<PAGE> 1
CIM HIGH YIELD SECURITIES -- 1998 REVIEW & OUTLOOK
The total return for CIM High Yield Securities (the "Fund") was (3.09)%
before Fund expenses and (4.95)% after Fund expenses, based on net asset value
((5.45%) total return based on market value), for the year ended December 31,
1998. The Fund underperformed its benchmark, the Credit Suisse First Boston High
Yield Index, which had a total return of 0.58% for the same period. Relative to
other, less risky fixed income asset classes, high yield securities
underperformed both investment grade corporate securities and 10 year Treasury
securities, which returned 8.57% and 12.87%, respectively. Past performance is
not indicative of future results.
Market conditions for high yield securities were very difficult during
1998, particularly in the latter half of the year. The global financial crisis
of late summer/early fall caused an unprecedented flight from the more risky
high yield securities to U.S. Treasuries, resulting in severe underperformance
of high yield securities. High yield spreads, which began the year at 386 basis
points versus comparable Treasuries, widened to approximately 657 basis points
by year end 1998. Although both demand and market valuations did improve late in
1998, risk premiums remained much higher than earlier in 1998 as global
financial stress has given way to growing concerns about the sustainability of
domestic economic growth and the U.S. corporate earnings outlook.
We expect the market for high yield assets in 1999 will remain highly
volatile as the U.S. and global economies move to below trend rates of growth.
We further anticipate that the Federal Reserve will continue to pursue an
accommodative course for monetary policy and as such, a U.S. recession should be
avoided. While on balance we believe the high yield sector will outperform the
less risky Treasury sector during the year -- due largely to the higher yield
cushion that high yield securities currently offer -- we remain cautious with
regard to the portfolio's risk profile. We will continue to favor issuers with
strong cash flow positions and a demonstrated ability to access the capital
markets to meet their financing requirements.
Thank you for your support during a difficult year and we look forward to a
prosperous 1999.
INVESCO (NY), Inc.
February 24, 1999
<PAGE> 2
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 123.0%
TELECOMMUNICATION -- 19.2%
$ 325,000 Hermes Euro Railtel, Sr. Notes, 11.500%, 08/15/07........... $ 350,187
750,000 Hyperion Telecommunications, Inc., Sr. Discount Notes,
0/13.000%, 04/15/03**..................................... 555,000
1,000,000 Intermedia Communication, 8.50%, 01/15/08................... 960,000
700,000 Iridium LLC Capital Corp., Sr. Sub. Notes, 11.250%,
07/15/05.................................................. 590,625
1,000,000 Level 3 Communications, 9.125%, 05/01/08.................... 995,000
700,000 MGC Communications, Inc., Sr. Notes, 13.000%, 10/01/04...... 465,500
500,000 Omnipoint Corp., Sr. Notes, 11.625%, 08/15/06............... 347,500
1,000,000 PSINet, Inc., Sr. Notes, 10.000%, 02/15/05.................. 990,000
1,000,000 Primus Telecom Group, 11.750%, 08/01/04..................... 1,050,000
1,000,000 Source Media, 12.000%, 11/01/04............................. 750,000
750,000 Star Choice Communications, Sr. Secured Notes, 13.000%,
12/15/05.................................................. 746,250
------------
7,800,062
------------
OIL AND GAS -- 7.7%
1,000,000 Continental Resources, 10.250%, 08/01/08.................... 860,000
750,000 Costilla Energy, Inc., Sr. Notes, 10.250%, 10/01/06......... 532,500
500,000 Ocean Energy, Inc., Sr. Sub. Notes, 10.375%, 10/15/05....... 530,000
500,000 Ocean Energy, Inc., 8.375%, 07/01/08........................ 475,000
750,000 Vintage Petroleum, Inc., Sr. Sub. Notes, 9.000%, 12/15/05... 742,500
------------
3,140,000
------------
CABLE T.V. -- 10.5%
1,000,000 Charter Communications International, Inc., Sr. Notes,
11.250%, 03/15/06......................................... 1,117,500
1,250,000 Galaxy Telecommunication L.P., Sr. Sub. Notes, 12.375%,
