-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RInWsnAcDxsNlVSxqNyLR8Peo19qUw1fc4xA8LwP+qS2fLgHsqNvuTXNOITMFHrH PqZY03xeLKOVhxC7LKHOuQ== 0000927405-97-000052.txt : 19970228 0000927405-97-000052.hdr.sgml : 19970228 ACCESSION NUMBER: 0000927405-97-000052 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIM HIGH YIELD SECURITIES CENTRAL INDEX KEY: 0000821466 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05328 FILM NUMBER: 97544877 BUSINESS ADDRESS: STREET 1: C/O CHANCELLOR TRUST COMPANY STREET 2: 1166 AVENUE OF THE AMERICAS 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2122789559 MAIL ADDRESS: STREET 1: C/O CHANCELLOR TRUST COMPANY STREET 2: 1166 AVENUE OF THE AMERICAS 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 N-30D 1 CIM HIGH YIELD SECURITIES -- 1996 REVIEW AND OUTLOOK Dear Shareholder: 1996 was an excellent year in both absolute and relative terms for the high yield market and CIM High Yield Securities (the "Fund"). The high yield market, as measured by the CS First Boston High Yield Index, was up 12.4% while the return of the ten-year Treasury was 0.9% for the year ended December 31, 1996. With the strong performance, spreads on high yield securities narrowed during the year from 484 basis points to a level of approximately 355 basis points over the ten-year Treasury. This strong performance was due to a stronger than expected economy which gave support to the high yield companies and forced Treasury yields to increase for most of the year. The Fund performed well, returning 16.5% based on net asset value before fees and expenses. After fees and expenses, the Fund returned 14.4% on a net asset value basis. The strong relative performance of the Fund was due in large part to our focus on quality single B issues which benefited from a stronger economy. As we entered 1996 our focus was on sectors such as radio/TV, cable, retail and steel/metals. All of these sectors showed strong performance except for cable which under-performed due to increased competition and regulation. Towards the end of 1996 we began to soften our view of the economy and began to re-focus the Fund into areas which we believe offered relative stability in a low growth environment. As we enter 1997 our primary focus will continue to be in radio/TV and cable for their defensive characteristics, although at reduced levels from 1996. New areas of emphasis will be in food products, financial intermediaries, healthcare and energy. Our outlook for 1997 is still very positive for the high yield market. Even though spreads are narrower than in the past, the overall soundness of the market in terms of fundamental quality, supply and demand is strong. We expect the growth in the use of high yield issues as a means to diversify one's portfolio will continue and the high yield sector will again produce suitable returns. Our outlook for the economy is for a slow growth, low inflation environment which will be positive for all credits. In an attempt to maximize our exposure and diversify our risk, we are currently invested in 67 companies and in 30 industries as of December 31, 1996. Our principal focus remains on generating a high income return which helps to dampen any price volatility and provides for a more consistent return. We appreciate your support during 1996 and hope we can provide you another positive year in 1997. Sincerely, /s/ Dan Baldwin Dan S. Baldwin Portfolio Manager January 22, 1997 CIM HIGH YIELD SECURITIES STATEMENT OF INVESTMENTS DECEMBER 31, 1996
