security will, if market
quotations are readily available, be valued at the closing bid price in the
over-the-counter market (or the NASDAQ Official Closing Price in the case of
securities reported on the NASDAQ national market system for which any sales
occurred during the day).
Portfolio securities for which there are no such valuations are valued at
fair value as determined in good faith by or at the direction of the Board of
Trustees. Short-term obligations with maturities of less than 60 days are valued
at amortized cost which approximates market value.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Interest income,
including, where applicable, amortization of premium and accretion of discount
on investments, is recorded on the accrual basis.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund distributes monthly
to shareholders substantially all of its net investment income. Capital gains,
if any, net of capital losses, are distributed annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
of income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund.
FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax should be payable by the Fund.
CASH FLOW INFORMATION: Cash, as used in the Statement of Cash Flows, is
the amount reported in the Statement of Assets and Liabilities. The Fund invests
in securities and distributes dividends from net investment income and net
realized gains (which are either paid in cash or reinvested at the discretion of
shareholders). These activities are reported in the Statements of Changes in Net
Assets. Information on cash payments is presented in the Statement of Cash
Flows. Accounting practices that do not affect reporting activities on a cash
basis include unrealized gain or loss on investment securities and accretion
income recognized on investment securities.
16
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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 income and
expenses during the reported period. Actual results could differ from those
estimates.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with INVESCO Institutional (N.A.), Inc. (the "Adviser"). The
Advisory Agreement provides that the Fund will pay the Adviser a fee, computed
and payable monthly, at the annual rate of 0.50% of the Fund's average weekly
net assets.
The Fund has also entered into an Administration and Support Agreement
with PFPC Inc. ("PFPC"), to provide all administrative services to the Fund
other than those related to the investment decisions. PFPC is paid a fee
computed and payable monthly at an annual rate of 0.09% of the Fund's average
weekly net assets, but no less than $40,000 per annum.
The Fund pays each Trustee not affiliated with the Adviser $6,000 per year
plus $1,000 per board meeting and committee meeting attended, and reimburses
each such Trustee for travel and out-of-pocket expenses relating to their
attendance at such meetings. The Fund pays the actual out-of-pocket expenses of
the Trustees affiliated with the Adviser relating to their attendance at such
meetings.
Boston Safe Deposit & Trust Company, an indirect wholly-owned subsidiary
of Mellon Bank Corporation, serves as the Fund's custodian. PFPC serves as the
Fund's shareholder servicing agent (transfer agent).
3. PURCHASE AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding U.S. Government and short-term investments, during the year ended
December 31, 2003, amounted to $24,048,801 and $22,786,041, respectively.
As of December 31, 2003, net unrealized appreciation was $2,327,852, of
which $2,929,415 related to unrealized appreciation of investments and $601,563
related to unrealized depreciation of investments. As of December 31, 2003, book
cost basis did not differ from tax cost basis.
4. FUND SHARES
The Fund has one class of shares of beneficial interest, par value $0.01
per share, of which an unlimited number of shares are authorized. Transactions
in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------- ------------------
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
Issued as reinvestment of dividends ... 75,542 $313,493 70,062 $281,261
------ -------- ------ --------
Net increase .......................... 75,542 $313,493 70,062 $281,261
====== ======== ====== ========
17
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE
The Fund currently has an $11 million ("commitment amount") line of credit
provided by Fleet National Bank (the "Bank") under an Amended and Restated
Credit Agreement (the "Agreement") dated as of September 18, 1992 and amended
and restated as of May 23, 2002, as amended, primarily to leverage its
investment portfolio. Under this Agreement, the Fund may borrow up to the lesser
of $11 million or 25% of its total assets. Interest is payable at either the
federal funds rate plus 0.75% or its applicable LIBOR rate plus 0.75%, as
selected by the Fund from time to time in its loan requests. The Fund is charged
a commitment fee of one tenth of one percent per annum of the average daily
unused commitment amount. At December 31, 2003, the Fund had borrowings of
$9,260,000 outstanding under this Agreement. During the year ended December 31,
2003, the Fund had an average outstanding daily balance of $8,366,630 with
interest rates ranging from 1.69% to 2.13% and average debt per share of $1.38.