10/01/05.................................................. 1,390,625
1,000,000 Intermedia Capital Partners, Sr. Notes, 11.250%, 08/01/06... 1,127,500
600,000 James Cable Partners, 10.750%, 08/15/04..................... 627,750
------------
4,263,375
------------
METALS AND MINERALS -- 4.3%
1,000,000 AEI Holding Company, Sr. Notes, 10.500%, 12/15/05***........ 1,000,000
750,000 Kaiser Aluminum & Chemical Corporation, Sr. Sub. Notes,
12.750%, 02/01/03......................................... 744,375
------------
1,744,375
------------
STEEL -- 0.2%
700,000 Acme Metals, Inc., Sr. Notes, 10.875%, 12/15/07............. 77,000
------------
HEALTHCARE -- 7.4%
600,000 Dade International, Inc., Sr. Sub. Notes, 11.125%,
05/01/06.................................................. 666,750
525,000 HealthSouth Corp., 3.250%, 04/01/03......................... 448,219
1,250,000 Magellan Health Services, Inc., Sr. Sub. Notes, 9.000%,
02/15/08.................................................. 1,118,750
700,000 Maxxim Medical, Inc., Sr. Secured Sub. Notes, 10.500%,
08/01/06.................................................. 754,250
------------
2,987,969
------------
OTHER RETAILERS -- 1.9%
750,000 Central Tractor Farm & Country, Sr. Notes, 10.625%,
04/01/07.................................................. 765,000
------------
</TABLE>
See Notes to Financial Statements.
1
<PAGE> 3
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
SURFACE TRANSPORT -- 2.5%
$ 500,000 American Commercial Lines, 10.250%, 06/30/08................ $ 510,000
750,000 Ameritruck Distribution Corp., Sr. Sub. Notes, 12.250%,
11/15/05.................................................. 52,500
500,000 Stena AB, Sr. Notes, 8.750%, 06/15/07....................... 470,625
------------
1,033,125
------------
BUSINESS EQUIPMENT AND SERVICES -- 6.1%
1,000,000 Unisys Corp., Sr. Notes, 12.000%, 04/15/03.................. 1,122,500
500,000 Unisys Corp., Sr. Notes, 7.875%, 04/01/08................... 530,000
820,000 United Stationers Supply, 8.375%, 04/15/08.................. 823,075
------------
2,475,575
------------
HOME FURNISHINGS -- 6.2%
1,000,000 Lifestyle Furnishings, Inc., Sr. Sub. Notes, 10.875%,
08/01/06.................................................. 1,100,000
500,000 Salton/Maxim Housewares, 10.750%, 12/15/05***............... 499,375
825,000 Shop Vac Corp., Sr. Secured Notes, 10.625%, 09/01/03........ 900,281
------------
2,499,656
------------
HOTELS AND CASINOS -- 6.9%
400,000 Circus Circus Enterprise, 9.250%, 12/01/05.................. 409,500
1,000,000 Hollywood Park, Sr. Sub. Notes, 9.500%, 08/01/07............ 992,500
500,000 Park Place Entertainment, 7.875%, 12/15/05***............... 501,250
1,000,000 Trump Atlantic City Associates, 1st Mortgage Notes, 11.250%,
05/01/06.................................................. 880,000
------------
2,783,250
------------
FOOD PRODUCTS -- 2.7%
1,000,000 International Home Foods, Inc., Sr. Sub. Notes, 10.375%,
11/01/06.................................................. 1,078,750
------------
BUILDING AND DEVELOPMENT -- 3.9%
900,000 American Builders and Contractors, Sr. Sub. Notes, 10.625%,
05/15/07.................................................. 850,500
950,000 Desa International, 9.875%, 12/15/07........................ 722,000
------------
1,572,500
------------
APPAREL/TEXTILES -- 3.6%
1,000,000 CMI Industries, 9.500%, 10/01/03............................ 960,000
500,000 Pillowtex Corp., 9.000%, 12/15/07........................... 520,000
------------
1,480,000
------------
BEVERAGE AND TOBACCO -- 2.8%
875,000 Delta Beverage Group, Inc., Sr. Notes, 9.750%, 12/15/03..... 914,375
250,000 Eagle Family Foods, 8.7500%, 01/15/08....................... 236,875
------------
1,151,250
------------
BROADCAST/RADIO/T.V. -- 10.1%
1,000,000 LIN Television Corp., Sr. Sub. Notes, 8.375%, 03/01/08...... 997,500
2,000,000 Paxson Communications, 11.625%, 10/01/02.................... 2,030,000
976,000 SFX Broadcasting, Inc., Sr. Sub. Notes, 10.750%, 05/15/06... 1,077,260
------------
4,104,760
------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE> 4
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
LEISURE -- 5.6%
