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 811-05328
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CIM High Yield Securities
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(Exact name of registrant as specified in charter)
C/O Chancellor Trust Company
1166 Avenue of the Americas, 27th Floor
New York, N.Y. 10036
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(Address of principal executive offices) (Zip code)
Cindy Cameron
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: 502-589-2011
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2005
-----------------
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[LOGO] INVESCO
CIM HIGH YIELD SECURITIES -- 2005 ANNUAL REPORT
We are pleased to provide this annual report for CIM High Yield Securities
(the "Fund") as of December 31, 2005. The following pages contain a listing of
the Fund's holdings as well as the financial statements for the year of 2005.
FUND COMMENTARY AND MARKET REVIEW
The Fund's return at net asset value was -0.48% for 2005. Its return for
2005 based on its market price was 3.11%. Changes in the market price of the
Fund's shares reflect investor demand and are not necessarily linked directly to
changes in net asset value. These returns compare to an average return of 2.43%
for the Fund's peer group, the Lipper High Current Yield Leverage Funds. The
Fund's performance based on net asset value lagged its Lipper peer group because
the Fund's relatively small size meant that its fixed expenses were spread over
a smaller capital base resulting in an expense ratio that was higher than most
of the funds in the Fund's peer group. The Fund's performance versus its peer
group was also hurt because of its relative underexposure to Emerging Market
debt securities and the fact that the Fund did not utilize leverage to the same
extent as its peers.
Credit concerns in April and May prompted by problems in the auto sector
caused the high yield market to retrace gains made in the first quarter of 2005.
While the high yield bond market made a recovery over the course of 2005,
returns were not as robust as the year before. This was not an unexpected result
considering the significant returns in the high yield bond market in the last
few years and against the backdrop of 13 U.S. fed funds rate increases over the
course of 2005 and the beginning of 2006.
Nevertheless, the external environment for the high yield market remains
favorable. Empirical evidence supports the concept that credit spreads are
driven mainly by realized credit losses. Default rates are therefore the best
indicator of credit spreads, which, maintaining historical lows, still offer the
best justification for tight spreads.
It is our opinion, with so many assets searching for investment and yield,
that investors will overcome recent risk aversion and, in recognizing strong
fundamentals, return to the high yield market over the course of the coming
months.
LIQUIDATION
As you know, on August 4, 2005, the Board of Trustees of the Fund approved
a plan of complete liquidation and dissolution for the Fund. The plan of
liquidation was approved by the shareholders of the Fund on January 20, 2006.
The plan became effective at the close of business on February 3, 2006.
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 SUMMARY (% OF TOTAL INVESTMENTS)
DECEMBER 31, 2005 (UNAUDITED)
CORPORATE BONDS AND NOTES
Chemicals and Plastics .......................................... 6.7%
Wireline ........................................................ 6.7%
Lodging and Casinos ............................................. 6.0%
Pipe Lines/Ex Natural Gas ....................................... 5.4%
Financial Intermediaries ........................................ 5.0%
Cable and Satellite Television .................................. 4.8%
Publishing & Printing ........................................... 4.8%
Utilities ....................................................... 4.6%
Oil and Gas ..................................................... 4.2%
Building and Development ........................................ 3.5%
Health Care ..................................................... 3.3%
Wireless Communications ......................................... 3.0%
Electronics/Electric ............................................ 3.0%
Industrial Machinery/Components ................................. 2.8%
Consumer Products ............................................... 2.5%
Paper & Forest Products ......................................... 2.5%
Auto Parts & Accessories ........................................ 2.4%
Containers/Packaging ............................................ 2.1%
Retail .......................................................... 1.4%
Broadcasting .................................................... 1.4%
Equipment Leasing ............................................... 1.3%
Ecological Services and Equipment ............................... 1.2%
Food Service .................................................... 1.2%
Food/Drug Retailers ............................................. 1.2%
Metals/Minerals ................................................. 1.1%
Aerospace/Defense ............................................... 1.1%
Property - Casualty Insurance ................................... 1.0%
Steel ........................................................... 0.9%
Software/Services ............................................... 0.9%
Office/Business Equipment ....................................... 0.7%
Marine Transportation ........................................... 0.7%
Apparel/Textiles ................................................ 0.6%
Leisure Goods, Activities, Movies ............................... 0.5%
Personal Services ............................................... 0.5%
Consulting Services ............................................. 0.5%
Retail Food ..................................................... 0.5%
Airlines ........................................................ 0.5%
Telecommunication Equipment ..................................... 0.2%
FOREIGN BONDS ...................................................... 2.7%
SHORT TERM OBLIGATIONS ............................................. 6.6%
--------
TOTAL .............................................................. 100.0%
========
3
CIM HIGH YIELD SECURITIES
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- 119.0%
CHEMICALS AND PLASTICS -- 8.8%
$ 162,000 BCP Crystal US Holdings Corp., Sr. Sub. Notes, 9.625%, 06/15/14 ......................... $ 181,035
175,000 Equistar Chemical Funding, Sr. Notes, 10.625%, 05/01/11 ................................. 193,375
250,000 Hercules Inc., Sr. Sub. Notes, 6.750%, 10/15/29 ......................................... 241,875
213,000 Huntsman ICI Chemicals Ltd., Sr. Sub. Notes, 10.125%, 07/01/09 .......................... 220,987
40,000 Huntsman International LLC., Sr. Sub. Notes, 7.375%, 01/01/15** ......................... 38,800
175,000 Innophos Inc., Sr. Sub. Notes, 8.875%, 08/15/14** ....................................... 177,188