For the year ended December 31, 2003, interest expense totaled $159,325 under
this Agreement.
6. CAPITAL LOSS CARRYFORWARD
Capital loss carryforwards are available to offset future realized capital
gains. To the extent that these carryforwards are used to offset future capital
gains, it is probable that the amount which is offset will not be distributed to
shareholders.
At December 31, 2003, the Fund had available for Federal tax purposes
unused capital loss carryforwards of $253,172, $2,499,736, $133,391, $4,838,652,
$7,509,786, $4,573,327 and $87,693 expiring in 2004, 2006, 2007, 2008, 2009,
2010 and 2011, respectively.
7. RISK FACTORS
The Fund invests in securities offering high current income which
generally will be in the lower rating categories of recognized ratings agencies
(below investment-grade bonds). These securities generally involve more credit
risk than securities in the higher rating categories. In addition, the trading
market for high yield securities may be relatively less liquid than the market
for higher-rated securities. The Fund will provide notice to shareholders at
least 60 days prior to any change in its policy of investing primarily (at least
80% of its total assets under normal circumstances) in "high yield", high risk
fixed income securities. The Fund's use of leverage also increases exposure to
capital risk. The Fund may invest 2-3% of its assets in emerging markets.
Emerging markets may be subject to a substantially greater degree of social,
political, and economic instability than is the case in domestic markets.
18
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DISTRIBUTIONS TO SHAREHOLDERS
Income and long-term capital gain distributions are determined in
accordance with Federal income tax regulations, which may differ from accounting
principles generally accepted in the United States. To the extent the
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment. These
reclassifications have no effect upon net assets or net asset values. For the
year ended December 31, 2003, differences in book and tax accounting have been
reclassified to undistributed net investment income, accumulated realized gain
(loss) and paid in capital as follows:
Increase Accumulated Net
Decrease Paid-In Capital Realized Gain
------------------------ ------------------------
$679,423 $679,423
The tax character of distributions paid during 2003 and 2002 was as
follows:
2003 2002
---- ----
DISTRIBUTIONS PAID FROM:
Ordinary income ................................ $2,891,837 $2,846,501
Return of capital .............................. -- 11,936
---------- ----------
Total .......................................... $2,891,837 $2,858,437
========== ==========
As of December 31, 2003, the components of accumulated earnings/(deficit)
on a tax basis were as follows:
Capital loss carryforwards ...................................... $(19,895,757)
Undistributed net investment income ............................. 4,243
Unrealized appreciation ......................................... 2,327,852
------------
Total accumulated deficit ....................................... $(17,563,662)
19
CIM HIGH YIELD SECURITIES
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
CIM High Yield Securities
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CIM High Yield Securities (the
"Fund") as of December 31, 2003, and the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the Fund
for the periods ended prior to December 31, 2001, were audited by other auditors
whose report thereon dated February 2, 2001, expressed an unqualified opinion on
these financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2003, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of CIM
High Yield Securities at December 31, 2003, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the three years in the period then ended in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LP
February 6, 2004
Philadelphia, Pennsylvania
20
CIM HIGH YIELD SECURITIES
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of the Fund are managed under the direction of
the Fund's Board of Trustees. Information pertaining to the Trustees and
officers of the Fund is set forth below.
NUMBER
TERM OF OF PORTFOLIOS
OFFICE AND IN FUND
POSITIONS(S) LENGTH OF COMPLEX
HELD WITH TIME PRINCIPAL OCCUPATIONS(S) OVERSEEN OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE 1 THE FUND SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ------------------------ ------------ ---------- ------------------------------ ------------- ------------------------------
NON-INTERESTED TRUSTEES:
- ------------------------
DR. DONALD RATAJCZAK Chairman Term: Chairman and CEO of Brainworks 1 Director, Ruby Tuesday, Inc.
D.O.B.: 10/21/42 of the 2002-2005; Ventures, an enterprise and (restaurant); Director,
Board of Trustee assets management business; Morgan, Keegan & Company
Trustees since 1987. Former Director, Economic (investment firm) until March
Forecasting Center, Georgia 30, 2001, remains a consulting
State University; Professor, economist; Director, Crown
Georgia State University Crafts (consumer products
(retired June 30, 2000). company); Director, TBC
Corporation (tire marketing
and distribution company);
Director, Regan Holdings.