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- ----------- CORPORATE BONDS AND NOTES -- 122.4% CABLE T.V. -- 13.8% Adelphia Communications Corporation, Sr. Note, $1,100,000 12.500%, 05/15/2002................................. $ 1,130,250 CAI Wireless Systems, Inc., Sr. Note, 12.250%, 750,000 09/15/2002.......................................... 376,875 Charter Communications International, Inc., Sr. Note, 1,000,000 11.250%, 03/15/2006................................. 1,047,500 Galaxy Telecom L.P., Sr. Sub. Note, 12.375%, 1,250,000 10/01/2005.......................................... 1,328,125 Intermedia Capital Partners, Sr. Note, 11.250%, 1,250,000 08/01/2006***....................................... 1,287,500 Le Groupe Videotron Ltd., Sr. Note, 10.625%, 750,000 02/15/2005.......................................... 832,500 ----------- 6,002,750 ----------- BROADCAST/RADIO/TV -- 10.2% Heritage Media Services, Gtd. Sr. Secured Note, 750,000 11.000%, 06/15/2002................................. 800,625 Jacor Communications Company, Gtd. Sr. Sub. Note, 500,000 9.750%, 12/15/2006.................................. 515,000 Katz Media Corporation, Sr. Sub. Note, 10.500%, 1,000,000 01/15/2007***....................................... 1,025,000 Paxson Communications Corporation, Sr. Sub. Note, 1,000,000 11.625%, 10/01/2002***.............................. 1,042,500 SFX Broadcasting, Inc., Sr. Sub. Note, 10.750%, 1,000,000 05/15/2006.......................................... 1,057,500 ----------- 4,440,625 ----------- APPAREL/TEXTILES -- 9.4% CMI Industries Inc., Sr. Sub. Note, 9.500%, 1,000,000 10/01/2003.......................................... 932,500 900,000 Dan River, Inc., Sr. Sub. Note, 10.125%, 12/15/2003.. 913,500 Pillowtex Corporation, Gtd. Sr. Sub. Note, 10.000%, 850,000 11/15/2006***....................................... 886,125 Polysindo International Finance, Note, 11.375%, 500,000 06/15/2006.......................................... 540,625 750,000 Tultex Corporation, Sr. Note, 10.625%, 03/15/2005.... 818,438 ----------- 4,091,188 ----------- HEALTHCARE -- 7.4% Dade International, Inc., Sr. Sub. Note, 11.125%, 600,000 05/01/2006.......................................... 649,500 800,000 GranCare, Inc., Sr. Sub. Note, 9.375%, 09/15/2005.... 873,000 Maxim Medical Inc., Gtd. Sr. Secured Sub. Note, 700,000 10.500%, 08/01/2006***.............................. 733,250 Paracelsus Healthcare Corporation, Sr. Sub. Note, 1,000,000 10.000%, 08/15/2006................................. 945,000 ----------- 3,200,750 ----------- OTHER RETAILERS -- 7.0% Brylane Capital Corporation, Series B, Sr. Sub. Note, 1,250,000 10.000%, 09/01/2003................................. 1,292,187 1,000,000 Hills Stores Company, Sr. Note, 12.500%, 07/01/2003.. 890,000 Shop Vac Corporation, Sr. Note, 10.625%, 825,000 09/01/2003***....................................... 870,375 ----------- 3,052,562 -----------
See Notes to Financial Statements. 1 CIM HIGH YIELD SECURITIES STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) BUSINESS EQUIPMENT AND SERVICES -- 6.9% Iron Mountain Inc., Gtd. Sr. Sub. Note, 10.125%, $ 300,000 10/01/2006.......................................... $ 317,625 1,000,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 03/15/2006...... 1,107,500 Unifrax Investment Corporation, Sr. Note, 10.500%, 500,000 11/01/2003.......................................... 518,125 1,000,000 Unisys Corporation, Sr. Note, 12.000%, 04/15/2003.... 1,066,250 ----------- 3,009,500 ----------- FOOD PRODUCTS -- 6.5% International Home Foods Inc., Sr. Sub. Note, 1,000,000 10.375%, 11/01/2006***.............................. 1,040,000 Specialty Foods Corporation, Series B, Sr. Note, 1,000,000 11.125%, 10/01/2002***.............................. 960,000 Van de Kamp's Inc., Sr. Sub. Note, 12.000%, 750,000 09/15/2005.......................................... 830,625 ----------- 2,830,625 ----------- OIL AND GAS -- 5.5% 750,000 Costilla Energy Inc., Sr. Note, 10.250%, 10/01/2006.. 795,000 325,000 Mesa Operating Company, Note, 10.625%, 07/01/2006.... 354,250 TransTexas Gas Corporation, Gtd. Sr. Secured Note, 625,000 11.500%, 06/15/2002................................. 675,000 United Meridian Corporation, Sr. Sub. Note, 10.375%, 500,000 10/15/2005.......................................... 549,375 ----------- 2,373,625 ----------- PACKAGING AND CONTAINERS -- 5.3% Delta Beverage Group Inc., Sr. Note, 9.750%, 875,000 12/15/2003***....................................... 896,875 Printpack Inc., Sr. Sub. Note, 10.625%, 850,000 08/15/2006***....................................... 888,250 Stone Container Corporation, Sr. Note, 11.500%, 500,000 10/01/2004.......................................... 