350,000 Lyondell Chemical Co., Sr. Sub. Notes, 10.875%, 05/01/09 ................................ 365,313
150,000 Nalco Company, Sr. Sub. Notes, 8.875%, 11/15/13 ......................................... 157,875
150,000 Nell AF Sarl, Sr. Notes, 8.375%, 08/15/15** ............................................. 149,250
120,000 Plastipak Holding, Inc., 8.500%, 12/15/15** ............................................. 121,800
175,000 Rhodia SA, Sr. Sub. Notes, 8.875%, 06/01/11 ............................................. 180,250
73,000 Rockwood Specialties GRP., Sr. Sub. Notes, 10.625%, 05/15/11 ............................ 80,391
200,000 Rockwood Specialties GRP., Sr. Sub. Notes, 7.500%, 11/15/14 ............................. 200,250
-----------
2,308,389
-----------
WIRELINE -- 8.8%
75,000 American Cellular Corp., Sr. Notes, Series B, 10.000%, 08/01/11 ......................... 81,750
200,000 AT & T Corp., Sr. Notes, 9.050%, 11/15/11 ............................................... 221,627
300,000 Citizens Communications, Sr. Notes, 9.250%, 05/15/11 .................................... 332,250
75,000 Dobson Cellular Systems, Sr. Notes, 9.875%, 11/01/12 .................................... 83,062
75,000 Dobson Cellular Systems, Sr. Notes, 8.375%, 11/01/11 .................................... 79,969
100,000 Dobson Communications, Sr. Notes, 8.875%, 10/01/13 ...................................... 100,250
250,000 MCI Inc., Sr. Notes, 8.735%, 05/01/14 ................................................... 277,187
179,000 Panamsat Corp., Sr. Notes, 9.000%, 08/15/14 ............................................. 188,398
200,000 Qwest Capital Funding, Sr. Notes, 7.900%, 08/15/10 ...................................... 208,000
200,000 Qwest Capital Funding, Sr. Notes, 7.000%, 08/03/09 ...................................... 203,000
125,000 Qwest Communications International, Sr. Notes, 7.250%, 02/15/11 ......................... 128,125
150,000 Qwest Corp., Sr. Notes, 7.875%, 09/01/11 ................................................ 162,375
125,000 Qwest Corp., Sr. Notes, 7.625%, 06/15/15** .............................................. 134,375
100,000 Time Warner Telecom Holdings, Sr Notes, 9.250%, 02/15/14 ................................ 106,000
-----------
2,306,368
-----------
LODGING AND CASINOS -- 7.8%
100,000 Aztar Corp., Sr. Sub. Notes, 7.875%, 06/15/14 ........................................... 105,250
179,000 Global Cash Account Finance, Sr. Sub Notes, 8.750%, 03/15/12 ............................ 191,306
200,000 Host Marriott LP., Sr. Notes, 7.125%, 11/01/13 .......................................... 209,000
200,000 Jacobs Entertainment, Sr. Notes, 11.875%, 02/01/09 ...................................... 213,250
425,000 MGM Mirage Inc., Sr. Notes, 6.750%, 09/01/12 ............................................ 432,969
150,000 Resort International Hotel/Casino, Sr. Notes, 11.500%, 03/15/09 ......................... 166,875
175,000 River Rock Entertainment, Sr. Notes, 9.750%, 11/01/11 ................................... 189,437
140,000 Riviera Holdings Corp., Sr. Notes, 11.000%, 06/15/10 .................................... 151,375
175,000 Seneca Gaming Corp., Sr. Notes, 7.250%, 05/01/12 ........................................ 176,969
200,000 Wheeling Island Gaming, Sr. Notes, 10.125%, 12/15/09 .................................... 210,750
-----------
2,047,181
-----------
See Notes to Financial Statements.
4
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
PIPE LINES/EX NATURAL GAS -- 7.0%
$ 100,000 El Paso CGP. Co., Sr. Notes, 7.625%, 09/01/08** ......................................... $ 102,000
350,000 El Paso Corp., Sr. Notes, 7.875%, 06/15/12 .............................................. 362,250
100,000 El Paso Corp., Sr. Notes, 7.750%, 06/15/10** ............................................ 102,500
225,000 El Paso Production Holding, Sr. Notes, 7.750%, 06/01/13 ................................. 234,562
150,000 Sonat, Inc., Sr. Notes, 7.625%, 07/15/11 ................................................ 153,375
260,000 Targa Resources, Inc., Sr. Notes, 8.500%, 11/01/13** .................................... 267,800
200,000 Williams Cos., Inc., Sr. Notes, 8.125%, 03/15/12 ........................................ 219,000
375,000 Williams Cos., Inc., Sr. Notes, 7.625%, 07/15/19 ........................................ 404,063
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1,845,550
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FINANCIAL INTERMEDIARIES -- 6.5%
300,000 AmeriCredit Corp., Sr. Notes, 9.250%, 05/01/09 .......................................... 317,250
350,000 Ford Motor Credit Co., Sr. Notes, 7.000%, 10/01/13 ...................................... 299,485
960,000 General Motors Accept Corp., Sr. Sub. Notes, 6.750%, 12/01/14 ........................... 865,027
200,000 Western Financial Bank, Sr. Sub. Notes, 9.625%, 05/15/12 ................................ 225,000
-----------
1,706,762
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CABLE AND SATELLITE TELEVISION -- 6.3%
250,000 Cablevision Systems, Corp., Sr. Notes. Series B, 8.000%, 04/15/12 ....................... 235,000
350,000 Charter Communications Holdings II, Sr. Notes, 10.250%, 09/15/10 ........................ 350,000
248,000 Charter Communications Holdings, Sr. Notes, 11.000%, 10/01/15** ......................... 209,560
100,000 CSC Holdings, Inc., Sr. Notes, 7.250%, 07/15/08 ......................................... 100,250
175,000 DIRECTV Holdings, Sr. Notes, 6.375%, 06/15/15 ........................................... 171,938
150,000 GCI, Inc., Sr. Notes, 7.250%, 02/15/14 .................................................. 149,250
125,000 Insight Midwest, Sr. Notes, 10.500%, 11/01/10 ........................................... 132,031
100,000 Mediacom LLC., Sr. Notes, 9.500%, 01/15/13 .............................................. 98,125
200,000 NTL Cable PLC., Sr. Notes, 8.750%, 04/15/14 ............................................. 210,000
-----------
1,656,154
-----------
PUBLISHING & PRINTING -- 6.2%
50,000 American Media Operation, Sr. Sub. Notes, 8.875%, 01/15/11 .............................. 42,750
50,000 American Media Operation, Sr. Sub. Notes, Series B, 10.250%, 05/01/09 ................... 45,875
250,000 Cenveo Corp., Sr. Sub. Notes, 7.875%, 12/01/13 .......................................... 242,500
147,000 Dex Media West, Sr. Sub Notes, Series B, 9.875%, 08/15/13 ............................... 163,905
200,000 Dex Media, Inc., Sr. Notes, 8.000%, 11/15/13 ............................................ 205,000
325,000 Houghton Mifflin Co., Sr. Sub. Notes, 9.875%, 02/01/13 .................................. 348,968
100,000 Mail Well I, Corp. (Cenveo Corp.), Sr. Notes, 9.625%, 03/15/12 .......................... 108,500
175,000 Vertis, Inc., Sr. Notes, 9.750%, 04/01/09 ............................................... 182,219
300,000 WDAC Subsidiary Corp., Sr. Notes, 8.375%, 12/01/14** .................................... 292,125
-----------
1,631,842
-----------
See Notes to Financial Statements.
