<PAGE>
CIM HIGH YIELD SECURITIES -- 1997 REVIEW AND OUTLOOK
The total return for CIM High Yield Securities (the "Fund") was 15.83%
before Fund expenses and 14.50% after Fund expenses, based on net asset value
(13.31% total return based on market value), for the year ended December 31,
1997. This compares very favorably with the Fund's benchmark, the Credit Suisse
First Boston High Yield Index, which had a total return of 12.63% for the same
period. The Fund has also performed well relative to other asset classes. For
the year ended December 31, 1997, investment grade corporate securities and
10-year Treasuries returned 10.39% and 11.10%, respectively. These securities
are, of course, less risky than the securities in which the Fund invests. The
Fund's strong performance is generally due to the ongoing focus on cash-pay,
single-B average quality, shorter duration securities in the marketplace. Past
performance is not indicative of future results.
Market conditions continue to be very favorable for leveraged credits.
While the supply of new issues has grown at a very rapid pace (approximately
$135 billion in 1997), it has been easily supported by strong demand from mutual
funds, structured portfolio products, insurance companies, and institutional and
international investors. This growth has fueled several market changes including
increased financing available for new technologies and foreign issuers. In
addition, the volatility in the equity and emerging markets, fueled by concerns
over Asia, has accelerated investor interest in the more stable returns
currently available in the U.S. high yield market. In this environment, high
yield spreads to comparable Treasuries have widened to approximately 386 basis
points in December 1997 from 355 basis points at the beginning of the year.
The current macroeconomic environment of low inflation, moderate growth,
favorable Treasury and equity markets, and an equilibrium of technical factors
remain favorable for leveraged credits. However, given some of the recent
troubling developments in several of the Asian economies, our sensitivity to
these markets is heightened with regard to exports and other critical issues
that may directly impact the credit quality of some U.S. companies.
In our investment efforts for 1998, we expect to continue to focus on the
more stable industry sectors and credits that tend to exhibit lower leverage and
stronger debt coverages than comparably priced securities. Specifically, we
intend to continue to focus on the industries that should maintain strong
competitive positions or on companies within industries that maintain dominant
market positions and/or strong asset values.
The high yield market will, in our opinion, continue to outperform other
fixed income classes over the long term. We believe the current environment
continues to provide solid underlying support for credit fundamentals.
We appreciate your support during 1997 and hope that we can provide you
another positive year in 1998.
Chancellor LGT Asset Management,
Inc.
February 13, 1998
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 123.0%
TELECOMMUNICATION -- 18.8%
$ 500,000 Comcast Cellular, Sr. Note, 9.500%, 05/01/07................ $ 523,750
350,000 Concentric Network Corp, 12.750%, 12/15/07***............... 359,625
750,000 Fonorola Inc., Sr. Secured Note, 12.500%, 08/15/02.......... 834,375
1,000,000 Globalstar LP/Capital, 11.375%, 02/15/04.................... 1,010,000
325,000 Hermes Euro Railtel, 11.500%, 08/15/07***................... 360,750
700,000 Iridium LLC Capital Corp, 11.250%, 07/15/05***.............. 693,000
750,000 Metrocall, Inc., Sr. Sub. Note, 10.375%, 10/01/07........... 765,000
700,000 MGC Communications Inc., 13.000%, 10/01/04***............... 703,500
500,000 Omnipoint Corporation, 11.625%, 08/15/06.................... 530,000
1,000,000 Primus Telecom Group, 11.750%, 08/01/04..................... 1,070,000
1,000,000 Source Media, 12.000%, 11/01/04***.......................... 990,000
750,000 Star Choice Communications, 13.000%, 12/15/05***............ 774,375
------------
8,614,375
------------
METALS AND MINERALS -- 9.4%
1,000,000 AEI Holding Company, 10.000%, 11/15/07...................... 1,027,500
1,250,000 Acme Metals Inc., 10.875%, 12/15/07***...................... 1,228,125