ROBERT G. WADE, JR. Trustee Term: Consultant to INVESCO, Inc. 1 Director, Pendragon.
D.O.B.: 7/16/27 2002-2005; from November 1996 to December
Trustee 1998; Chairman of the Board of
since 1987. Chancellor Capital Management,
Inc. and its subsidiaries from
January 1995 to November 1996.
JOHN F. NICKOLL Trustee Term: Director, Chairman, President 1 Chairman of Wells
D.O.B.: 1/2/35 2003-2006; and Chief Executive Officer of Fargo Business Credit.
Trustee The Foothill Group Inc., a
since 1987. commercial finance and asset
management company.
DR. BRUCE H. OLSON Trustee Term: Professor of Finance, Miami 1 --
D.O.B.: 9/19/35 2001-2004; University (Ohio).
Trustee
since 1987.
<FN>
- ---------------------------
1 Address: 1166 Avenue of the Americas - 27th Floor, New York, NY 10036.
</FN>
21
CIM HIGH YIELD SECURITIES
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
NUMBER
TERM OF OF PORTFOLIOS
OFFICE AND IN FUND
POSITIONS LENGTH OF COMPLEX
HELD WITH TIME PRINCIPAL OCCUPATIONS(S) OVERSEEN OTHER DIRECTORSHIPS
NAME, ADDRESS, AND AGE* THE FUND SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ------------------------ ---------- ---------- ------------------------------ ------------- ------------------------------
OFFICERS:
- ---------
A. GEORGE BAUMANN President Term: Head of INVESCO's -- --
D.O.B.: 1/1/57 Until Institutional Fixed Income at
successor INVESCO since January 2001;
is elected; President and CEO of PRIMCO
since 2002. Capital Management January
1998 - December 2000;
President of PRIMCO Capital
Management 1995-1998.
CINDY A. HAYES Treasurer Term: Deputy Finance Director, -- --
D.O.B.: 10/30/64 Until INVESCO North America since
successor January 2004; Chief Financial
is elected; Officer of INVESCO's
since 2002. Institutional Fixed Income
Division January 2000-2004;
Controller of PRIMCO Capital
Management, January 1996 -
January 2000.
DEBORAH O'NEAL JOHNSON Secretary Term: Associate General Counsel, -- --
D.O.B.: 3/24/65 Until INVESCO Institutional (N.A.),
successor Inc., since 1997.
is elected;
since 2003.
<FN>
- ---------------------------
*Address: 400 W. Market St., Suite 3300, Louisville, KY 40202-1662, unless otherwise noted.
</FN>
22
To Shareholders of CIM High Yield Securities (the "Fund")
About the Fund's Dividend Reinvestment Plan
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"),
shareholders of the Fund ("Shareholders") whose shares are registered in their
own name will automatically have all dividends and other distributions
reinvested in additional shares of the Fund by PFPC (the "Agent") as agent under
the Plan, unless such Shareholder terminates participation in the Plan as
provided below. Shareholders whose shares are registered in the name of a
broker-dealer or other nominee (i.e., in "Street Name") will not participate in
the Plan unless the requisite election is made by the broker-dealer and only if
such a service is provided by the broker-dealer. Shareholders who own Fund
shares registered in Street Name and who desire that their distributions be
reinvested should consult their broker-dealers. Shareholders who do not
participate in the Plan will receive all distributions by check mailed directly
to the Shareholder by the Agent.
Whenever the Fund declares a capital gains distribution or an income
dividend payable in shares or cash, participating Shareholders will take such
distribution or dividend entirely in shares and the Agent shall automatically
receive such shares, including fractions, for the Shareholder's account, except
in the circumstances described in the paragraph below.
Whenever the market price of the shares on the record date for the dividend
or distribution is equal to or exceeds their net asset value, participants will
be issued shares of the Fund at the higher of net asset value or 95% of the
market price. This discount reflects savings in underwriting or other costs
which the Fund would otherwise be required to incur to raise additional capital.