5
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
UTILITIES -- 6.0%
$ 200,000 AES Corp., Sr. Notes, 9.000%, 05/15/15** ................................................ $ 220,000
104,000 AES Corp., Sr. Notes, 8.750%, 06/15/08 .................................................. 109,720
75,000 Aquila Inc., Sr. Notes, 9.950%, 02/01/11 ................................................ 83,062
100,000 CMS Energy Corp., Sr. Notes, 8.500%, 04/15/11 ........................................... 109,375
210,000 Dynegy Holdings, Inc., Sr. Notes, 10.125%, 07/15/13** ................................... 238,350
150,000 Dynegy Holdings, Inc., Sr. Notes, 8.750%, 02/15/12 ...................................... 162,750
150,000 Midwest Generation LLC., Sr. Notes, 8.750%, 05/01/34 .................................... 165,937
75,000 PSEG Energy Holding, Sr. Notes, 10.000%, 10/01/09 ....................................... 82,875
75,000 PSEG Energy Holdings, Sr Notes, 8.500%, 06/15/11 ........................................ 80,625
200,000 Reliant Resource, Sr. Notes, 9.500%, 07/15/13 ........................................... 201,500
125,000 TXU Corp., Sr. Notes, 5.550%, 11/15/14 .................................................. 119,355
-----------
1,573,549
-----------
OIL AND GAS -- 5.5%
175,000 Chesapeake Energy Corp., Sr. Notes, 7.750%, 01/15/15 .................................... 186,375
170,000 Denbury Resources, Inc., Sr. Sub. Notes, 7.500%, 12/15/15 ............................... 172,975
250,000 Ferrellgas Partners LP., Sr. Notes, 8.750%, 06/15/12 .................................... 248,750
160,000 Forest Oil Corp., Sr. Notes, 7.750%, 05/01/14 ........................................... 166,800
250,000 Hilcorp Energy, Sr. Sub. Notes, 7.750%, 11/01/15** ...................................... 255,625
250,000 Sesi LLC., Sr. Notes, 8.875%, 05/15/11 .................................................. 263,125
100,000 Swift Energy Co., Sr. Notes, 7.625%, 07/15/11 ........................................... 102,500
50,000 Whiting Petroleum Corp., Sr. Sub. Notes, 7.250%, 05/01/13 ............................... 50,875
-----------
1,447,025
-----------
BUILDING AND DEVELOPMENT -- 4.6%
75,000 Beazer Homes, Sr. Notes, 6.500%, 11/15/13 ............................................... 71,719
200,000 Builders FirstSource, Inc., Sr. Notes, 8.590%, 02/15/12 ................................. 204,500
250,000 D.R. Horton, Inc., Sr. Notes, 6.875%, 05/01/13 .......................................... 262,137
275,000 KB Home, Sr. Notes, 6.250%, 06/15/15 .................................................... 267,505
225,000 Ply Gem Industries, Inc., Sr. Sub Notes, 9.000%, 02/15/12 ............................... 200,812
200,000 THL Buildco (Nortek, Inc.) Sr. Sub. Notes, 8.500%, 09/01/14 ............................. 194,000
-----------
1,200,673
-----------
HEALTH CARE -- 4.3%
275,000 HCA, Inc., Sub. Notes, 6.750%, 07/15/13 ................................................. 284,924
170,000 Omnicare, Inc., Sr. Notes, 6.875%, 12/15/15 ............................................. 173,400
100,000 Senior Housing Properties Trust, Sr.Notes, 7.875%, 04/15/15 ............................. 105,000
150,000 Tenet Healthcare Corp., Sr. Notes, 9.875%, 07/01/14 ..................................... 152,625
100,000 Triad Hospitals, Inc., Sr. Sub. Notes, 7.000%, 11/15/13 ................................. 100,750
100,000 Vanguard Health Holdings II, Sr. Sub. Notes, 9.000%, 10/01/14 ........................... 106,750
200,000 VWR International, Inc., Sr. Sub. Notes, 8.000%, 04/15/14 ............................... 200,000
-----------
1,123,449
-----------
See Notes to Financial Statements.
6
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
ELECTRONICS/ELECTRIC -- 4.0%
$ 175,000 Avago Technologies, Sr. Notes, 10.125%, 12/01/13** ...................................... $ 180,687
200,000 Celestica, Inc., Sr. Sub. Notes, 7.875%, 07/01/11 ....................................... 202,500
400,000 L-3 Communications Corp., Sr. Sub. Notes, 6.375%, 10/15/15** ............................ 401,000
75,000 Sanmina-Sci Corp., Sr. Notes, 10.375%, 01/15/10 ......................................... 83,250
175,000 Stats Chippac LTD., Sr. Notes, 6.750%, 11/15/11 ......................................... 169,750
-----------
1,037,187
-----------
WIRELESS COMMUNICATIONS -- 3.9%
100,000 American Tower Corp., Sr. Notes, 7.250%, 12/01/11 ....................................... 104,500
100,000 American Tower Corp., Sr. Notes., 7.125%, 10/15/12 ...................................... 103,500
175,000 Centennial Communications, Sr. Notes, 8.125%, 02/01/14 .................................. 178,500
225,000 Nextel Communications, Sr. Notes, 7.375%, 08/01/15 ...................................... 237,632
75,000 Nextel Partners, Inc., Sr. Notes, 8.125%, 07/01/11 ...................................... 80,531
150,000 Rogers Wireless, Inc., Sr. Sub. Notes, 8.000%, 12/15/12 ................................. 159,563
150,000 Rural Cellular Corp., Sr. Notes, 8.250%, 03/15/12 ....................................... 159,000
-----------
1,023,226
-----------
INDUSTRIAL MACHINERY/COMPONENTS -- 3.7%
225,000 Case New Holland, Inc., Sr. Notes, 9.250%, 08/01/11 ..................................... 241,875
44,000 Dresser Rand Group, Inc., Sr. Sub. Notes, 7.375%, 11/01/14** ............................ 45,540
65,000 JLG Industries, Inc., Sr. Sub Notes, 8.375%, 06/15/12 ................................... 68,900
250,000 Mueller Group, Inc , Sr. Sub. Notes, 10.000%, 05/01/12 .................................. 266,875
200,000 Sensus Metering Systems, Sr. Sub. Notes, 8.625%, 12/15/13 ............................... 178,000
200,000 Trimas Corp. Sr., Sub. Notes, 9.875%, 06/15/12 .......................................... 166,000
-----------
967,190
-----------
PAPER & FOREST PRODUCTS -- 3.3%
51,000 Abitibi-Consolidated Inc., Sr. Notes, 8.550%, 08/01/10 .................................. 51,892
200,000 Boise Cascade LLC, Sr. Notes, 7.125%, 10/15/14 .......................................... 187,500
275,000 Catalyst Paper Corp., Sr. Notes, 8.625%, 06/15/11 ....................................... 264,000
175,000 Georgia Pacific Corp., Sr. Notes, 8.125%, 05/15/11 ...................................... 176,094
200,000 Graphic Packaging International, Sr. Sub. Notes, 9.500%, 08/15/13 ....................... 192,000
-----------
871,486
-----------
CONSUMER PRODUCTS -- 3.3%
250,000 Chattem, Inc., Sr. Sub. Notes, 7.000%, 03/01/14 ......................................... 255,000
175,000 Playtex Products, Inc., Sr. Sub Notes, 9.375%, 06/01/11 ................................. 184,187
225,000 Samsonite Corp., Sr. Sub. Notes, 8.875%, 06/01/11 ....................................... 234,000
175,000 Sealy Mattress Co., Sr. Sub. Notes, 8.250%, 06/15/14 .................................... 181,125
-----------
854,312
-----------
See Notes to Financial Statements.