750,000 Kaiser Aluminum & Chemical Corporation, Sr. Sub. Note,
12.750%, 02/01/03......................................... 800,625
1,250,000 Murrin Murrin Holdings, 9.375%, 08/31/07***................. 1,250,000
------------
4,306,250
------------
CABLE T.V. -- 9.2%
1,000,000 Charter Communications International, Inc., Sr. Note,
11.250%, 03/15/06......................................... 1,098,750
1,250,000 Galaxy Telecommunication L.P., Sr. Sub. Note, 12.375%,
10/01/05.................................................. 1,378,125
1,000,000 Intermedia Capital Partners, Sr. Note, 11.250%, 08/01/06.... 1,112,500
600,000 James Cable Partners, 10.750%, 08/15/04..................... 634,500
------------
4,223,875
------------
PACKAGING AND CONTAINERS -- 6.3%
750,000 Pindo Deli, 10.750%, 10/01/07***............................ 645,000
350,000 Printpack Inc., Sr. Sub Note, 10.625%, 08/15/06............. 372,750
1,000,000 Stone Container Corp., Sr. Sub. Note, 12.250%, 04/01/02..... 1,020,000
1,000,000 Tjiwi Kimia Financial, 10.000%, 08/01/04***................. 830,000
------------
2,867,750
------------
APPAREL/TEXTILES -- 5.9%
1,000,000 CMI Industries, Sr. Sub, Notes 9.500%, 10/01/03............. 987,500
500,000 Pillowtex Corporation, 9.000%, 12/15/07***.................. 511,875
500,000 Polysindo International Finance, Note, 11.375%, 06/15/06.... 410,000
750,000 Tultex Corporation, Sr. Note, 10.625%, 03/15/05............. 780,000
------------
2,689,375
------------
</TABLE>
See Notes to Financial Statements.
1
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
FOOD PRODUCTS -- 5.7%
$1,000,000 International Home Foods Inc., Sr. Sub. Note, 10.375%,
11/01/06.................................................. $ 1,100,000
650,000 North Atlantic Trading, Sr. Note, 11.000%, 06/15/04***...... 682,500
750,000 Van de Kamps Inc., Sr. Sub. Note, 12.000%, 09/15/05......... 832,500
------------
2,615,000
------------
BROADCAST/RADIO/T.V. -- 5.4%
375,000 Chancellor Media Corp., 8.125%, 12/15/07***................. 368,438
1,000,000 FWT Inc., 9.875%, 11/15/07***............................... 1,027,500
1,000,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.750%, 05/15/06.... 1,097,500
------------
2,493,438
------------
OTHER RETAILERS -- 5.3%
800,000 Brylane Capital Corporation, Series B, Sr. Sub. Note,
10.000%, 09/01/03......................................... 852,000
750,000 Central Tractor Farm & Country, Sr. Note, 10.625%,
04/01/07.................................................. 795,000
1,000,000 Hills Stores Company, Sr. Note, 12.500%, 07/01/03........... 795,000
------------
2,442,000
------------
BUSINESS EQUIPMENT AND SERVICES -- 4.9%
600,000 Loomis Fargo & Company, Sr. Sub. Note, 10.000%, 01/15/04.... 604,500
1,000,000 Unisys Corporation, Sr. Note, 12.000%, 04/15/03............. 1,132,500
500,000 Viasystems Inc., Sr. Sub. Note, 9.750%, 06/01/07............ 516,875
------------
2,253,875
------------
HEALTHCARE -- 4.9%
600,000 Dade International, Inc., Sr. Sub. Note, 11.125%,
05/01/06.................................................. 669,000
700,000 Maxxim Medical Inc., Sr. Secured Sub. Note, 10.500%,
08/01/06.................................................. 759,500
800,000 Paragon Health Network, 9.500%, 11/01/07***................. 802,000
------------
2,230,500
------------
CHEMICALS AND PLASTICS -- 4.5%
1,250,000 PCI Chemicals Canada, 9.250%, 10/15/07***................... 1,251,561
750,000 Sterling Chemicals Inc., Sr. Sub. Note, 11.750%, 08/15/06... 804,375
------------
2,055,936
------------
HOTELS AND CASINOS -- 4.5%
1,000,000 Hollywood Park Sr., Sub. Note, 9.500%, 08/01/07***.......... 1,070,000
1,000,000 Trump Atlantic City Associates, 1st Mortgage Note, 11.250%,
05/01/06.................................................. 982,500
------------
2,052,500
------------
HOME FURNISHINGS -- 4.4%
1,000,000 Lifestyle Furnishings Inc., Sr. Sub. Note, 10.875%,
08/01/06.................................................. 1,115,000
825,000 Shop Vac Corporation, Sr. Note, 10.625%, 09/01/03***........ 898,219
------------
2,013,219
------------
BUILDING AND DEVELOPMENT -- 4.2%
900,000 American Builders and Contractors, Sr. Sub. Note, 10.625%,
05/15/07.................................................. 937,125