$ 425,000 Loews Cineplex Entertainment, 8.875%, 08/01/08.............. $ 436,687
500,000 Muzak LP Capital, Sr. Notes, 10.000%, 10/01/03.............. 517,500
500,000 Riddell Sports, Inc., Sr. Notes, 10.500%, 07/15/07.......... 475,000
1,000,000 Samsonite Corp., 10.750%, 06/15/08.......................... 850,000
------------
2,279,187
------------
AUTOMOTIVE -- 3.7%
500,000 Hayes Lemmerz Intl., Inc., 8.250%, 12/15/08***.............. 500,000
1,000,000 Safety Components, Sr. Sub. Notes, 10.125%, 07/15/07........ 1,008,750
------------
1,508,750
------------
PACKAGING AND CONTAINERS -- 2.5%
1,000,000 Stone Container Corp., Sr. Sub. Notes, 12.250%, 04/01/02.... 1,002,500
------------
COSMETICS/TOILETRIES -- 2.3%
850,000 Chattem, Inc., Sr. Sub. Notes, 12.750%, 06/15/04............ 949,875
------------
FOOD DRUG RETAILER -- 0.6%
250,000 Duane Reade, Inc., 9.250%, 02/15/08......................... 255,625
------------
FOOD SERVICES -- 0.6%
500,000 Colorado Prime Corp., 12.500%, 05/01/04..................... 225,000
------------
CHEMICALS AND PLASTICS -- 1.6%
750,000 Sterling Chemicals, Inc., Sr. Sub. Notes, 11.750%,
08/15/06.................................................. 645,000
------------
CONGLOMERATES -- 3.1%
1,250,000 Fisher Scientific International, Inc., Sr. Sub. Notes,
9.000%, 02/01/08.......................................... 1,250,000
------------
FINANCE -- 1.5%
600,000 Dollar Financial Group, Inc., Sr. Notes, 10.875%,
11/15/06.................................................. 606,750
------------
UTILITIES -- 3.2%
1,250,000 Niagara Mohawk Power Corp., Sr. Notes, 7.375%, 07/01/03..... 1,279,688
------------
ELECTRONICS -- 2.3%
1,000,000 Viasystems Inc., 9.750%, 06/01/07........................... 950,000
------------
TOTAL CORPORATE BONDS AND NOTES (Cost $52,296,716).......... 49,909,022
------------
UNITED STATES GOVERNMENT SECURITIES -- 3.2%
UNITED STATES TREASURY BILLS:
69,000 4.05%++, 01/14/1999......................................... 68,900
1,214,000 4.43%++, 01/21/1999......................................... 1,211,073
------------
TOTAL UNITED STATES GOVERNMENT SECURITIES (Cost
$1,279,973)............................................... 1,279,973
------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 5
CIM HIGH YIELD SECURITIES
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------ ------------
<C> <S> <C>
COMMON STOCK -- 1.6%
30,000 Dr. Pepper Bottling Holdings, Class A, (11/01/98, cost
$27,000)**+............................................... $ 630,000
1,601 Harvest Foods, Inc., (02/20/1992, cost $36)**+.............. 1,601
------------
TOTAL COMMON STOCK
(Cost $27,036)............................................ 631,601
------------
WARRANTS -- 0.3%
1,250 Capital Gaming International, Inc., Warrants, expire
02/01/1999, (02/10/1994, cost $0)**+...................... 26
500 Colorado Prime Holdings, Warrants, expire 12/31/03,
(07/23/1997, cost $0)**+***............................... 5,000
1,000 Globalstar Telecom, Warrants, expire 02/15/04, (02/13/1997,
cost $0)**+***............................................ 60,000
700 MGC Communications, Inc., Warrants, expire 10/01/04,
(01/1998, cost $0)**+***.................................. 21,588
1,000 Primus Telecom, Warrants, expire 08/01/04, (07/30/1997, cost
$0)**+.................................................... 12,500
17,370 Star Choice Communications, Warrants, expire 12/15/05,
(12/18/1997, cost $0)**+.................................. 28,661
------------
127,775
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $53,603,725*)............................ 128.1% 51,948,371
OTHER ASSETS AND LIABILITIES (NET)............................... (28.1) (11,381,772)
----- -------------
NET ASSETS....................................................... 100.0% $ 40,566,599
===== =============
</TABLE>
- ---------------
<TABLE>
<C> <S>
* 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, 1998 is $759,376 which represents
1.872% of total net assets.
++ Rate represents annualized yield at date of purchase.
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 6
CIM HIGH YIELD SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $53,603,725) (Note 1)