7
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
AUTO PARTS & ACCESSORIES -- 3.2%
$ 200,000 Delco Remy International, Inc., Sr. Sub. Notes, 11.000%, 05/01/09 ....................... $ 72,000
150,000 Dura Operating Corp., Sr. Sub. Notes, Series B, 8.625%, 04/15/12 ........................ 124,500
300,000 Goodyear Tire & Rubber, Sr. Notes, 7.857%, 08/15/11 ..................................... 294,000
50,000 Navistar International, Sr. Notes, 7.500%, 06/15/11 ..................................... 47,875
50,000 Tenneco Automotive, Inc., Sr. Notes, Series B, 10.250%, 07/15/13 ........................ 54,875
200,000 Tenneco Automotive, Inc., Sr. Sub. Notes, 8.625%, 11/15/14 .............................. 190,000
75,000 Visteon Corp., Sr. Notes, 7.000%, 03/10/14 .............................................. 58,312
-----------
841,562
-----------
CONTAINERS / PACKAGING -- 2.8%
115,000 Graham Packaging Co., Sr. Notes, 9.875%, 10/15/14 ....................................... 112,700
100,000 Graham Packaging Co., Sr. Notes, 8.500%, 10/15/12 ....................................... 99,000
230,000 Solo Cup Co., Sr. Sub. Notes, 8.500%, 02/15/14 .......................................... 202,400
300,000 Stone Container Corp., Sr. Notes, 9.750%, 02/01/11 ...................................... 304,500
-----------
718,600
-----------
RETAIL -- 1.9%
75,000 Dillards, Inc., Sr. Notes, 7.850%, 10/01/12 ............................................. 78,375
350,000 Penney (JC) Co., Inc., Sr. Notes, 9.000%, 08/01/12 ...................................... 413,547
-----------
491,922
-----------
BROADCASTING -- 1.8%
200,000 Rainbow National Services LLC., Sr. Notes, 8.750%, 09/01/12** ........................... 214,000
250,000 Sinclair Broadcast Group, Sr. Sub. Notes, 8.000%, 03/15/12 .............................. 258,750
-----------
472,750
-----------
EQUIPMENT LEASING -- 1.8%
350,000 Hertz Corp ., Sr. Notes, 10.500%, 01/01/16** ............................................ 362,250
100,000 United Rentals, N.A. Inc., Sr. Sub. Notes, 7.750%, 11/15/13 ............................. 98,000
-----------
460,250
-----------
ECOLOGICAL SERVICES AND EQUIPMENT -- 1.6%
200,000 Allied Waste North America, Inc., Sr. Notes, Series B, 9.250%, 09/01/12 ................. 217,500
100,000 Allied Waste North America, Sr. Notes, 7.875%, 04/15/13 ................................. 103,750
100,000 Casella Waste Systems, Sr. Sub. Notes, 9.750%, 02/01/13 ................................. 105,750
-----------
427,000
-----------
FOOD SERVICE -- 1.6%
250,000 Buffets, Inc., Sr. Sub. Notes, 11.250%, 07/15/10 ........................................ 256,250
175,000 Friendly Ice Cream Corp., Sr. Notes, 8.375%, 06/15/12 ................................... 156,625
-----------
412,875
-----------
See Notes to Financial Statements.
8
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
FOOD/DRUG RETAILERS -- 1.5%
$ 100,000 B&G Foods Holding Corp., Sr. Notes, 8.000%, 10/01/11 .................................... $ 102,500
100,000 Ingles Markets, Inc., Sr. Sub. Notes, 8.875%, 12/01/11 .................................. 104,000
200,000 Stater Bros Holdings, Inc., Sr. Notes, 8.125%, 06/15/12 ................................. 199,000
-----------
405,500
-----------
METALS/MINERALS -- 1.5%
260,000 Gilbratar Industries, Inc., Sr Notes, 8.000%, 12/01/15** ................................ 263,250
135,000 Novelis, Inc., Sr. Notes, 7.250%, 02/15/15** ............................................ 126,563
-----------
389,813
-----------
AEROSPACE/DEFENSE -- 1.4%
100,000 BE Aerospace, Inc., Sr. Sub. Notes, Series B, 8.875%, 05/01/11 .......................... 105,500
100,000 Bombadier Inc., Sr. Notes, 6.750%, 05/01/12** ........................................... 93,000
175,000 K & F Acquisition, Inc., Sr. Notes, 7.750%, 11/15/14 .................................... 177,625
-----------
376,125
-----------
PROPERTY - CASUALTY INSURANCE -- 1.3%
175,000 Crum & Forster Holding Corp., Sr. Notes, 10.375%, 06/15/13 .............................. 185,500
175,000 Fairfax Financial Holdings, Sr. Notes, 7.750%, 04/26/12 ................................. 164,164
-----------
349,664
-----------
STEEL -- 1.2%
100,000 AK Steel Corp., Sr. Notes, 7.750%, 06/15/12 ............................................. 90,750
100,000 International Steel Group, Sr. Notes, 6.500%, 04/15/14 .................................. 100,500
125,000 Ryerson Tull, Inc., Sr. Notes, 8.250%, 12/15/11 ......................................... 122,188
-----------
313,438
-----------
SOFTWARE/SERVICES -- 1.2%
100,000 Sungard Data Systems, Inc., Sr. Notes, 4.875%, 01/15/14 ................................. 87,500
200,000 UGS Corp., Sr. Sub. Notes, 10.000%, 06/01/12 ............................................ 219,000
-----------
306,500
-----------
MARINE TRANSPORTATION -- 1.0%
250,000 OMI Corp., Sr. Notes, 7.625%, 12/01/13 .................................................. 254,688
-----------
OFFICE/BUSINESS EQUIPMENT -- 0.9%
200,000 Xerox Corp., Sr. Notes, 9.750%, 01/15/09 ................................................ 222,250
-----------
APPAREL & TEXTILES -- 0.8%
100,000 Levi Strauss & Co., Sr. Notes, 9.750%, 01/15/15 ......................................... 104,500
100,000 Phillips Van-Heusen, Sr. Notes, 8.125%, 05/01/13 ........................................ 106,000
-----------
210,500
-----------
See Notes to Financial Statements.