950,000 Desa International, 9.875%, 12/15/07***..................... 976,125
------------
1,913,250
------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
BEVERAGE AND TOBACCO -- 3.2%
$ 500,000 Colorado Prime Corporation, 12.500%, 05/01/04............... $ 550,000
875,000 Delta Beverage Group Inc., Sr. Note, 9.750%, 12/15/03....... 925,313
------------
1,475,313
------------
SURFACE TRANSPORT -- 3.0%
750,000 Ameritruck Distribution Corporation, Sr. Sub. Note, 12.250%,
11/15/05.................................................. 783,750
600,000 Ryder TRS Inc., Sr. Sub. Note, 10.000%, 12/01/06............ 603,000
------------
1,386,750
------------
OIL AND GAS -- 2.9%
750,000 Costilla Energy Inc., Sr. Note, 10.250%, 10/01/06........... 781,875
500,000 United Meridian Corporation, Sr. Sub. Note, 10.375%,
10/15/05.................................................. 545,000
------------
1,326,875
------------
ECOLOGICAL -- 2.4%
1,000,000 Allied Waste North America, Sr. Sub. Note, 10.250%,
12/01/06.................................................. 1,095,000
------------
LEISURE -- 2.3%
500,000 Muzak LP Capital, Sr. Note, 10.000%, 10/01/03............... 522,500
500,000 Riddell Sports Inc., Sr. Note, 10.500%, 07/15/07............ 520,000
------------
1,042,500
------------
MANUFACTURING -- DIVERSIFIED -- 2.3%
1,000,000 Interlake Corporation, Sr. Sub. Deb., 12.125%, 03/01/02..... 1,038,750
------------
AUTOMOTIVE -- 2.2%
1,000,000 Safety Components, 10.125%, 07/15/07........................ 1,033,750
------------
COSMETICS/TOILETRIES -- 2.1%
850,000 Chattem Inc., Sr. Sub. Note, 12.750%, 06/15/04.............. 961,563
------------
FOOD/DRUG RETAILERS -- 2.0%
750,000 Grand Union Company, Sr. Note, 12.000%, 09/01/04............ 405,000
500,000 Jitney Jungle Stores, 10.375%, 09/15/07..................... 518,750
------------
923,750
------------
AEROSPACE -- 1.7%
750,000 Burke Industries Inc., 10.000%, 08/15/07***................. 780,000
------------
UTILITIES -- 1.5%
700,000 Trench Electric & Trench Inc., 10.255%, 12/15/07***......... 713,125
------------
FOOD SERVICE -- 1.5%
700,000 CFP Holdings Inc., Sr. Note, 11.625%, 01/15/04.............. 691,250
------------
FINANCE -- 1.4%
600,000... Dollar Financial Group Inc., Sr. Note, 10.875%, 11/15/06.... 642,750
------------
TRANSPORTATION -- 1.1%
500,000 Stena AB, 8.750%, 06/15/07.................................. 507,500
------------
TOTAL CORPORATE BONDS AND NOTES (Cost $54,850,276).......... 56,390,219
------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
UNITED STATES GOVERNMENT SECURITIES -- 1.3%
UNITED STATES TREASURY BILLS:
$ 295,000 5.04%++, 01/15/1998......................................... $ 294,432
317,000 4.37%++, 01/22/1998......................................... 316,205
------------
TOTAL UNITED STATES GOVERNMENT SECURITIES (Cost $610,637)... 610,637
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<C> <S> <C>
COMMON STOCK -- 1.4%
30,000 Dr. Pepper Bottling Holdings, Class A, (10/21/1988, cost
$27,000)**+............................................... 630,000
1,601 Harvest Foods Inc., (02/20/1992, cost $36)**+............... 1,601
972 Thermadyne Holdings Corporation, New**...................... 28,674
------------
TOTAL COMMON STOCK
(Cost $27,332)............................................ 660,275
------------
WARRANTS -- 0.4% (Cost $0.00)
1,250 Capital Gaming International Incorporated, Warrants, expire
02/01/1999, (2/10/1994, cost $0)**+....................... 1
500 Colorado Prime Holdings, Warrants, expire 12/31/03,
(07/23/1997, cost $0)**+***............................... 50,000
1,000 Globalstar Telecom, Warrants, expire 02/15/04, (02/13/1997,
cost $0)**+............................................... 102,000
1,000 Primus Telecom, Warrants, expire 08/01/04, (07/30/1997, cost
$0)**+.................................................... 10,000
------------
162,001
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $55,488,245*).......................... 126.1% 57,823,132
OTHER ASSETS AND LIABILITIES (NET)............................. (26.1) (11,975,477)
----- ------------
NET ASSETS..................................................... 100.0% $ 45,847,655
===== ============
</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, 1997 is $793,602 which
represents 1.731% of total net assets.
