CIM HIGH YIELD SECURITIES -- 1996 REVIEW AND OUTLOOK
Dear Shareholder:
1996 was an excellent year in both absolute and relative terms for the high
yield market and CIM High Yield Securities (the "Fund"). The high yield market,
as measured by the CS First Boston High Yield Index, was up 12.4% while the
return of the ten-year Treasury was 0.9% for the year ended December 31, 1996.
With the strong performance, spreads on high yield securities narrowed during
the year from 484 basis points to a level of approximately 355 basis points
over the ten-year Treasury. This strong performance was due to a stronger than
expected economy which gave support to the high yield companies and forced
Treasury yields to increase for most of the year.
The Fund performed well, returning 16.5% based on net asset value before
fees and expenses. After fees and expenses, the Fund returned 14.4% on a net
asset value basis. The strong relative performance of the Fund was due in large
part to our focus on quality single B issues which benefited from a stronger
economy. As we entered 1996 our focus was on sectors such as radio/TV, cable,
retail and steel/metals. All of these sectors showed strong performance except
for cable which under-performed due to increased competition and regulation.
Towards the end of 1996 we began to soften our view of the economy and began to
re-focus the Fund into areas which we believe offered relative stability in a
low growth environment. As we enter 1997 our primary focus will continue to be
in radio/TV and cable for their defensive characteristics, although at reduced
levels from 1996. New areas of emphasis will be in food products, financial
intermediaries, healthcare and energy.
Our outlook for 1997 is still very positive for the high yield market. Even
though spreads are narrower than in the past, the overall soundness of the
market in terms of fundamental quality, supply and demand is strong. We expect
the growth in the use of high yield issues as a means to diversify one's
portfolio will continue and the high yield sector will again produce suitable
returns. Our outlook for the economy is for a slow growth, low inflation
environment which will be positive for all credits. In an attempt to maximize
our exposure and diversify our risk, we are currently invested in 67 companies
and in 30 industries as of December 31, 1996. Our principal focus remains on
generating a high income return which helps to dampen any price volatility and
provides for a more consistent return.
We appreciate your support during 1996 and hope we can provide you another
positive year in 1997.
Sincerely,
/s/ Dan Baldwin
Dan S. Baldwin
Portfolio Manager
January 22, 1997
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 122.4%
CABLE T.V. -- 13.8%
Adelphia Communications Corporation, Sr. Note,
$1,100,000 12.500%, 05/15/2002................................. $ 1,130,250
CAI Wireless Systems, Inc., Sr. Note, 12.250%,
750,000 09/15/2002.......................................... 376,875
Charter Communications International, Inc., Sr. Note,
1,000,000 11.250%, 03/15/2006................................. 1,047,500
Galaxy Telecom L.P., Sr. Sub. Note, 12.375%,
1,250,000 10/01/2005.......................................... 1,328,125
Intermedia Capital Partners, Sr. Note, 11.250%,
1,250,000 08/01/2006***....................................... 1,287,500
Le Groupe Videotron Ltd., Sr. Note, 10.625%,