9
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
CORPORATE BONDS AND NOTES -- (CONTINUED)
CONSULTING SERVICES -- 0.7%
$ 175,000 FTI Consulting, Sr. Notes, 7.625%, 06/15/13** ........................................... $ 181,125
-----------
LEISURE GOODS, ACTIVITIES, MOVIES -- 0.7%
175,000 NCL Corp., Sr. Notes, 10.625%, 07/15/14 ................................................. 181,125
-----------
AIRLINES -- 0.7%
100,000 American Airlines, Inc., Sr. Notes, 6.817%, 05/23/11 .................................... 95,587
89,405 Continental Airlines, Inc., Sr. Notes, 7.875%, 07/02/18 ................................. 82,134
-----------
177,721
-----------
RETAIL FOOD -- 0.6%
150,000 Smithfield Foods, Inc., Sr. Notes, 7.750%, 05/15/13 ..................................... 159,375
-----------
PERSONAL SERVICES -- 0.6%
50,000 Service Corp. International, Sr. Notes, 7.700%, 04/15/09 ................................ 52,750
100,000 Service Corp. International, Sr. Notes, 7.700%, 04/15/09 ................................ 105,500
-----------
158,250
-----------
TELECOMMUNICATIONS EQUIPMENT -- 0.2%
75,000 Lucent Technologies, Sr. Notes, 6.450%, 03/15/29 ........................................ 64,688
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $30,931,998) ..................................................................... 31,176,064
-----------
FOREIGN BONDS -- 3.6%
TELECOMMUNICATIONS EQUIPMENT -- 1.4%
350,000 Intelsat Bermuda LTD., Sr. Notes, 8.625%, 01/15/15** .................................... 355,250
-----------
OIL AND GAS -- 1.2%
300,000 Petrobras International Finance, Sr. Notes, 7.750%, 09/15/14 ............................ 325,500
-----------
FOREST PRODUCTS & PAPER -- 1.0%
250,000 Kappa Beheer BV, Sr. Sub. Notes, 10.625%, 07/15/09** .................................... 260,105
-----------
TOTAL FOREIGN BONDS
(Cost $936,472) ........................................................................ 940,855
-----------
See Notes to Financial Statements.
10
CIM HIGH YIELD SECURITIES -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
SHORT TERM OBLIGATIONS -- 8.6%
$ 100,000 United States Treasury Bill, 3.440%, 01/05/06*** ........................................ $ 99,962
115,000 United States Treasury Bill, 3.470%, 01/05/06*** ........................................ 114,956
290,000 United States Treasury Bill, 3.500%, 01/05/06*** ........................................ 289,887
370,000 United States Treasury Bill, 3.520%, 01/05/06*** ........................................ 369,855
1,375,000 United States Treasury Bill, 3.730%, 01/05/06*** ........................................ 1,374,430
-----------
TOTAL SHORT TERM OBLIGATIONS
(Cost $2,249,090) ..................................................................... 2,249,090
-----------
TOTAL INVESTMENTS (Cost $34,117,560) ...................................................... 131.2% 34,366,009
OTHER ASSETS AND LIABILITIES (NET) ........................................................ (31.2)% (8,166,138)
----- -----------
NET ASSETS ................................................................................ 100.0% $26,199,871
===== ===========
** 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 $4,792,143 or 18.29% of
total net assets.
*** Rate represents annualized yield at date of purchase.
See Notes to Financial Statements.
11
CIM HIGH YIELD SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investments, at value (Cost $34,117,560) .................................... $ 34,366,009
Cash ........................................................................ 13,032
Receivable for investments sold ............................................. 258,584
Interest receivable ......................................................... 623,528
Prepaid expenses ............................................................ 45,829
------------
Total Assets ............................................................. 35,306,982
------------
LIABILITIES:
Notes payable (including accrued interest of $101,554) ...................... $ 8,491,554
Payables for securities purchased ........................................... 515,810
Investment advisory fee payable ............................................. 11,094
Administration fee payable .................................................. 3,413
Custodian fees payable ...................................................... 834
Accrued expenses and other payables ......................................... 84,406
------------
Total Liabilities ........................................................ 9,107,111
------------
NET ASSETS ..................................................................... $ 26,199,871
============
NET ASSETS consist of:
Shares of beneficial interest, $0.01 per share par value,
issued and outstanding 6,134,216 ......................................... $ 61,342
Paid-in capital in excess of par value ...................................... 45,575,703
Accumulated net realized loss on investments sold ........................... (19,685,623)
Unrealized appreciation of investments ...................................... 248,449
------------
Total Net Assets ......................................................... $ 26,199,871
============
NET ASSET VALUE PER SHARE
($26,199,871 / 6,134,216 shares of beneficial interest outstanding) ......... $ 4.27
============
MARKET VALUE PER SHARE ......................................................... $ 4.07
============
See Notes to Financial Statements.
12
CIM HIGH YIELD SECURITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Interest ........................................................ $ 2,956,602
-----------
EXPENSES:
Interest expense ................................................ $ 348,994
Investment advisory fee ......................................... 134,397
Legal and audit fees ............................................ 122,618
Miscellaneous ................................................... 78,097
Shareholder servicing agent fees ................................ 52,991
Trustees' fees and expenses ..................................... 50,002
Administration fee .............................................. 39,718
Fund accounting fee ............................................. 39,352
Printing fee .................................................... 28,128
Custodian fees .................................................. 15,670
-----------
Total Expenses ............................................... 909,967
-----------
NET INVESTMENT INCOME .............................................. 2,046,635
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments sold during the period ......... (239,172)
Net change in unrealized appreciation/depreciation of
investments during the period ................................ (1,960,767)
-----------
(2,199,939)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................... $ (153,304)
===========
See Notes to Financial Statements.
13
CIM HIGH YIELD SECURITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2005
NET DECREASE IN CASH:
Cash flows from operating activities:
Interest received ...................................................... $ 3,018,326
Operating expenses paid ................................................ (531,495)
Decrease in short-term securities, net ................................. (978,934)
Purchases of long-term securities ...................................... (20,031,493)
Proceeds from sales of long-term securities ............................ 21,196,289
Interest payments on notes payable ..................................... (311,846)
------------
Net cash provided by operating activities .................................. $ 2,360,847
------------
Cash flows from financing activities:
Principal payments on loan ............................................. (800,000)
Distributions paid ..................................................... (2,054,953)
------------
Net cash used in financing activities ...................................... (2,854,953)
------------
Net decrease in cash ....................................................... (494,106)
Cash -- beginning of period ................................................ 507,138
------------
Cash -- end of period ...................................................... $ 13,032
============
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations ....................... $ (153,304)
Decrease in interest receivable ........................................ 78,291
Increase in prepaid expenses ........................................... (26,759)
Increase in receivable for securities sold ............................. (258,584)
Increase in accrued interest ........................................... 37,148
Decrease in investment advisory fee payable ............................ (1,142)
Decrease in administration fee payable ................................. (273)
Decrease in custodian fee payable ...................................... (326)
Increase in accrued expenses and other payables ........................ 57,978
Increase in payable for securities purchased ........................... 204,970
Amortization of discount/premium ....................................... (16,567)
Decrease in short-term securities, net ................................. (978,934)
Purchases of long-term securities ...................................... (20,236,463)
Proceeds from sales of long-term securities ............................ 21,454,873
Net realized loss on investments sold .................................. 239,172
Net change in unrealized appreciation/depreciation of investments ...... 1,960,767
------------
Total adjustments ................................................. 2,514,151
------------
Net cash provided by operating activities .................................. $ 2,360,847
============
See Notes to Financial Statements.