++ Rate represents annualized yield at date of purchase.
See Notes to Financial Statements.
4
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $55,488,245) (Note 1)
See accompanying statement.......................................... $57,823,132
Cash.................................................................. 3,067
Interest receivable................................................... 1,458,044
Prepaid expenses...................................................... 13,047
-----------
Total Assets..................................................... 59,297,290
LIABILITIES:
Notes payable (including accrued interest of $3,074) (Note 5)......... $12,503,074
Dividends payable..................................................... 835,524
Investment advisory fee payable (Note 2).............................. 15,199
Accrued Trustees' fees and expenses (Note 2).......................... 6,504
Shareholder servicing agent fees payable (Note 2)..................... 4,400
Administration fee payable (Note 2)................................... 2,736
Custodian fees payable (Note 2)....................................... 1,350
Accrued expenses and other payables................................... 80,848
-----------
Total Liabilities................................................ 13,449,635
-----------
NET ASSETS................................................................. $45,847,655
===========
NET ASSETS consist of:
Accumulated net realized loss on investments sold..................... $(5,805,637)
Unrealized appreciation of investments................................ 2,334,887
Shares of beneficial interest, $0.01 per share par value,
issued and outstanding 5,762,234.................................... 57,622
Paid-in capital in excess of par value................................ 49,260,783
-----------
Total Net Assets................................................. $45,847,655
===========
NET ASSET VALUE PER SHARE
($45,847,655 / 5,762,234 shares of beneficial interest outstanding)...... $7.96
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................... $5,753,861
Dividends.............................................. 57,500
----------
Total Investment Income........................... 5,811,361
EXPENSES:
Interest expense (Note 5).............................. $883,977
Investment advisory fee (Note 2)....................... 221,145
Legal and audit fees................................... 53,211
Administration fee (Note 2)............................ 40,102
Trustees' fees and expenses (Note 2)................... 34,000
Shareholder servicing agent fees (Note 2).............. 21,940
Custodian fees (Note 2)................................ 16,116
Miscellaneous.......................................... 80,929
--------
Total Expenses.................................... 1,351,420
----------
NET INVESTMENT INCOME....................................... 4,459,941
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(Notes 1 and 3):
Net realized gain on investments sold during the
year.................................................. 1,294,580
Net unrealized appreciation of investments during the
year.................................................. 412,056
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 1,706,636
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $6,166,577
==========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
NET INCREASE IN CASH:
Cash flows from operating activities:
Interest and dividends received........................ $ 5,606,727
Operating expenses paid................................ (451,649)
------------
Net cash provided by operating activities................... $ 5,155,078
Cash flows from investing activities:
Purchases of short-term securities, net................ 365,916
Purchases of long-term securities...................... (87,320,506)
Proceeds from sales of long-term securities............ 86,117,745
------------
Net cash used in investing activities....................... (836,845)
-----------
Net cash provided by operating and investing activities..... 4,318,233
Cash flows from financing activities:
Interest payments on notes payable..................... (885,634)
Cash dividends paid*................................... (3,430,955)
------------
Net cash used in financing activities....................... (4,316,589)
-----------
Net increase in cash........................................ 1,644
Cash -- beginning of year................................... 1,423
-----------
Cash -- end of year......................................... $ 3,067
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH
PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Net increase in net assets resulting from operations........ $ 6,166,577
Interest expense....................................... $ 883,977
Increase in investments................................ (2,599,727)
Increase in interest receivable........................ (148,388)
Decrease in prepaid expenses........................... 178
Decrease in investment advisory fee payable............ (3,153)
Decrease in accrued Trustees' fees and expenses........ (996)
Decrease in shareholder servicing agent fees payable... (434)
Decrease in administration fee payable................. (597)
Decrease in custodian fees payable..................... (1,304)
Increase in accrued expenses and other payables........ 22,100
------------
Total adjustments............................ (1,848,344)
-----------
Net cash provided by operating and investing activities..... $ 4,318,233
===========
</TABLE>
- ---------------
*Non cash financing activities include reinvestments of dividends of $820,897.