If net asset value exceeds the market price of Fund shares at such time or if
the Fund should declare a dividend or other distribution payable only in cash,
the Agent will buy Fund shares in the open market, on the American Stock
Exchange (the "Exchange") or elsewhere, for the Shareholder's account. If before
the Agent has completed its purchases, the market price exceeds the net asset
value of the Fund's shares, the average per share purchase price paid by the
Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the Fund.
For all purposes of the Plan: (a) the market price of the Fund shares on a
particular date shall be the last sales price on the Exchange on the close of
the previous trading day or, if there is no sale on the Exchange on that date,
then the mean between the closing bid and asked quotations for such stock on the
Exchange on such date and (b) net asset value per Fund shares on a particular
date shall be as determined by or on behalf of the Fund.
The Fund will not charge participants for reinvesting dividends or
distributions. The Agent's service fee for handling capital gains distributions
or income dividends will be paid by the Fund. There will be no brokerage
commissions charged with respect to shares issued directly by the Fund. However,
Shareholders will be charged a pro rata share of brokerage commissions incurred
by the Agent on all open market purchases. In addition, Shareholders requesting
certificates or redeeming shares issued under the Plan will be charged a $5.00
service fee by the Agent.
The automatic reinvestment of dividends and capital gains distributions
does not relieve Plan participants of any income tax that may be payable on the
dividends or capital gains distributions. Distributions of net investment income
and net realized capital gains, if any, will be taxable, whether received in
cash or reinvested in shares under the Plan. When distributions are received in
the form of shares issued by the Fund (as opposed to purchased on the
23
open market) under such Plan, however, the amount of the distribution deemed to
have been received by participating Shareholders is the fair market value of the
shares received rather than the amount of cash which would otherwise have been
received. In such case, participating Shareholders will have a basis for federal
income tax purposes in each share received from the Fund equal to the fair
market value of such share on the payment date.
A Shareholder may terminate participation in the Plan at any time by
notifying the Agent in writing. Such termination will become effective
immediately if notice is received by the Agent not less than 10 business days
before the next following dividend or distribution record date. Otherwise, the
termination will be effective, with respect to any subsequent dividend or
distributions, on the first trading day after the dividend paid for such record
date has been credited to the Shareholder's account. Upon any termination the
Agent will, upon the request of the Shareholder, cause a certificate or
certificates for the full shares held for the Shareholder under the Plan and
cash adjustment for any fraction to be delivered to her or him. If, upon
termination, the Shareholder requests a certificate for shares held in the
account, a $5.00 service fee will be charged to the Shareholder by the Agent. If
the Shareholder elects by notice to the Agent in writing in advance of such
termination to have the Agent sell part or all of her or his shares and remit
the proceeds to her or him, the Agent is authorized to deduct a $5.00 fee plus
brokerage commissions for this transaction from the proceeds.
The Fund reserves the right to amend or terminate the Plan as applied to
any dividend or distribution for which the record date is at least 90 days after
written notice of the change is sent to the participants in the Plan.
Information concerning the Plan may be obtained by calling PFPC Inc. at
1-800-331-1710, or by writing the Fund, c/o PFPC Inc., 101 Federal Street,
Boston, MA 02110.
24
CIM HIGH YIELD SECURITIES
SHAREHOLDER VOTING RESULTS (UNAUDITED)
At the Annual Meeting of Shareholders, held on October 9, 2003, the
following matter was voted on and approved:
The election of the following Trustee:
TRUSTEE FOR ABSTAINED
------- --- ---------
John F. Nicholl 5,377,650* 65,006
*Represents 88.74% of the outstanding shares of the Fund.
PROXY VOTING POLICIES AND PROCEDURES
A description of the proxy voting policies and procedures is available
without charge upon request, by calling 1-800-331-1710.
25
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[THIS PAGE INTENTIONALLY LEFT BLANK]
CIM
================================================================================
HIGH YIELD SECURITIES
ANNUAL REPORT
DECEMBER 31, 2003
This report is sent to
shareholders of CIM High Yield
Securities for their information.
It is not a Prospectus, circular
or representation intended for use
in the purchase or sale of shares
of the Fund or any securities
mentioned in the report.
For Additional Information about
CIMHigh Yield Securities
Call 1-800-331-1710.