14
CIM HIGH YIELD SECURITIES
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
Increase in net assets from operations:
Net investment income ..................................................... $ 2,046,635 $ 2,606,657
Net realized gain/(loss) on investments sold during the year .............. (239,172) 449,306
Net change in unrealized appreciation/depreciation of
investments during the year .......................................... (1,960,767) (118,636)
------------ ------------
Net increase/(decrease) in net assets resulting from operations ........... (153,304) 2,937,327
------------ ------------
Distributions to shareholders from:
Net investment income ................................................ (2,054,953) (2,602,643)
------------ ------------
Total distributions ............................................... (2,054,953) (2,602,643)
------------ ------------
Fund share transactions:
Shares issued as reinvestment of dividends ........................... -- 190,864
------------ ------------
Net increase in net assets from Fund share transactions ................... -- 190,864
------------ ------------
Net increase/(decrease) in net assets ..................................... (2,208,257) 525,548
NET ASSETS:
Beginning of year ......................................................... 28,408,128 27,882,580
------------ ------------
End of year ............................................................... $ 26,199,871 $ 28,408,128
============ ============
Accumulated undistributed net investment income ........................... $ -- $ 8,257
See Notes to Financial Statements.
15
CIM HIGH YIELD SECURITIES
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
------- ------- ------- ------- -------
Operating performance:
Net asset value, beginning
of year ....................... $ 4.63 $ 4.58 $ 3.68 $ 4.25 $ 4.71
------- ------- ------- ------- -------
Net investment income ........... 0.33 0.43 0.48 0.48 0.51
Net realized and
unrealized gain/(loss)
on investments ................ (0.36) 0.05 0.90 (0.57) (0.46)
------- ------- ------- ------- -------
Net increase/(decrease)
in net assets resulting
from investment
operations .................... (0.03) 0.48 1.38 (0.09) 0.05
Distributions:
Dividends from net
investment income ............. (0.34) (0.43) (0.48) (0.48) (0.51)
Return of capital ............... -- -- -- --# --#
------- ------- ------- ------- -------
Total from distributions ........ (0.34) (0.43) (0.48) (0.48) (0.51)
------- ------- ------- ------- -------
Net asset value, end of
year** ........................ $ 4.27 $ 4.63 $ 4.58 $ 3.68 $ 4.25
======= ======= ======= ======= =======
Market value, end of
year** ........................ $ 4.07 $ 4.28 $ 4.77 $ 3.64 $ 4.29
======= ======= ======= ======= =======
Total investment return
(net asset value)** ........... (0.48)% 11.19% 39.39% (2.06)% 0.72%
======= ======= ======= ======= =======
Total investment return
(market value)** .............. 3.11% (1.20)% 46.15% (4.12)% (1.78)%
======= ======= ======= ======= =======
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's) .................... $26,200 $28,408 $27,883 $22,111 $25,293
Ratio of net investment
income to average
net assets .................... 7.61% 9.52% 11.47% 12.22% 11.11%
Ratio of operating expenses
to average net assets (2) ..... 2.08% 1.93% 1.58% 1.55% 1.44%
Portfolio turnover rate (1) ..... 54.5% 55.1% 70.1% 40.2% 75.2%
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/00 12/31/99 12/31/98* 12/31/97 12/31/96
------- ------- ------- ------- -------
Operating performance:
Net asset value, beginning
of year ....................... $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32
------- ------- ------- ------- -------
Net investment income ........... 0.69 0.72 0.71 0.78 0.78
Net realized and
unrealized gain/(loss)
on investments ................ (1.82) (0.39) (1.07) 0.30 0.36
------- ------- ------- ------- -------
Net increase/(decrease)
in net assets resulting
from investment
operations .................... (1.13) 0.33 (0.36) 1.08 1.14
Distributions:
Dividends from net
investment income ............. (0.63) (0.71) (0.69) (0.78) (0.77)
Return of capital ............... (0.06) -- -- (0.03) --
------- ------- ------- ------- -------
Total from distributions ........ (0.69) (0.71) (0.69) (0.81) (0.77)
------- ------- ------- ------- -------
Net asset value, end of
year** ........................ $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69
======= ======= ======= ======= =======
Market value, end of
year** ........................ $ 4.87 $ 5.25 $ 7.19 $ 8.31 $ 8.12
======= ======= ======= ======= =======
Total investment return
(net asset value)** ........... (18.76)% 4.93% (4.95)% 14.50% 16.46%
======= ======= ======= ======= =======
Total investment return
(market value)** .............. 4.58% (18.89)% (5.45)% 13.31% 14.38%
======= ======= ======= ======= =======
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's) .................... $27,707 $38,389 $40,567 $45,848 $43,495
Ratio of net investment
income to average
net assets .................... 11.10% 10.76% 9.37% 10.08% 10.46%
Ratio of operating expenses
to average net assets (2) ..... 1.22% 1.02% 1.02% 1.06% 1.10%
Portfolio turnover rate (1) ..... 118.8% 98.0% 62.4% 154.5% 172.2%
- ----------
(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 3.38%, 2.64%, 2.21%,
2.37%, 3.17%, 3.89%, 3.13%, 2.98%, 3.06% and 3.19% for the years ended
December 31, 2005, 2004, 2003, 2002, 2001, 2000, 1999, 1998, 1997 and
1996, 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.
** Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for the purpose of this calculation, to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods.
# Amount rounds to less than $0.005 per share.
See Notes to Financial Statements.
16
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
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.
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.
USE OF ESTIMATES: The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reported period. Actual results could differ from those estimates.
17
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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, 2005, amounted to $20,236,463 and $21,454,873, respectively.
As of December 31, 2005, net unrealized appreciation on a tax basis was
$243,502, of which $922,758 related to unrealized appreciation of investments
and $679,256 related to unrealized depreciation of investments. The cost of
securities on a federal tax basis at December 31, 2005 was $34,122,507.
The difference between book-basis and tax-basis unrealized depreciation is
attributable to the tax deferral of losses on wash sales.