See Notes to Financial Statements.
7
<PAGE>
CIM HIGH YIELD SECURITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Net investment income.................................... $ 4,459,941 $ 4,354,382
Net realized gain/(loss) on investments sold during the
year................................................... 1,294,580 (242,657)
Net unrealized appreciation of investments during the
year................................................... 412,056 2,314,525
----------- -----------
Net increase in net assets resulting from operations..... 6,166,577 6,426,250
Distributions to shareholders from net investment
income................................................. (4,485,703) (4,323,851)
Distributions to shareholders in excess of net investment
income................................................. (149,068) --
Net increase in net assets from Fund share transactions
(Note 4)............................................... 820,897 756,369
----------- -----------
Net increase in net assets............................... 2,352,703 2,858,768
NET ASSETS:
Beginning of year........................................ 43,494,952 40,636,184
----------- -----------
End of year (including distributions in excess of net
investment income of $(29,390) and $(7,286),
respectively).......................................... $45,847,655 $43,494,952
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
CIM HIGH YIELD SECURITIES
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58 $ 7.10 $ 5.65
------ ------ ------ ------ ------ ------ ------
Net investment income........................ 0.78 0.78 0.77 0.82 0.87 0.83 0.84
Net realized and unrealized gain/(loss) on
investments................................. 0.30 0.36 0.23 (0.89) 0.71 0.46 1.44
------ ------ ------ ------ ------ ------ ------
Net increase/(decrease) in net assets
resulting from investment operations........ 1.08 1.14 1.00 (0.07) 1.58 1.29 2.28
Change in net asset value from Fund share
transaction................................. -- -- -- -- (0.31) -- --
Distributions:
Dividends from net investment income......... (0.78) (0.77) (0.79) (0.84) (0.83) (0.81) (0.83)
Dividends in excess of net investment
income...................................... (0.03) -- -- -- -- -- --
Distributions from net realized capital
gains....................................... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total from distributions..................... (0.81) (0.77) (0.79) (0.84) (0.83) (0.81) (0.83)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year................. $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58 $ 7.10
====== ====== ====== ====== ====== ====== ======
Market value, end of year.................... $8.313 $8.125 $7.875 $7.125 $7.875 $7.500 $6.625
====== ====== ====== ====== ====== ====== ======
Total investment return...................... 13.31% 14.38% 22.72% 0.99% 16.55%(3) 25.70% 58.61%
====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $45,848 $43,495 $40,636 $38,678 $42,901 $30,024 $28,015
Ratio of net investment income to average net
assets...................................... 10.08% 10.46% 10.32% 10.82% 11.17% 11.00% 12.59%
Ratio of operating expenses to average net
assets...................................... 1.06%(2) 1.10%(2) 1.14%(2) 0.95%(2) 1.09%(2) 1.65%(2) 2.46%
Portfolio turnover rate(1)................... 154.5% 172.2% 79.9% 50.6% 114.3% 40.6% 51.2%
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
12/31/90 12/31/89 12/31/88*
-------- -------- ---------
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 7.38 $ 9.41 $ 9.35
------ ------ ------
Net investment income........................ 0.86 1.13 1.16
Net realized and unrealized gain/(loss) on
investments................................. (1.72) (1.96) 0.12
------ ------ ------
Net increase/(decrease) in net assets
resulting from investment operations........ (0.86) (0.83) 1.28
Change in net asset value from Fund share
transaction................................. -- -- --
Distributions:
Dividends from net investment income......... (0.87) (1.15) (1.13)
Dividends in excess of net investment
income...................................... -- -- --
Distributions from net realized capital
gains....................................... -- (0.05) (0.09)
------ ------ ------
Total from distributions..................... (0.87) (1.20) (1.22)
------ ------ ------
Net asset value, end of year................. $ 5.65 $ 7.38 $ 9.41
====== ====== ======
Market value, end of year.................... $4.750 $7.000 $9.500
====== ====== ======
Total investment return...................... (20.89)% (15.18)% 11.67%
====== ====== ======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $22,283 $29,122 $36,394
Ratio of net investment income to average net
assets...................................... 13.00% 12.78% 12.07%
Ratio of operating expenses to average net
assets...................................... 2.35% 2.28% 2.36%
Portfolio turnover rate(1)................... 34.9% 77.4% 209.6%
</TABLE>
- ---------------
* Chancellor Trust Company became the Fund's investment adviser effective
September 30, 1988. On October 31, 1996 the Fund entered into a new
investment advisory agreement with Chancellor LGT Asset Management, Inc. due
to the acquisition of Chancellor Capital Management, Inc., the corporate
parent of Chancellor Trust Company, by Liechtenstein Global Trust, AG.