750,000 02/15/2005.......................................... 832,500
-----------
6,002,750
-----------
BROADCAST/RADIO/TV -- 10.2%
Heritage Media Services, Gtd. Sr. Secured Note,
750,000 11.000%, 06/15/2002................................. 800,625
Jacor Communications Company, Gtd. Sr. Sub. Note,
500,000 9.750%, 12/15/2006.................................. 515,000
Katz Media Corporation, Sr. Sub. Note, 10.500%,
1,000,000 01/15/2007***....................................... 1,025,000
Paxson Communications Corporation, Sr. Sub. Note,
1,000,000 11.625%, 10/01/2002***.............................. 1,042,500
SFX Broadcasting, Inc., Sr. Sub. Note, 10.750%,
1,000,000 05/15/2006.......................................... 1,057,500
-----------
4,440,625
-----------
APPAREL/TEXTILES -- 9.4%
CMI Industries Inc., Sr. Sub. Note, 9.500%,
1,000,000 10/01/2003.......................................... 932,500
900,000 Dan River, Inc., Sr. Sub. Note, 10.125%, 12/15/2003.. 913,500
Pillowtex Corporation, Gtd. Sr. Sub. Note, 10.000%,
850,000 11/15/2006***....................................... 886,125
Polysindo International Finance, Note, 11.375%,
500,000 06/15/2006.......................................... 540,625
750,000 Tultex Corporation, Sr. Note, 10.625%, 03/15/2005.... 818,438
-----------
4,091,188
-----------
HEALTHCARE -- 7.4%
Dade International, Inc., Sr. Sub. Note, 11.125%,
600,000 05/01/2006.......................................... 649,500
800,000 GranCare, Inc., Sr. Sub. Note, 9.375%, 09/15/2005.... 873,000
Maxim Medical Inc., Gtd. Sr. Secured Sub. Note,
700,000 10.500%, 08/01/2006***.............................. 733,250
Paracelsus Healthcare Corporation, Sr. Sub. Note,
1,000,000 10.000%, 08/15/2006................................. 945,000
-----------
3,200,750
-----------
OTHER RETAILERS -- 7.0%
Brylane Capital Corporation, Series B, Sr. Sub. Note,
1,250,000 10.000%, 09/01/2003................................. 1,292,187
1,000,000 Hills Stores Company, Sr. Note, 12.500%, 07/01/2003.. 890,000
Shop Vac Corporation, Sr. Note, 10.625%,
825,000 09/01/2003***....................................... 870,375
-----------
3,052,562
-----------
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
BUSINESS EQUIPMENT AND SERVICES -- 6.9%
Iron Mountain Inc., Gtd. Sr. Sub. Note, 10.125%,
$ 300,000 10/01/2006.......................................... $ 317,625
1,000,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 03/15/2006...... 1,107,500
Unifrax Investment Corporation, Sr. Note, 10.500%,
500,000 11/01/2003.......................................... 518,125
1,000,000 Unisys Corporation, Sr. Note, 12.000%, 04/15/2003.... 1,066,250
-----------
3,009,500
-----------
FOOD PRODUCTS -- 6.5%
International Home Foods Inc., Sr. Sub. Note,
1,000,000 10.375%, 11/01/2006***.............................. 1,040,000
Specialty Foods Corporation, Series B, Sr. Note,
1,000,000 11.125%, 10/01/2002***.............................. 960,000
Van de Kamp's Inc., Sr. Sub. Note, 12.000%,
750,000 09/15/2005.......................................... 830,625
-----------
2,830,625
-----------
OIL AND GAS -- 5.5%
750,000 Costilla Energy Inc., Sr. Note, 10.250%, 10/01/2006.. 795,000
325,000 Mesa Operating Company, Note, 10.625%, 07/01/2006.... 354,250
TransTexas Gas Corporation, Gtd. Sr. Secured Note,
625,000 11.500%, 06/15/2002................................. 675,000