CIM 3192 12/03
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(b) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(c) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Donald Ratajczak is qualified to serve as an audit
committee financial expert serving on its audit committee and that he is
"independent," as defined by this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$26,000 for 2002 and $28,000 for 2003.
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 for 2002 and $0 for 2003.
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $2,000 for 2002 and $3,000
for 2003.
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2002 and $0 for 2003.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Audit Committee Charter provides that the Audit Committee shall
pre-approve, or establish pre-approval policies and procedures
concerning, the following: all audit and permitted non-audit
services to be provided the Fund, and all permitted non-audit
services to be provided by the Fund's independent accountant to the
adviser and to entities controlling, controlled by or under common
control with the adviser that provide ongoing services to the Fund,
if the services relate directly to the operations and financial
reporting of the Fund, except that de minimis non-audit services,
may, to the extent permitted by applicable law, be approved prior to
completion of the audit; and ensure that the Board is fully informed
about any findings or recommendations of the independent accountant.
The Audit Committee has not yet established pre-approval policies
and procedures; therefore, the full Audit Committee pre-approved
each of the audit and non-audit services to be provided by the
principal accountant.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) Not applicable.
(c) 100%
(d) Not applicable.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0 for 2002 and $0 for 2003.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
INVESCO
PROXY VOTING POLICIES
AND
PROCEDURES
February 1, 2003
GENERAL POLICY
INVESCO Institutional (NA), Inc. and its wholly-owned subsidiaries, and INVESCO
Global Asset Management (N.A.), Inc. ("INVESCO") each has responsibility for
making investment decisions that are in the best interest of its clients. As
part of the investment management services it provides to clients, INVESCO may
be authorized by clients to vote proxies appurtenant to the shares for which the
clients are beneficial owners.
As a fiduciary, INVESCO believes that it has a duty to manage clients' assets
solely in the best interest of the clients and that the ability to vote proxies
is a client asset. Accordingly, INVESCO has a duty to vote proxies in a manner
in which it believes will add value to the client's investment.
INVESCO is regulated by various state and federal laws, such as the investment
Advisers Act of 1940, the Investment Company Act of 1940, and the Employee
Retirement Income Security Act of 1974 ("ERISA"). Because there may be different
proxy voting standards for ERISA and non-ERISA clients, INVESCO's policy is to
apply the proxy voting policies and procedures described herein to all of its
clients. Any discussion herein which refers to an ERISA or non-ERISA situation
is used for reference only.
INVESCO may amend its proxy policies and procedures from time to time without
prior notice to its clients.
BACKGROUND
ERISA fiduciary standards relating to proxy voting have not been interpreted
until more recent times.
Due to the large number of mergers and acquisitions in the 1980s and the growing
importance of institutional investors in the equity markets, the Department of
Labor ("DOL"), which enforces fiduciary standards for ERISA plan sponsors and
managers, took the position that the right to vote shares of stock owned by a
pension plan is, in itself, an asset of the plan. Thus, the "Wall Street Rule"
of "vote with management (or abstain from voting) or sell the stock" was under
scrutiny.
In 1988, the DOL stated, in the "Avon Letter", that the fiduciary act of
managing plan assets that are shares of corporate stock includes the voting of
proxies appurtenant to those shares of stock. Accordingly, where the authority
to manage plan assets has been delegated to an investment manager pursuant to
ERISA, no person other than the investment manager has authority to vote proxies
appurtenant to such plan assets, except to the extent the named fiduciary has
reserved to itself the right to direct a plan trustee regarding the voting of
proxies.
In 1990, in the "Monks Letter", the DOL stated that an ERISA violation would
occur if the investment manager is explicitly or implicitly assigned the
authority to vote proxies appurtenant to certain plan-owned stock and the named
fiduciary, trustee or any person other than
2
the investment manager makes the decision on how to vote the same proxies. Thus,
according to the DOL, if the investment management contract expressly provides
that the investment manager is not required to vote proxies, but does not
expressly preclude the investment manager from voting the relevant proxies, the
investment manager would have the exclusive fiduciary responsibility for voting
the proxies. In contrast, the DOL pointed out that if either the plan document
or the investment management contract expressly precludes the investment manager
from voting proxies, the responsibility for voting proxies lies exclusively with
the trustee.