See accompanying statement.......................................... $51,948,371
Cash.................................................................. 533
Interest receivable................................................... 1,330,514
Prepaid expenses...................................................... 10,038
-----------
Total Assets..................................................... 53,289,456
LIABILITIES:
Notes payable (including accrued interest of $143,997) (Note 5)....... $12,643,997
Investment advisory fee payable (Note 2).............................. 17,285
Shareholder servicing agent fees payable (Note 2)..................... 9,750
Administration fee payable (Note 2)................................... 3,333
Custodian fees payable (Note 2)....................................... 1,005
Accrued expenses and other payables................................... 47,487
-----------
Total Liabilities................................................ 12,722,857
-----------
NET ASSETS................................................................. $40,566,599
===========
NET ASSETS consist of:
Accumulated undistributed net investment income....................... $ 125,504
Accumulated net realized loss on investments sold..................... (8,031,488)
Unrealized depreciation of investments................................ (1,655,354)
Shares of beneficial interest, $0.01 per share par value,
issued and outstanding 5,867,796.................................... 58,678
Paid-in capital in excess of par value................................ 50,069,259
-----------
Total Net Assets................................................. $40,566,599
===========
NET ASSET VALUE PER SHARE
($40,566,599 / 5,867,796 shares of beneficial interest outstanding)...... $6.91
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
CIM HIGH YIELD SECURITIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................... $ 5,468,893
-----------
Total Investment Income........................... 5,468,893
EXPENSES:
Interest expense (Note 5).............................. $867,617
Investment advisory fee (Note 2)....................... 222,103
Legal and audit fees................................... 67,165
Administration fee (Note 2)............................ 41,110
Trustees' fees and expenses (Note 2)................... 30,178
Shareholder servicing agent fees (Note 2).............. 37,033
Custodian fees (Note 2)................................ 12,407
Miscellaneous.......................................... 42,399
--------
Total Expenses.................................... 1,320,012
-----------
NET INVESTMENT INCOME....................................... 4,148,881
-----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 3):
Net realized loss on investments sold during the
year.................................................. (2,248,607)
Net unrealized depreciation of investments during the
year.................................................. (3,990,241)
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS............. (6,238,848)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(2,089,967)
===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 8
CIM HIGH YIELD SECURITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
NET DECREASE IN CASH:
Cash flows from operating activities:
Interest and dividends received........................ $ 5,596,423
Operating expenses paid................................ (481,563)
------------
Net cash provided by operating activities................... $ 5,114,860
Cash flows from investing activities:
Increase in short-term securities, net................. (666,503)
Purchases of long-term securities...................... (33,041,568)
Proceeds from sales of long-term securities............ 33,343,984
------------
Net cash used in investing activities....................... (364,087)
-----------
Net cash provided by operating and investing activities..... 4,750,773
Cash flows from financing activities:
Interest payments on notes payable..................... (726,694)
Cash dividends paid*................................... (4,026,613)
------------
Net cash used in financing activities....................... (4,753,307)