(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 year, excluding short-term securities.
(2) The annualized operating expense ratio excludes interest expense. The
annualized ratios including interest expense were 3.06%, 3.19%, 3.52%,
2.80%, 2.63% and 2.06% for the years ended December 31, 1997, 1996, 1995,
1994, 1993, and 1992, respectively.
(3) 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%.
See Notes to Financial Statements.
9
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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.
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
requirements 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.
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.
10
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. ("Investor Services Group"), a
wholly-owned subsidiary of First Data Corporation, to provide all administrative
services to the Fund other than those related to the investment decisions.
Investor Services Group 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. Investor Services Group
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, 1997,
amounted to $87,320,506 and $86,117,745, respectively.
At December 31, 1997, aggregate gross unrealized appreciation for all
securities (other than restricted securities), in which there is an excess of
value over tax costs amounted to $2,833,878, 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 $575,320.
At December 31, 1997, aggregate gross unrealized appreciation for
restricted securities in which there is an excess of value over tax costs
amounted to $373,127, and the aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over value amounted to
$296,798.
11
<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, 1997 DECEMBER 31, 1996
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued as reinvestment of dividends.................. 104,665 $820,897 102,537 $756,369
------- -------- ------- --------
Net increase......................................... 104,665 $820,897 102,537 $756,369
======= ======== ======= ========
</TABLE>
5. NOTES PAYABLE
The Fund currently has a $12.5 million ("commitment amount") line of credit
provided by BankBoston, N.A. (formerly 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,
1997, the Fund had borrowings of $12,500,000 outstanding under this Agreement.
During the year ended December 31, 1997, the Fund had an average outstanding
daily balance of $12,500,000 with interest rates ranging from 6.1825% to 7.0625%
and average debt per share of $2.19. For the year ended December 31, 1997,
interest expense totaled $883,977 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, 1997, the Fund had available for Federal tax purposes
unused capital loss carryforwards of $2,716,656, $1,552,171, $330,065, $679,423
and $253,172 expiring in 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.
12
<PAGE>
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. SUBSEQUENT EVENT
It was announced on January 29, 1998 that Amvescap, PLC, a global-asset
management company, had reached an agreement to acquire LGT Asset Management,
which controls Chancellor LGT Asset Management, Inc., the Fund's investment
adviser.
13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To 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, 1997, 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 ten year 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.
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, 1997 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, 1997, 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 ten year period then ended, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
February 13, 1998
14
<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 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 open
market) under such Plan, however, the amount of the distribution deemed to have
been received by participating Shareholders is the fair
15
<PAGE>
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 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 October 8, 1997, and
adjournments thereof, the following matters were voted on and approved:
PROPOSAL NO. 1
The election of the following Trustees:
<TABLE>
<CAPTION>
FOR WITHHELD UNVOTED
--- -------- -------
<S> <C> <C> <C>
John F. Nickoll 5,052,016* 54,828 626,093
</TABLE>
*Represents 88.12% of the outstanding shares of the Fund.
PROPOSAL NO. 2
To ratify the selection of KPMG Peat Marwick LLP as the Fund's independent
auditors:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED UNVOTED
--- ------- --------- -------
<S> <C> <C> <C>
5,031,158** 25,332 50,354 626,093
</TABLE>
**Represents 87.76% of the outstanding shares of the Fund.
16
<PAGE>
PROPOSAL NO. 3
To change the fundamental investment restriction regarding securities
subject to restrictions to exclude certain Rule 144A securities:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED UNVOTED
--- ------- --------- -------
<S> <C> <C> <C>
2,879,053*** 219,358 208,938 2,425,587
</TABLE>
***Represents 87.05% of shares voted at the meeting.
17
<PAGE>
CIM
- --------------------------------------------------------------------------------
HIGH YIELD SECURITIES
ANNUAL REPORT
DECEMBER 31, 1997
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.
CIM 3192 2/98