United Meridian Corporation, Sr. Sub. Note, 10.375%,
500,000 10/15/2005.......................................... 549,375
-----------
2,373,625
-----------
PACKAGING AND CONTAINERS -- 5.3%
Delta Beverage Group Inc., Sr. Note, 9.750%,
875,000 12/15/2003***....................................... 896,875
Printpack Inc., Sr. Sub. Note, 10.625%,
850,000 08/15/2006***....................................... 888,250
Stone Container Corporation, Sr. Note, 11.500%,
500,000 10/01/2004.......................................... 526,250
-----------
2,311,375
-----------
MANUFACTURING -- DIVERSIFIED -- 4.8%
1,000,000 Foamex L.P., Sr. Note, 11.250%, 10/01/2002........... 1,062,500
Interlake Corporation, Sr. Sub. Deb., 12.125%,
1,000,000 03/01/2002.......................................... 1,035,000
-----------
2,097,500
-----------
CHEMICALS AND PLASTICS -- 4.7%
Sterling Chemicals Inc., Sr. Sub. Note, 11.750%,
750,000 08/15/2006.......................................... 791,250
Tri Polyta Finance BV, Gtd. Secured Note, 11.375%,
1,200,000 12/01/2003.......................................... 1,257,000
-----------
2,048,250
-----------
FOOD/DRUG RETAILERS -- 3.8%
750,000 Grand Union Company, Sr. Note, 12.000%, 09/01/2004... 798,750
Smiths Food & Drug Centers, Inc., Sr. Sub. Note,
750,000 11.250%, 05/15/2007................................. 832,500
-----------
1,631,250
-----------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
SURFACE TRANSPORT -- 3.4%
Ameritruck Distribution Corporation, Sr. Sub. Note,
$ 750,000 12.250%, 11/15/2005***.............................. $ 757,500
750,000 Trism, Inc., Sr. Sub. Note, 10.750%, 12/15/2000...... 721,875
-----------
1,479,375
-----------
TELECOMMUNICATION -- 3.4%
Fonorola Inc., Gtd. Sr. Secured Note, 12.500%,
750,000 08/15/2002.......................................... 821,250
750,000 Metrocall, Inc., Sr. Sub. Note, 10.375%, 10/01/2007.. 645,000
-----------
1,466,250
-----------
LEISURE -- 3.2%
E&S Holdings Corporation, Sr. Sub. Note, 10.375%,
850,000 10/01/2006***....................................... 890,375
500,000 Muzak LP, Gtd. Sr. Note, 10.000%, 10/01/2003......... 514,375
-----------
1,404,750
-----------
HOTELS AND CASINOS -- 3.1%
Harrah's Jazz Company, 1st Mortgage Note, 14.250%,
750,000 11/15/2001 (In Default)............................. 371,250
Trump Atlantic City Associates, 1st Mortgage Note,
1,000,000 11.250%, 05/01/2006................................. 990,000
-----------
1,361,250
-----------
HOME FURNISHINGS -- 2.5%
Lifestyle Furnishings Inc., Gtd. Sr. Sub. Note,
1,000,000 10.875%, 08/01/2006***.............................. 1,085,000
-----------
FINANCE -- 2.5%
Dollar Financial Group Inc., Sr. Note, 10.875%,
600,000 11/15/2006***....................................... 619,500
First Nationwide Escrow, Sr. Sub. Note, 10.625%,
425,000 10/01/2003***....................................... 459,000
-----------
1,078,500
-----------
ECOLOGICAL -- 2.4%
Allied Waste North America, Sr. Sub. Note, 10.250%,
1,000,000 12/01/2006***....................................... 1,055,000
-----------
STEEL -- 2.4%
Florida Steel Corporation, 1st Mortgage Note,
1,000,000 11.500%, 12/15/2000................................. 1,045,000
-----------
COSMETICS/TOILETRIES -- 2.1%
850,000 Chattem Inc., Sr. Sub. Note, 12.750%, 06/15/2004***.. 904,187
-----------
METALS AND MINERALS -- 1.9%
Kaiser Aluminum & Chemical Corporation, Sr. Sub.