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, 2005 DECEMBER 31, 2004
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
Issued as reinvestment of dividends ...... -- $ -- 42,292 $190,864
-------- -------- -------- --------
Net increase ............................. -- $ -- 42,292 $190,864
======== ======== ======== ========
18
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, 2005, the Fund had borrowings of
$8,390,000 outstanding under this Agreement. During the year ended December 31,
2005, the Fund had an average outstanding daily balance of $8,793,425 with an
average rate of 3.96% and average debt per share of $1.43. For the year ended
December 31, 2005, interest expense totaled $348,994 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, 2005, the Fund had available for Federal tax purposes
unused capital loss carryforwards of $2,303,012, $133,391, $4,838,652,
$7,509,786, $4,573,327, $87,693 and $234,815 expiring in 2006, 2007, 2008, 2009,
2010, 2011 and 2013 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.
19
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions paid for the year ended December 31,
2005 and year ended 2004 are as follows:
2005 2004
---- ----
DISTRIBUTIONS PAID FROM:
Ordinary income .................................... $2,054,953 $2,602,643
---------- ----------
Total .............................................. $2,054,953 $2,602,643
========== ==========
As of December 31, 2005, the components of accumulated earnings/(deficit)
on a tax basis were as follows:
Capital loss carryforwards .................................... $(19,680,676)
Net unrealized appreciation ................................... 243,502
------------
Total accumulated deficit ..................................... $(19,437,174)
============
The components of accumulated earnings/deficit on a tax basis differ from
book basis as a result of wash sales.
9. INDEMNIFICATION CONTINGENCIES
In the normal course of business, the Fund enters into contracts that
provide for general indemnifications to the counterparties to those contracts.
The Fund's maximum exposure under these arrangements is dependent upon claims
that may be made against the Fund in the future and, therefore, cannot be
estimated; however, based on experience, the risk of material loss from such
claims is considered remote.
10. SUBSEQUENT EVENT
On August 4, 2005, the Board of Trustees of the Fund approved the Plan of
Liquidation and Dissolution of the Fund. The Plan of Liquidation and Dissolution
was submitted to a vote of shareholders of the Fund at the Annual meeting of
Shareholders held on October 7, 2005. The Annual Meeting was adjourned and
reconvened several times and on January 20, 2006, the Plan of Liquidation and
Dissolution was approved by shareholders. On February 3, 2006, the Fund ceased
its business as an investment company and the Fund's assets are expected to be
distributed by one or more cash payments in complete cancellation of all of the
outstanding shares of the Fund.
20
CIM HIGH YIELD SECURITIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
CIM High Yield Securities
We have audited the accompanying statement of assets and liabilities of
CIM High Yield Securities (the "Fund"), including the portfolio of investments,
as of December 31, 2005, 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
five 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 the standards of the Public
Company Accounting Oversight Board (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.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. 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, 2005, 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 five years in the period then ended in conformity with U.S. generally
accepted accounting principles.
As described in Note 10 to the financial statements, in accordance with
the Fund's Plan of Liquidation, the Fund ceased operations and began an orderly
liquidation effective February 3, 2006.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 10, 2006
21
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. Additional information about the Funds'
trustees is available in the Statement of Additional Information and is
available, without charge, upon request, by calling 1-800-331-1710.
NUMBER
TERM OF OF PORTFOLIOS
OFFICE AND IN FUND
POSITION(S) LENGTH OF COMPLEX
HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
NAME, ADDRESS(1), AND AGE THE FUND SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
- ------------------------- ---------- ---------- ----------------------- ------------- -------------------
TRUSTEES:
ROBERT G. WADE, JR. Trustee Term: Consultant to INVESCO, 1 N/A
Age.: 78 2002-2005; Inc. from November 1996
Trustee to December 1998; retired
since 1987. in 1998.
JOHN F. NICKOLL Trustee Term: Director, Chairman, 1 Chairman of Wells
Age: 70 2003-2006; President and Chief Fargo Business Credit.
Trustee Executive Officer of The
since 1987. Foothill Group Inc., a
commercial finance and asset
management company.
DR. BRUCE H. OLSON Trustee Term: Professor of Finance, Miami 1 N/A
Age: 70 2004-2007; University (Ohio).
Trustee
since 1987.
- ----------
(1) The address for each Trustee is 1166 Avenue of the Americas, 27th Floor,
New York, NY 10036.
22
CIM HIGH YIELD SECURITIES
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
POSITION
HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) DURING PAST
NAME, ADDRESS, AND AGE THE FUND LENGTH OF TIME SERVED FIVE YEARS
- ---------------------- -------- --------------------- -----------------------------------
OFFICERS:
A. GEORGE BAUMANN(1) President Term: Until successor is Head of Institutional Fixed Income at INVESCO
Age: 48 elected; Since 2002. since January 2001; President and CEO of PRIMCO
Capital Management, January 1998-December 2000.
CINDY M. CAMERON(1) Treasurer Term: Until successor is Deputy Finance Director, INVESCO North America
Age: 40 elected; Since 2002. since January 2004; Chief Financial Officer of
INVESCO's Institutional Fixed Income Division
January 2000-December 2003.
JEFFREY H. KUPOR(2) Secretary Term: Until successor is General Counsel, INVESCO Institutional (N.A.),
Age: 37 elected; Since 2003. Inc., since December 2003; Asst. General Counsel of
AMVESCAP Group Services, Inc., January 2002-
December 2003; General Counsel and Secretary,
Z-Tel Technologies, Inc., November 1999-December
2001.
SALVATORE FAIA Chief Term: Until successor is Senior Legal Counsel, PFPC Inc. from 2002 to 2004;
ESQUIRE, CPA Compliance elected; Since 2004. Chief Legal Counsel, Corviant Corporation
Vigilant Compliance Officer (Investment Adviser, Broker-Dealer and Service
186 Dundee Drive, Suite 700 Provider to the Investment Advisers and Separate
Williamstown, NJ 08094 Accountant Providers) from 2001 to 2002; Partner,
Age: 42 Pepper Hamilton LLP (law firm) from 1997 to 2001.
- ----------
(1) The address for these officers is 400 W. Market St., Suite 3300,
Louisville, KY 40202-1662.
(2) The address for this officer is 1360 Peachtree Street, NE, Suite 100,
Atlanta, GA 303463.
23
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
24
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.
25
CIM HIGH YIELD SECURITIES
SHAREHOLDER VOTING RESULTS
At the Annual Meeting of Shareholders, held on October 7, 2005, the
following matter was voted on and approved:
The election of the following Trustee:
TRUSTEE FOR ABSTAINED
------- --- ---------
Robert G. Wade 5,415,387 299,847
The Annual Meeting of Shareholders was adjourned and reconvened several
times with regard to the proposal to liquidate and dissolve the Fund. At the
reconvened Annual Meeting of Shareholders held on January 20, 2006, shareholders
voted and approved the liquidation of the Fund as follows:
FOR AGAINST ABSTAINED
--- ------- ---------
4,106,040 266,151 175,994
PROXY VOTING POLICY AND VOTING RECORD
A description of the policies and procedures used by the Fund's adviser in
determining how to vote proxies relating to the Fund's portfolio securities is
available without charge, upon request, by calling 1-800-331-1710. It is also
available on the SEC's website at WWW.SEC.GOV.