-----------
Net decrease in cash........................................ (2,534)
Cash -- beginning of year................................... 3,067
-----------
Cash -- end of year......................................... $ 533
===========
RECONCILIATION OF NET DECREASE IN NET ASSETS TO NET CASH
PROVIDED BY OPERATING AND INVESTING ACTIVITIES:
Net decrease in net assets resulting from operations........ $(2,089,967)
Interest expense....................................... 867,617
Decrease in investments................................ 5,874,761
Decrease in interest receivable........................ 127,530
Decrease in prepaid expenses........................... 3,009
Increase in investment advisory fee payable............ 2,086
Decrease in accrued Trustee's fees and expenses........ (6,504)
Increase in shareholder servicing agent fees payable... 5,350
Increase in administration fee payable................. 597
Decrease in custodian fee payable...................... (345)
Decrease in accrued expenses and other payables........ (33,361)
------------
Total adjustments............................ 6,840,740
-----------
Net cash provided by operating and investing activities..... $ 4,750,773
===========
</TABLE>
- ---------------
*Non cash financing activities include reinvestments of dividends of $809,532.
See Notes to Financial Statements.
7
<PAGE> 9
CIM HIGH YIELD SECURITIES
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net investment income.................................... $ 4,148,881 $ 4,459,941
Net realized gain/(loss) on investments sold during the
year................................................... (2,248,607) 1,294,580
Net unrealized appreciation/(depreciation) of investments
during the year........................................ (3,990,241) 412,056
----------- -----------
Net increase/(decrease) in net assets resulting from
operations............................................. (2,089,967) 6,166,577
Distributions to shareholders from net investment
income................................................. (4,000,621) (4,485,703)
Distributions to shareholders in excess of net investment
income................................................. -- (149,068)
Net increase in net assets from Fund share transactions
(Note 4)............................................... 809,532 820,897
----------- -----------
Net increase/(decrease) in net assets.................... (5,281,056) 2,352,703
NET ASSETS:
Beginning of year........................................ 45,847,655 43,494,952
----------- -----------
End of year (including undistributed net investment
income/(distributions in excess of net investment
income) of $148,260 and $(29,390), respectively)....... $40,566,599 $45,847,655
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 10
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
12/31/98* 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58 $ 7.10
------ ------ ------ ------ ------ ------ ------
Net investment income........................ 0.71 0.78 0.78 0.77 0.82 0.87 0.83
Net realized and unrealized gain/(loss) on
investments................................. (1.07) 0.30 0.36 0.23 (0.89) 0.71 0.46
------ ------ ------ ------ ------ ------ ------
Net increase/(decrease) in net assets
resulting from investment operations........ (0.36) 1.08 1.14 1.00 (0.07) 1.58 1.29
Change in net asset value from Fund share
transaction................................. -- -- -- -- -- (0.31) --
Distributions:
Dividends from net investment income......... (0.69) (0.78) (0.77) (0.79) (0.84) (0.83) (0.81)
Dividends in excess of net investment
income...................................... -- (0.03) -- -- -- -- --
Distributions from net realized capital
gains....................................... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total from distributions..................... (0.69) (0.81) (0.77) (0.79) (0.84) (0.83) (0.81)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year................. $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58
====== ====== ====== ====== ====== ====== ======
Market value, end of year.................... $7.190 $8.313 $8.125 $7.875 $7.125 $7.875 $7.500