750,000 Note, 12.750%, 02/01/2003........................... 803,438
-----------
BUILDING MATERIALS -- 1.8%
750,000 Southdown, Inc., Sr. Sub. Note, 10.000%, 03/01/2006.. 795,000
-----------
ELECTRONICS -- 1.8%
Celestica International Inc., Sr. Sub. Note, 10.500%,
750,000 12/31/2006***....................................... 790,313
-----------
AEROSPACE -- 1.7%
K&F Industries, Sr. Secured Note, 11.875%,
700,000 12/01/2003.......................................... 752,500
-----------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
RAILROADS -- 1.7%
Johnstown America Industries, Gtd. Sr. Sub. Note,
$ 750,000 11.750%, 08/15/2005................................. $ 718,125
-----------
TRANSPORTATION -- 1.4%
Ryder TRS Inc., Sr. Sub. Note, 10.000%,
600,000 12/01/2006***....................................... 624,000
-----------
PAPER PRODUCTS -- 1.0%
Florida Coast Paper LLC, 1st Mortgage Note, 12.750%,
400,000 06/01/2003.......................................... 436,000
-----------
AUTOMOTIVE PARTS AND EQUIPMENT -- 0.8%
Safelite Glass Corporation, Sr. Sub. Note, 9.875%,
350,000 12/15/2006***....................................... 360,500
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $51,843,233).................................. 53,249,188
-----------
UNITED STATES GOVERNMENT SECURITIES -- 2.1%
UNITED STATES TREASURY BILLS:
843,000 4.540%++, 01/09/1997................................. 842,149
79,000 4.250%++, 01/16/1997................................. 78,860
-----------
TOTAL UNITED STATES GOVERNMENT SECURITIES
(Cost $921,009)..................................... 921,009
-----------
<CAPTION>
SHARES
------
<C> <S> <C>
PREFERRED STOCK -- 1.3% (Cost $500,000)
K-III Communications Corporation, Sr. Exchangeable
20,000 Preferred Stock, 11.500%............................ 537,500
-----------
COMMON STOCKS -- 1.2%
40,000 Dr. Pepper Bottling Holdings, Class A**.............. 480,000
1,601 Harvest Foods Inc., (02/20/1992, cost $36)**+........ 8,005
972 Thermadyne Holdings Corporation, New**............... 27,702
-----------
TOTAL COMMON STOCKS (Cost $36,332)................... 515,707
-----------
WARRANTS -- 0.0%# (Cost $0.00)
Capital Gaming International Incorporated, Warrants,
1,250 expire 02/01/1999**................................. 1
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $53,300,574*)...................... 127.0% 55,223,405
OTHER ASSETS AND LIABILITIES (NET)......................... (27.0) (11,728,453)
----- ------------
NET ASSETS................................................. 100.0% $ 43,494,952
===== ============
</TABLE>
- --------
* Aggregate cost for Federal income tax purposes.
** Non-income producing security.
*** 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.
+ Securities for which market quotations are not readily available are
valued by or at the direction of the Board of Trustees. Parenthetical
disclosure includes the acquisition date and cost of the security. The
total fair value of such securities at December 31, 1996 is $8,005 which
represents 0.02% of total net assets.
++ Rate represents annualized yield at date of purchase.
# Amount represents less than 0.1% of total net assets.
See Notes to Financial Statements.
4
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $53,300,574) (Note 1)
See accompanying statement......................... $55,223,405
Cash................................................ 1,423
Interest receivable................................. 1,309,656
Prepaid expenses.................................... 13,225
-----------
Total Assets...................................... 56,547,709
LIABILITIES:
Notes payable (including accrued interest of $4,731)
(Note 5)........................................... $12,504,731
Dividends payable................................... 452,605
Investment advisory fee payable (Note 2)............ 18,352
Accrued Trustees' fees and expenses (Note 2)........ 7,500
Shareholder servicing agent fees payable (Note 2)... 4,834
Administration fee payable (Note 2)................. 3,333
Custodian fees payable (Note 2)..................... 2,654
Accrued expenses and other payables................. 58,748
-----------
Total Liabilities................................. 13,052,757
-----------
NET ASSETS............................................ $43,494,952
===========
NET ASSETS consist of:
Distributions in excess of net investment income.... $ (7,286)
Accumulated net realized loss on investments sold... (7,106,033)
Unrealized appreciation of investments.............. 1,922,831
Shares of beneficial interest, $0.01 per share par
value, issued and outstanding 5,657,569............ 56,576
Paid-in capital in excess of par value.............. 48,628,864
-----------
Total Net Assets.................................. $43,494,952
===========
NET ASSET VALUE PER SHARE
($43,494,952/5,657,569 shares of beneficial
interest outstanding)................................ $ 7.69
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................ $5,624,736
Dividends............................................... 57,500
----------
Total Investment Income............................... 5,682,236
EXPENSES:
Interest expense (Note 5)............................... $869,140
Investment advisory fee (Note 2)........................ 208,100
Legal and audit fees.................................... 51,715
Trustees' fees and expenses (Note 2).................... 41,157