In addition, the Fund's complete proxy voting record for the 12 months
ended June 30, 2005 is available without charge, upon request, by calling toll
free 1-800-331-1710. It is also available on the SEC's website at WWW.SEC.GOV.
QUARTERLY PORTFOLIO DISCLOSURE
The Fund files its complete schedule of portfolio holdings with the SEC
for the first and third quarters of each fiscal year on Form N-Q within 60 days
of the end of the fiscal quarter. The Fund's Form N-Q is available on the SEC's
website at WWW.SEC.GOV, and may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the Public Reference Room may
be obtained by calling 1-800-SEC-0330. In addition, the Fund's Form N-Q is
available, without charge, upon request, by calling toll free 1-800-331-1710.
26
CIM
- --------------------------------------------------------------------------------
HIGH YIELD SECURITIES
Annual Report
December 31, 2005
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
CIM High Yield Securities
Call 1-800-331-1710.
CIM 3192 12/05
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.
(c) 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.
(d) 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
trustees has determined that the registrant has at least one audit committee
financial expert serving on its audit committee. John F. Nickoll, Dr. Bruce H.
Olson, and Robert G. Wade, Jr. are the registrant's audit committee financial
experts and each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
- ----------
(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 were $38,500 in 2005 and $35,000 in 2004.
Audit-Related Fees
- ------------------
(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 were $0 in 2005 and $0 in 2004.
Tax Fees
- --------
(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 were $0 in 2005 and $0 in
2004.
All Other Fees
- --------------
(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 in 2005 and $0 in 2004.
(e)(1) 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 established pre-approval policies and
procedures; therefore, the full Audit Committee pre-approves 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) Not applicable.
(d) Not applicable.
(f) None of the hours expended on the principal accountant's engagement
to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other
than the principal accountant's full-time, permanent employees.
(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, 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 $1,234,242 for 2005 and $177,700 for
2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
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 investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated audit committee consisting of all the
independent trustees of the registrant. The members of the audit committee are:
Dr. Bruce H. Olson, John F. Nickoll and Robert G. Wade, Jr.
ITEM 6. SCHEDULE OF INVESTMENTS.
The Registrant's Schedule of Investments in securities of unaffiliated issuers
as of the close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
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 the
2
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)
o Proposals creating an unusually favorable compensation structure
in advance of a
7
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
As of December 31, 2005 and until the Registrant's portfolio was
liquidated on February 23, 2006, Charles Bishop, Portfolio Manager,
employed by INVESCO Institutional, N.A. (INVESCO), the Registrant's
investment adviser, was the person who was primarily responsible for the
day-to-day management of the Registrant as its Portfolio Manager. He has
been employed by INVESCO for 13 years and his business experience for
the past five years includes Portfolio Manager and Senior Credit
Analyst. Charles Bishop is a Senior High Yield Analyst in Invesco's
Fixed Income Group. His coverage responsibilities include Automotive
Parts, Industrials, Aerospace and Defense, Metals, Packaging,
Transportation, Technology, Telecom and Finance. His role is to identify
securities from this group of sectors, aggregate the input from the rest
of the team members and he actively managed the Registrant's portfolio
of securities.
(a)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBER AND POTENTIAL CONFLICTS OF INTEREST
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
The table below shows other accounts managed by the Portfolio Manager as
of December 31, 2005:
--------------------------------------------------------------------------------------------------------------
Total Assets
Name of No. of Accounts in Accounts
Portfolio Total where Advisory where Advisory
Manager or No. of Accounts Total Fee is Based on Fee is Based
Team Member Type of Accounts Managed Assets Performance on Performance
--------------------------------------------------------------------------------------------------------------
Charles Bishop Registered 0 $0 0 $0
Investment
Companies:
--------------------------------------------------------------------------------------------------------------
Charles Bishop Other Pooled 1 $154 mil 0 $0
Investment
Vehicles:
--------------------------------------------------------------------------------------------------------------
Charles Bishop Other Accounts: 9 $417 mil 1 $51 mil
--------------------------------------------------------------------------------------------------------------
POTENTIAL CONFLICTS OF INTERESTS
All accounts managed by the Portfolio Manager employ the identical
investment strategy. Investment and trade allocations among accounts are
made pursuant to the investment adviser's allocation policies.
(a)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBERS
As of December 31, 2005 the investment adviser's compensation structure
for the Registrant's portfolio manager consists of:
BASE SALARY. The portfolio manager is paid a base salary which is set at
a level determined to be appropriate based upon an individual's
experience and responsibilities through the use of independent
compensation surveys of the investment management industry.
ANNUAL BONUS. The portfolio manager is paid an annual cash bonus which
has a performance driven component and a discretionary component, the
combined total of which will typically range from 50 to over 100 percent
of the manager's base salary.
EQUITY-BASED COMPENSATION. The portfolio manager may be awarded options
to purchase common shares and/or granted restricted shares or deferred
shares of AMVESCAP stock from pools determined from time to time by the
Remuneration Committee of the AMVESCAP Board of Directors. Awards or
equity-based compensation typically vest over time, so as to create
incentives to retain key talent.
PARTICIPATION IN GROUP INSURANCE PROGRAMS. The portfolio manager is
provided life insurance coverage in the form of a group variable
universal life insurance policy, under which he may make additional
contributions to purchase additional insurance coverage or for
investment purposes.
PARTICIPATION IN DEFERRED COMPENSATION PLAN. The portfolio manager is
eligible to participate in a non-qualified deferred compensation plan,
which affords participating employees the tax benefits of deferring the
receipt of a portion of their cash compensation.
(a)(4) DISCLOSURE OF SECURITIES OWNERSHIP
The table below sets forth beneficial ownership of shares of the
Registrant by the Portfolio Manager as of December 31, 2005.
----------------------------------------
Dollar ($)
Range of Fund
Name of Portfolio Shares
Manager or Beneficially
Team Member Owned
----------------------------------------
Charles Bishop $0
----------------------------------------
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, since the
registrant last provided disclosure in response to the requirements of Item
7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.
ITEM 11. 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 second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics that is the subject of disclosure required by Item 2
is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
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
-------------------------------------------------------
George Baumann, President
(principal executive officer)
Date March 10, 2006
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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
-------------------------------------------------------
George Baumann, President
(principal executive officer)
Date March 10, 2006
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By (Signature and Title)* /s/ Cindy Cameron
-------------------------------------------------------
Cindy Cameron, Treasurer
(principal financial officer)
Date March 10, 2006
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* Print the name and title of each signing officer under his or her signature.