In 1994, in its Interpretive Bulletin 94-2 ("94-2"), the DOL reiterated and
supplemented the Avon and Monks Letters. In addition, 94-2 extended the
principles put forth in the Avon and Monks Letters to voting of proxies on
shares of foreign corporations. However, the DOL recognized that the cost of
exercising a vote on a particular proxy proposal could exceed any benefit that
the plan could expect to gain in voting on the proposal. Therefore, the plan
fiduciary had to weigh the costs and benefits of voting on proxy proposals
relating to foreign securities and make an informed decision with respect to
whether voting a given proxy proposal is prudent and solely in the interest of
the plan's participants and beneficiaries.
In January 2003, the Securities and Exchange Commission ("SEC") adopted
regulations regarding Proxy Voting by investment advisers (SEC Release No.
IA-2106). These regulations required investment advisers to (1) adopt written
proxy voting policies and procedures which describe how the adviser addresses
material conflicts between its interests and those of its clients with respect
to proxy voting and which also addresses how the adviser resolves those
conflicts in the bet interest of clients; (2) disclose to clients how they can
obtain information from the adviser on how the adviser voted the proxies; and
(3) describe to clients its proxy voting policies and procedure to clients and,
upon request, furnish a copy of them to clients.
PROXY VOTING POLICY
Consistent with the fiduciary standards discussed above, INVESCO will vote
proxies unless either the named fiduciary (e.g., the plan sponsor) retains in
writing the right to direct the plan trustee or a third party to vote proxies or
INVESCO determines that any benefit the client might gain from voting a proxy
would be outweighed by the costs associated therewith (i.e., foreign proxies).
In voting such proxies, INVESCO will act prudently, taking into consideration
those factors that may affect the value of the security and will vote such
proxies in a manner in which, in its opinion, is in the best interests of
clients.
PROXY COMMITTEE
The INVESCO Proxy Committee will establish guidelines and procedures for voting
proxies and will periodically review records on how proxies were voted.
The Proxy Committee will consist of certain of INVESCO's equity investment
professionals and non-equity investment professionals.
3
PROXY MANAGER
The Proxy Committee will appoint a Proxy Manager and/or hire a third-party Proxy
Agent to analyze proxies, act as a liaison to the Proxy Committee and manage the
proxy voting process, which process includes the voting of proxies and the
maintenance of appropriate records.
The Proxy Manager will exercise discretion to vote proxies within the guidelines
established by the Proxy Committee. The Proxy Manager will consult with the
Proxy Committee in determining how to vote proxies for issues not specifically
covered by the proxy voting guidelines adopted by the Proxy Committee or in
situations where the Proxy Manager or members of the Committee determine that
consultation is prudent.
CONFLICTS OF INTEREST
In effecting our policy of voting proxies in the best interests of our clients,
there may be occasions where the voting of such proxies may present an actual or
perceived conflict of interest between INVESCO, as the investment manager, and
clients.
Some of these potential conflicts of interest situations include, but are not
limited to, (1) where INVESCO (or an affiliate) manage assets, administer
employee benefit plans, or provides other financial services or products to
companies whose management is soliciting proxies and failure to vote proxies in
favor of the management of such a company may harm our (or an affiliate's)
relationship with the company; (2) where INVESCO (or an affiliate) may have a
business relationship, not with the company, but with a proponent of a proxy
proposal and where INVESCO (or an affiliate) may manage assets for the proponent
or (3) where INVESCO (or an affiliate) or any member of the Proxy Committee may
have personal or business relationships with participants in proxy contests,
corporate directors or candidates for corporate directorships, or where INVESCO
(or an affiliate) or any member of the Proxy Committee may have a personal
interest in the outcome of a particular matter before shareholders.
In order to avoid even the appearance of impropriety, in the event that INVESCO
(or an affiliate) manages assets for a company, its pension plan, or related
entity or where any member of the Proxy Committee has a personal conflict of
interest, and where we have invested clients' funds in that company's shares,
the Proxy Committee will not take into consideration this relationship and will
vote proxies in that company solely in the best interest of all of our clients.