Administration fee (Note 2)............................. 40,000
Shareholder servicing agent fees (Note 2)............... 23,111
Custodian fees (Note 2)................................. 15,841
Miscellaneous........................................... 78,790
--------
Total Expenses........................................ 1,327,854
----------
NET INVESTMENT INCOME..................................... 4,354,382
----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized loss on investments sold during the year... (242,657)
Net change in unrealized appreciation of investments
during the year........................................ 2,314,525
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........... 2,071,868
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $6,426,250
==========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
NET DECREASE IN CASH:
Cash flows from operating activities:
Interest and dividends received.................. $ 5,581,470
Operating expenses paid.......................... (436,041)
------------
Net cash provided by operating activities.......... $ 5,145,429
Cash flows from investing activities:
Increase in short-term securities, net........... 3,217,942
Purchases of long-term securities................ (91,383,918)
Proceeds from sales of long-term securities...... 87,589,831
------------
Net cash used in investing activities.............. (576,145)
-----------
Net cash provided by operating and investing activ-
ities............................................. 4,569,284
Cash flows from financing activities:
Interest payments on notes payable............... (1,094,249)
Cash dividends paid*............................. (3,475,954)
------------
Net cash used in financing activities.............. (4,570,203)
-----------
Net decrease in cash............................... (919)
Cash--beginning of year............................ 2,342
-----------
Cash--end of year.................................. $ 1,423
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET
CASH PROVIDED BY OPERATING AND INVESTING
ACTIVITIES:
Net increase in net assets resulting from opera-
tions............................................. $ 6,426,250
Interest expense................................. $ 869,140
Increase in investments.......................... (2,763,184)
Decrease in interest and dividends receivable.... 14,405
Decrease in other assets......................... 2,501
Increase in accrued expenses and liabilities..... 20,172
------------
Total adjustments.............................. (1,856,966)
-----------
Net cash provided by operating and investing
activities........................................ $ 4,569,284
===========
</TABLE>
- --------
* Non cash financing activities include reinvestments of dividends of $756,369.
See Notes to Financial Statements.
7
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net investment income...................... $ 4,354,382 $ 4,210,792
Net realized loss on investments sold
during the year........................... (242,657) (526,841)
Net change in unrealized appreciation of
investments during the year............... 2,314,525 1,706,331
----------- -----------
Net increase in net assets resulting from
operations................................ 6,426,250 5,390,282
Distributions to shareholders from net
investment income......................... (4,323,851) (4,292,260)
Net increase in net assets from Fund share
transactions (Note 4)..................... 756,369 860,594
----------- -----------
Net increase in net assets................. 2,858,768 1,958,616
NET ASSETS:
Beginning of year.......................... 40,636,184 38,677,568
----------- -----------
End of year (including distributions in
excess of net investment income of
$(7,286) and $(109,322), respectively).... $43,494,952 $40,636,184
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
CIM HIGH YIELD SECURITIES
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/96 12/31/95
-------- --------
<S> <C> <C>
Operating performance:
Net asset value, beginning of year..................... $ 7.32 $ 7.11
------- -------
Net investment income.................................. 0.78 0.77
Net realized and unrealized gain/(loss) on investments. 0.36 0.23
------- -------
Net increase/(decrease) in net assets resulting from
investment operations................................. 1.14 1.00
Change in net asset value from Fund share transaction.. -- --
Distributions:
Dividends from net investment income................... (0.77) (0.79)
Distributions from net realized capital gains.......... -- --
------- -------
Total from distributions............................... (0.77) (0.79)
------- -------
Net asset value, end of year........................... $ 7.69 $ 7.32
======= =======
Market value, end of year.............................. $ 8.125 $ 7.875
======= =======
Total investment return................................ 14.38% 22.72%
======= =======
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)..................... $43,495 $40,636
Ratio of net investment income to average net assets... 10.46% 10.32%
Ratio of operating expenses to average net assets...... 1.10%(3) 1.14%(3)
Portfolio turnover rate (2)............................ 172.2% 79.9%
</TABLE>
- --------
* For the period from November 18, 1987 (commencement of operations) to
December 31, 1987.