====== ====== ====== ====== ====== ====== ======
Total investment return...................... (5.45)% 13.31% 14.38% 22.72% 0.99% 16.55%(3) 25.70%
====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $40,567 $45,848 $43,495 $40,636 $38,678 $42,901 $30,024
Ratio of net investment income to average net
assets...................................... 9.37% 10.08% 10.46% 10.32% 10.82% 11.17% 11.00%
Ratio of operating expenses to average net
assets...................................... 1.02%(2) 1.06%(2) 1.10%(2) 1.14%(2) 0.95%(2) 1.09%(2) 1.65%(2)
Portfolio turnover rate(1)................... 62.4% 154.5% 172.2% 79.9% 50.6% 114.3% 40.6%
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
12/31/91 12/31/90 12/31/89
-------- -------- --------
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 5.65 $ 7.38 $ 9.41
------ ------ ------
Net investment income........................ 0.84 0.86 1.13
Net realized and unrealized gain/(loss) on
investments................................. 1.44 (1.72) (1.96)
------ ------ ------
Net increase/(decrease) in net assets
resulting from investment operations........ 2.28 (0.86) (0.83)
Change in net asset value from Fund share
transaction................................. -- -- --
Distributions:
Dividends from net investment income......... (0.83) (0.87) (1.15)
Dividends in excess of net investment
income...................................... -- -- --
Distributions from net realized capital
gains....................................... -- -- (0.05)
------ ------ ------
Total from distributions..................... (0.83) (0.87) (1.20)
------ ------ ------
Net asset value, end of year................. $ 7.10 $ 5.65 $ 7.38
====== ====== ======
Market value, end of year.................... $6.625 $4.750 $7.000
====== ====== ======
Total investment return...................... 58.61% (20.89)% (15.18)%
====== ====== ======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $28,015 $22,283 $29,122
Ratio of net investment income to average net
assets...................................... 12.59% 13.00% 12.78%
Ratio of operating expenses to average net
assets...................................... 2.46% 2.35% 2.28%
Portfolio turnover rate(1)................... 51.2% 34.9% 77.4%
</TABLE>
- ---------------
* On May 29, 1998 the Fund entered into a new investment advisory agreement
with INVESCO (NY), Inc. due to the acquisition of Chancellor LGT Asset
Management, Inc. by AMVESCAP PLC.
(1) This rate is, in general, the percentage computed by taking the lesser of
the cost of purchases or proceeds from the sales 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 2.98%, 3.06%, 3.19%,
3.52%, 2.80%, 2.63% and 2.06% for the years ended December 31, 1998, 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> 11
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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> 12
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 INVESCO (NY), 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, 1998,
amounted to $33,041,568 and $33,343,984, respectively.
At December 31, 1998, aggregate gross unrealized appreciation for all
securities (other than restricted securities), in which there is an excess of
value over tax costs amounted to $2,009,100, 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 $2,542,590.
At December 31, 1998, aggregate gross unrealized appreciation for
restricted securities in which there is an excess of value over tax costs
amounted to $87,838, and the aggregate gross unrealized depreciation for
restricted securities in which there is an excess of tax cost over value
amounted to $1,209,702.
11
<PAGE> 13
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, 1998 DECEMBER 31, 1997
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued as reinvestment of dividends.................. 105,562 $809,532 104,665 $820,897
------- -------- ------- --------
Net increase......................................... 105,562 $809,532 104,665 $820,897
======= ======== ======= ========
</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,
1998, the Fund had borrowings of $12,500,000 outstanding under this Agreement.