In addition, members of the Proxy Committee must notify INVESCO's Chief
Compliance Officer, with impunity and without fear of retribution or
retaliation, of any direct, indirect or perceived improper influence made by
anyone within INVESCO or by an affiliated company's representatives with regard
to how INVESCO should vote proxies. The Chief Compliance Officer will
investigate the allegations and will report his or her findings the INVESCO
Management Committee. In the event that it is determined that improper influence
was made, the Management Committee will determine the appropriate action to take
which may include, but is not limited to, (1) notifying the affiliated company's
Chief Executive Officer, its Management Committee or Board of Directors, (2)
taking remedial action, if necessary, to correct the result of any improper
influence where the clients have been harmed, or (3) notifying the appropriate
4
regulatory agencies of the improper influence and to fully cooperate with these
regulatory agencies as required. In all cases, the Proxy Committee shall not
take into consideration the improper influence in determining how to vote
proxies and will vote proxies solely in the best interest of clients.
Furthermore, members of the Proxy Committee must advise INVESCO's Chief
Compliance Officer and fellow Committee members of any actual or potential
conflicts of interest he or she may have with regard to how proxies are to be
voted regarding certain companies (e.g., personal security ownership in a
company, or personal or business relationships with participants in proxy
contests, corporate directors or candidates for corporate directorships). After
reviewing such conflict, upon advice from the Chief Compliance Officer, the
Committee may require such Committee member to recuse himself or herself from
participating in the discussions regarding the proxy vote item and from casting
a vote regarding how INVESCO should vote such proxy.
PROXY VOTING PROCEDURES
The Proxy Manager will:
o Vote proxies;
o Take reasonable steps to reconcile proxies received by INVESCO and/or a
third-party Proxy Agent who administers the vote with shares held in
the accounts;
o Document the vote and rationale for each proxy voted (routine matters
are considered to be documented if a proxy is voted in accordance with
the Proxy Voting Guidelines established by the Proxy Committee);
o If requested, provide to clients a report of the proxies voted on their
behalf.
PROXY VOTING GUIDELINES
The Proxy Committee has adopted the following guidelines in voting proxies:
I. Corporate Governance
INVESCO will evaluate each proposal separately. However, INVESCO will
generally vote FOR a management sponsored proposal unless it believes
that adoption of the proposal may have a negative impact on the
economic interests of shareholders.
INVESCO will generally vote FOR
o Annual election of directors
o Appointment of auditors
5
o Indemnification of management or directors or both against
negligent or unreasonable action
o Confidentiality of voting
o Equal access to proxy statements
o Cumulative voting
o Declassification of Boards
o Majority of Independent Directors
INVESCO will generally vote AGAINST
o Removal of directors from office only for cause or by a
supermajority vote
o "Sweeteners" to attract support for proposals
o Unequal voting rights proposals ("superstock")
o Staggered or classified election of directors
o Limitation of shareholder rights to remove directors, amend
by-laws, call special meetings, nominate directors, or other
actions to limit or abolish shareholder rights to act
independently such as acting by written consent
o Proposals to vote unmarked proxies in favor of management
o Proposals to eliminate existing pre-emptive rights
II. Takeover Defense and Related Actions
INVESCO will evaluate each proposal separately. Generally, INVESCO will
vote FOR a management sponsored anti-takeover proposal which (1)
enhances management's bargaining position and (2) when combined with
other anti-takeover provisions, including state takeover laws, does not
discourage serious offers. INVESCO believes that generally four or more
anti-takeover measures, which can only be repealed by a super-majority
vote, are considered sufficient to discourage serious offers and
therefore should be voted AGAINST.
INVESCO will generally vote FOR
o Fair price provisions
o Certain increases in authorized shares and/or creation of new
classes of common or preferred stock
6
o Proposals to eliminate greenmail provisions
o Proposals to eliminate poison pill provisions
o Proposals to re-evaluate or eliminate in-place "shark repellents"
INVESCO will generally vote AGAINST
o Proposals authorizing the company's board of directors to adopt,
amend or repeal by-laws without shareholders' approval
o Proposals authorizing the company's management or board of
directors to buy back shares at premium prices without
shareholders' approval
III. Compensation Plans
INVESCO will evaluate each proposal separately. INVESCO believes that
in order for companies to recruit, promote and retain competent
personnel, companies must provide appropriate and competitive
compensation plans. INVESCO will generally vote FOR management
sponsored compensation plans, which are reasonable, industry
competitive and not unduly burdensome to the company in order for the
company to recruit, promote and retain competent personnel.