** Chancellor Trust Company became the Fund's investment adviser effective
September 30, 1988.
(1) During the period ended December 31, 1987, the adviser waived $10,026 of
fees. If these fees had not been waived, the ratio of operating expenses
to average net assets would have been 2.40%, and the ratio of net
investment income to average net assets would have been 6.19%.
(2) 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 year, excluding short-term securities.
(3) The annualized operating expense ratio excludes interest expense. The
annualized ratios including interest expense were 3.19%, 3.52%, 2.80%,
2.63% and 2.06% for the years ended December 31, 1996, 1995, 1994, 1993,
and 1992, respectively.
(4) The total return for the year ended December 31, 1993, adjusted for the
dilutive effect of the rights offering completed in August of 1993, is
21.07%.
+ Annualized.
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88** 12/31/87*
-------- -------- -------- -------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 8.02 $ 7.58 $ 7.10 $ 5.65 $ 7.38 $ 9.41 $ 9.35 $ 9.33
------- ------- ------- ------- ------- ------- ------- -------
0.82 0.87 0.83 0.84 0.86 1.13 1.16 0.08
(0.89) 0.71 0.46 1.44 (1.72) (1.96) 0.12 0.03
------- ------- ------- ------- ------- ------- ------- -------
(0.07) 1.58 1.29 2.28 (0.86) (0.83) 1.28 0.11
-- (0.31) -- -- -- -- -- --
(0.84) (0.83) (0.81) (0.83) (0.87) (1.15) (1.13) (0.09)
-- -- -- -- -- (0.05) (0.09) --
------- ------- ------- ------- ------- ------- ------- -------
(0.84) (0.83) (0.81) (0.83) (0.87) (1.20) (1.22) (0.09)
------- ------- ------- ------- ------- ------- ------- -------
$ 7.11 $ 8.02 $ 7.58 $ 7.10 $ 5.65 $ 7.38 $ 9.41 $ 9.35
======= ======= ======= ======= ======= ======= ======= =======
$ 7.125 $ 7.875 $ 7.500 $ 6.625 $ 4.750 $ 7.000 $ 9.500 $ 9.625
======= ======= ======= ======= ======= ======= ======= =======
0.99% 16.55%(4) 25.70% 58.61% (20.89)% (15.18)% 11.67% (2.76)%
======= ======= ======= ======= ======= ======= ======= =======
$38,678 $42,901 $30,024 $28,015 $22,283 $29,122 $36,394 $34,220
10.82% 11.17% 11.00% 12.59% 13.00% 12.78% 12.07% 6.41%(1)+
0.95%(3) 1.09%(3) 1.65%(3) 2.46% 2.35% 2.28% 2.36% 2.18%(1)+
50.6% 114.3% 40.6% 51.2% 34.9% 77.4% 209.6% 6.0%
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 independent pricing services approved by the Board of Trustees.