During the year ended December 31, 1998, the Fund had an average outstanding
daily balance of $12,500,000 with interest rates ranging from 6.4688% to 7.0625%
and average debt per share of $2.15. For the year ended December 31, 1998,
interest expense totaled $867,617 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, 1998, the Fund had available for Federal tax purposes
unused capital loss carryforwards of $2,716,656, $1,552,171, $330,065, $679,423,
$253,172, and $2,499,736 expiring in 1999, 2000, 2002, 2003, 2004, and 2006
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 (below
investment-grade bonds). These securities generally involve more credit risk
than securities in the higher rating categories. In addition, the trading market
for high yield securities may be relatively less liquid than the market for
higher-rated securities. The Fund's use of leverage also increases exposure to
capital risk.
12
<PAGE> 14
CIM HIGH YIELD SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. PORTFOLIO MANAGER CHANGES
At the time of this report last year, Daniel Baldwin was the Portfolio
Manager for the Fund until April, 1998. From April, 1998 through September, 1998
the Portfolio Manager was Kevin Rogers of INVESCO (NY), Inc. Previously, Mr.
Rogers had been an Analyst with Fidelity Investments from July, 1988 through
June, 1997. In September, 1998, Cheng-Hock Lau, the Chief Investment Officer of
INVESCO (NY), Inc. -- Fixed Income Group became the Portfolio Manager for the
Fund. Prior to joining INVESCO (NY), Inc., Mr. Lau was Senior Portfolio Manager
for Global Fixed Income with Fiduciary Trust from 1992 through 1995.
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET INCREASE/(DECREASE)
NET NET REALIZED AND IN NET ASSETS
INVESTMENT INVESTMENT UNREALIZED 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>
1998 -- QUARTER ENDED
March 31, 1998........ $1,580 $0.27 $1,235 $0.21 $ 1,062 $ 0.18 $ 2,297 $ 0.39
June 30, 1998......... 1,293 0.22 951 0.16 (1,462) (0.25) (511) (0.09)
September 30, 1998.... 1,419 0.24 1,075 0.18 (3,239) (0.56) (2,164) (0.37)
December 31, 1998..... 1,176 0.20 887 0.15 (2,600) (0.44) (1,713) (0.29)
1997 -- QUARTER ENDED
March 31, 1997........ 1,389 0.24 1,059 0.19 (236) (0.04) 822 0.14
June 30, 1997......... 1,465 0.26 1,122 0.20 1,145 0.20 2,267 0.40
September 30, 1997.... 1,474 0.26 1,128 0.20 1,295 0.22 2,243 0.44
December 31, 1997..... 1,484 0.26 1,151 0.20 (497) (0.09) 654 0.11
</TABLE>
13
<PAGE> 15
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, 1998, 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, 1998 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, 1998, 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.
/s/ KPMG LLP
New York, New York
February 12, 1999
14
<PAGE> 16
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> 17
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.
16
<PAGE> 18
CIM HIGH YIELD SECURITIES
SHAREHOLDER VOTING RESULTS
At the Annual Meeting of Shareholders, held on October 7, 1998, the
following matters were voted on and approved:
PROPOSAL NO. 1
The election of the following Trustee:
<TABLE>
<CAPTION>
FOR WITHHELD UNVOTED
--- -------- -------
<S> <C> <C> <C>
Dr. Bruce H. Olson 5,063,007* 49,654
</TABLE>
*Represents 86.78% of the outstanding shares of the Fund.
PROPOSAL NO. 2
To ratify the selection of KPMG LLP as the Fund's independent auditors:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED UNVOTED
--- ------- --------- -------
<S> <C> <C> <C>
5,029,269** 22,146 61,247
</TABLE>
**Represents 86.20% of the outstanding shares of the Fund.
17
<PAGE> 19
CIM
- --------------------------------------------------------------------------------
HIGH YIELD SECURITIES
ANNUAL REPORT
DECEMBER 31, 1998
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 2/99