INVESCO will generally vote FOR
o Stock option plans and/or stock appreciation right plans
o Profit incentive plans provided the option is priced at 100% fair
market value
o Extension of stock option grants to non-employee directors in
lieu of their cash compensation provided the option is priced at
or about the then fair market value
o Profit sharing, thrift or similar savings plans
INVESCO will generally vote AGAINST
o Stock option plans that permit issuance of loans to management or
selected employees with authority to sell stock purchased by the
loan without immediate repayment, or that are overly generous
(below market price or with appreciation rights paying the
difference between option price and the stock, or permit
pyramiding or the directors to lower the purchase price of
outstanding options without a simultaneous and proportionate
reduction in the number of shares available)
o Incentive plans which become effective in the event of hostile
takeovers or mergers (golden and tin parachutes)
7
o Proposals creating an unusually favorable compensation structure
in advance of a sale of the company
o Proposals that fail to link executive compensation to management
performance
o Acceleration of stock options/awards if the majority of the board
of directors changes within a two year period
o Grant of stock options to non-employee directors in lieu of their
cash compensation at a price below 100% fair market value
o Adoption of a stock purchase plan at less than 85% of fair market
value
IV. Capital Structure, Classes of Stock and Recapitalization
INVESCO will evaluate each proposal separately. INVESCO recognizes that
from time to time companies must reorganize their capital structure in
order to avail themselves of access to the capital markets and in order
to restructure their financial position in order to raise capital and
to be better capitalized. Generally, INVESCO will vote FOR such
management sponsored reorganization proposals if such proposals will
help the company gain better access to the capital markets and to
attain a better financial position. INVESCO will generally vote AGAINST
such proposals that appear to entrench management and do not provide
shareholders with economic value.
INVESCO will generally vote FOR
o Proposals to reincorporate or reorganize into a holding company
o Authorization of additional common or preferred shares to
accommodate a stock split or other business purposes not related
to anti-takeover measures as long as the increase is not
excessive and a valid need has been proven
INVESCO will generally vote AGAINST
o Proposals designed to discourage mergers and acquisitions in
advance
o Proposals to change state of incorporation to a state less
favorable to shareholders' interests
o Reincorporating in another state to implement anti-takeover
measures
V. Social Responsibility
INVESCO will evaluate each proposal separately. INVESCO believes that a
corporation, if it is in a solid financial position and can afford to
do so, has an obligation to return certain largesse to the communities
in which it operates. INVESCO believes that the primary mission of a
company is to be profitable. However, where a company has proven that
it is able to sustain a level of profitability and the market price of
the company's shares reflect an appropriate economic value for such
shares, INVESCO will generally
8
vote FOR certain social responsibility initiatives. INVESCO will
generally vote AGAINST proposed social responsibility initiatives if it
believes that the company already has adequate policies and procedures
in place and it should focus its efforts on enhancing shareholder value
where the assets and resources involved could be put to better use in
obtaining profits.
INVESCO will generally vote FOR
o International Labor Organization Principles
o Resolutions seeking Basic Labor Protections and Equal Employment
Opportunity
o Expanding EEO/Social Responsibility Reporting
RECORD KEEPING
The Proxy Manager will take necessary steps to retain proxy voting records for
the period of time as required by regulations.
9
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are attached hereto.
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) CIM High Yield Securities
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By (Signature and Title)* /s/ George Baumann
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George Baumann, Chief Executive Officer
(principal executive officer)
Date March 3, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ George Baumann
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George Baumann, Chief Executive Officer
(principal executive officer)
Date March 3, 2004
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By (Signature and Title)* /s/ Cindy Hayes
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Cindy Hayes, Chief Financial Officer
(principal financial officer)
Date February 12, 2004
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* Print the name and title of each signing officer under his or her signature.