Securities (other than fixed-income securities) for which the principal
market is one or more securities exchanges are valued at the last reported
sale price (or if there has been no current sale, at the closing bid price) on
the primary exchange on which such securities are traded. If a securities
exchange is not the principal market for a security, such security will, if
market quotations are readily available, be valued at the closing bid price in
the over-the-counter market (or the last sale price in the case of securities
reported on the NASDAQ national market system for which any sales occurred
during the day). Portfolio securities for which there are no such valuations
are valued at fair value as determined in good faith by or at the direction of
the Board of Trustees. Short-term obligations with maturities of less than 60
days are valued at amortized cost which approximates market value.
Securities transactions and investment income: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date. Interest income, including, where
applicable, amortization of premium and accretion of discount on investments,
is recorded on the accrual basis. Short-term investments that have a maturity
of 60 days or less are valued at amortized cost.
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 generally accepted accounting principles.
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 require-
ments of the Internal Revenue Service 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.
12
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Statement 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
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.
2. Investment Advisory Fee, Administration Fee and Other Related Party
Transactions
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Chancellor LGT Asset Management, 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 .50% of the Fund's average weekly
net assets.
The Fund has also entered into an Administration and Support Agreement with
First Data Investor Services Group, Inc., a wholly-owned subsidiary of First
Data Corporation, to provide all administrative services to the Fund other
than those related to the investment decisions. First Data Investor Services
Group, Inc. is paid a fee computed and payable monthly at an annual rate of
.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 meeting and committee meeting attended, and reimburses each
such Trustee for travel and out-of-pocket expenses relating to their
attendance at such meetings. The Fund pays the actual out-of-pocket expenses
of the Trustees affiliated with the Adviser relating to their attendance at
such meetings.
Boston Safe Deposit & Trust Company, an indirect wholly-owned subsidiary of
Mellon Bank Corporation, serves as the Fund's custodian. First Data Investor
Services Group, Inc. 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 short-term investments, during the year ended December 31, 1996
amounted to $91,383,918 and $87,589,831, respectively.
At December 31, 1996, aggregate gross unrealized appreciation for all
securities (other than restricted securities), in which there is an excess of
value over tax cost amounted to $2,953,517, and the aggregate gross unrealized
depreciation for all securities (other than restricted securities) in which
there is an excess of tax cost over value amounted to $1,038,655.
At December 31, 1996, the aggregate gross unrealized appreciation for
restricted securities in which there is an excess of value over tax cost
amounted to $7,969.
13
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Issued as reinvestment of dividends....... 102,537 $ 756,369 116,463 $ 860,594
-------- --------- -------- ---------
Net increase.............................. 102,537 $ 756,369 116,463 $ 860,594
======== ========= ======== =========
</TABLE>
5. Notes Payable
The Fund currently has a $12.5 million ("commitment amount") line of credit
provided by The First National Bank of Boston (the "Bank") under an Amended
Credit Agreement (the "Agreement") dated September 18, 1992, primarily to
leverage its investment portfolio. Under this Agreement the Fund may borrow up
to the lesser of $12.5 million or 25% of its gross assets. Interest is payable
at either the Bank's Base Rate or its applicable Money Market Rate, as
selected by the Fund from time to time in its loan requests. The Fund is
charged a commitment fee of one quarter of one percent per annum of the
average daily unused commitment amount. The Agreement requires, among other
provisions, that the percentage obtained by dividing total indebtedness for
money borrowed by total assets of the Fund shall not exceed 30%. At
December 31, 1996, the Fund had borrowings of $12,500,000 outstanding under this
Agreement. During the year ended December 31, 1996, the Fund had an average
outstanding daily balance of $12,500,000 with interest rates ranging from 6.688%
to 6.875% and average debt per share of $2.23. For the year ended December 31,
1996, interest expense totaled $869,140 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, 1996, the Fund had available for Federal tax purposes unused
capital loss carryforwards of $984,970, $3,316,747, $1,552,171, $330,065,
$679,423 and $242,657 expiring in 1998, 1999, 2000, 2002, 2003, and 2004,
respectively.
7. Concentration of Risk
The Fund invests in securities offering high current income which generally
will be in the lower rating categories of recognized ratings agencies (so-
called "junk 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's use of leverage also increases exposure to
capital risk.
14
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
8. Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
NET INCREASE/
NET REALIZED (DECREASE)
NET AND UNREALIZED IN NET ASSETS
INVESTMENT INVESTMENT GAIN/(LOSS) RESULTING FROM
INCOME INCOME ON INVESTMENTS OPERATIONS
------------ ------------ ---------------- ----------------
TOTAL PER TOTAL PER TOTAL PER TOTAL PER
(000) SHARE (000) SHARE (000) SHARE (000) SHARE
------ ----- ------ ----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 -- QUARTER ENDED
March 31, 1996.......... $1,419 $0.25 $1,100 $0.20 $ 1,406 $ 0.25 $ 2,506 $ 0.45
June 30, 1996........... 1,368 0.24 1,035 0.18 (1,616) (0.29) (581) (0.11)
September 30, 1996...... 1,433 0.26 1,098 0.20 1,648 0.29 2,746 0.49
December 31, 1996....... 1,462 0.26 1,121 0.20 634 0.11 1,755 0.31
1995 -- QUARTER ENDED
March 31, 1995.......... 1,435 0.26 1,092 0.20 1,203 0.22 2,295 0.42
June 30, 1995........... 1,422 0.26 1,028 0.19 1,073 0.19 2,101 0.38
September 30, 1995...... 1,410 0.26 1,072 0.20 (254) (0.04) 818 0.16
December 31, 1995....... 1,379 0.25 1,019 0.18 (843) (0.14) 176 0.04
</TABLE>
15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Shareholders and Board of Trustees
of CIM High Yield Securities:
We have audited the accompanying statement of assets and liabilities
including the statement of investments of CIM High Yield Securities, as of
December 31, 1996, 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
years in the two year period then ended and financial highlights for each of
the years in the nine year period then ended and for the period from November
18, 1987 (commencement of operations) to December 31, 1987. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996 by correspondence with the custodian. An audit
also includes assessing the accounting principles used, and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
CIM High Yield Securities as of December 31, 1996, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the years in the two year period then ended and financial
highlights for each of the years in the nine year period then ended and for
the period from November 18, 1987 (commencement of operations) to December 31,
1987, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
January 31, 1997
16
<PAGE>
To Shareholders of CIM High Yield Securities (the "Fund")
About the Fund's Dividend Reinvestment Plan (unaudited)
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 First Data Investor Services Group, Inc. (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 share 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 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.
17
<PAGE>
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 First Data
Investor Services Group, Inc. at 1-800-331-1710, or by writing the Fund, c/o
First Data Investor Services Group, Inc., One Exchange Place, Boston, MA
02109.
- -------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS
At the Annual Meeting of Shareholders, held on September 25, 1996, the
following matters were voted on and approved:
PROPOSAL NO. 1
The election of the following Trustees*:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Dr. Donald Ratajczak 4,988,271 58,737
Robert G. Wade, Jr. 4,984,742 62,266
</TABLE>
*Represents 88.70% of shares voting at the meeting
PROPOSAL NO. 2
To ratify the selection of KPMG Peat Marwick LLP as the Fund's independent
auditors**:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED
--- ------- ---------
<S> <C> <C>
4,962,160 36,333 48,515
</TABLE>
**Represents 88.27% of shares voting at the meeting
PROPOSAL NO. 3
To approve a new investment advisory agreement between the Fund and
Chancellor LGT Asset Management, Inc.***:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED
--- ------- ---------
<S> <C> <C>
4,517,492 430,195 99,320
</TABLE>
***Represents 80.40% of shares voting at the meeting
18
<PAGE>
CIM
----------------------------------------------------------------------
----------------------------------------------------------------------
HIGH YIELD SECURITIES
ANNUAL REPORT
DECEMBER 31, 1996
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 of any
securities mentioned in the
report.