526,250 ----------- 2,311,375 ----------- MANUFACTURING -- DIVERSIFIED -- 4.8% 1,000,000 Foamex L.P., Sr. Note, 11.250%, 10/01/2002........... 1,062,500 Interlake Corporation, Sr. Sub. Deb., 12.125%, 1,000,000 03/01/2002.......................................... 1,035,000 ----------- 2,097,500 ----------- CHEMICALS AND PLASTICS -- 4.7% Sterling Chemicals Inc., Sr. Sub. Note, 11.750%, 750,000 08/15/2006.......................................... 791,250 Tri Polyta Finance BV, Gtd. Secured Note, 11.375%, 1,200,000 12/01/2003.......................................... 1,257,000 ----------- 2,048,250 ----------- FOOD/DRUG RETAILERS -- 3.8% 750,000 Grand Union Company, Sr. Note, 12.000%, 09/01/2004... 798,750 Smiths Food & Drug Centers, Inc., Sr. Sub. Note, 750,000 11.250%, 05/15/2007................................. 832,500 ----------- 1,631,250 -----------
See Notes to Financial Statements. 2 CIM HIGH YIELD SECURITIES STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) SURFACE TRANSPORT -- 3.4% Ameritruck Distribution Corporation, Sr. Sub. Note, $ 750,000 12.250%, 11/15/2005***.............................. $ 757,500 750,000 Trism, Inc., Sr. Sub. Note, 10.750%, 12/15/2000...... 721,875 ----------- 1,479,375 ----------- TELECOMMUNICATION -- 3.4% Fonorola Inc., Gtd. Sr. Secured Note, 12.500%, 750,000 08/15/2002.......................................... 821,250 750,000 Metrocall, Inc., Sr. Sub. Note, 10.375%, 10/01/2007.. 645,000 ----------- 1,466,250 ----------- LEISURE -- 3.2% E&S Holdings Corporation, Sr. Sub. Note, 10.375%, 850,000 10/01/2006***....................................... 890,375 500,000 Muzak LP, Gtd. Sr. Note, 10.000%, 10/01/2003......... 514,375 ----------- 1,404,750 ----------- HOTELS AND CASINOS -- 3.1% Harrah's Jazz Company, 1st Mortgage Note, 14.250%, 750,000 11/15/2001 (In Default)............................. 371,250 Trump Atlantic City Associates, 1st Mortgage Note, 1,000,000 11.250%, 05/01/2006................................. 990,000 ----------- 1,361,250 ----------- HOME FURNISHINGS -- 2.5% Lifestyle Furnishings Inc., Gtd. Sr. Sub. Note, 1,000,000 10.875%, 08/01/2006***.............................. 1,085,000 ----------- FINANCE -- 2.5% Dollar Financial Group Inc., Sr. Note, 10.875%, 600,000 11/15/2006***....................................... 619,500 First Nationwide Escrow, Sr. Sub. Note, 10.625%, 425,000 10/01/2003***....................................... 459,000 ----------- 1,078,500 ----------- ECOLOGICAL -- 2.4% Allied Waste North America, Sr. Sub. Note, 10.250%, 1,000,000 12/01/2006***....................................... 1,055,000 ----------- STEEL -- 2.4% Florida Steel Corporation, 1st Mortgage Note, 1,000,000 11.500%, 12/15/2000................................. 1,045,000 ----------- COSMETICS/TOILETRIES -- 2.1% 850,000 Chattem Inc., Sr. Sub. Note, 12.750%, 06/15/2004***.. 904,187 ----------- METALS AND MINERALS -- 1.9% Kaiser Aluminum & Chemical Corporation, Sr. Sub. 750,000 Note, 12.750%, 02/01/2003........................... 803,438 ----------- BUILDING MATERIALS -- 1.8% 750,000 Southdown, Inc., Sr. Sub. Note, 10.000%, 03/01/2006.. 795,000 ----------- ELECTRONICS -- 1.8% Celestica International Inc., Sr. Sub. Note, 10.500%, 750,000 12/31/2006***....................................... 790,313 ----------- AEROSPACE -- 1.7% K&F Industries, Sr. Secured Note, 11.875%, 700,000 12/01/2003.......................................... 752,500 -----------
See Notes to Financial Statements. 3 CIM HIGH YIELD SECURITIES STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) RAILROADS -- 1.7% Johnstown America Industries, Gtd. Sr. Sub. Note, $ 750,000 11.750%, 08/15/2005................................. $ 718,125 ----------- TRANSPORTATION -- 1.4% Ryder TRS Inc., Sr. Sub. Note, 10.000%, 600,000 12/01/2006***....................................... 624,000 ----------- PAPER PRODUCTS -- 1.0% Florida Coast Paper LLC, 1st Mortgage Note, 12.750%, 400,000 06/01/2003.......................................... 436,000 ----------- AUTOMOTIVE PARTS AND EQUIPMENT -- 0.8% Safelite Glass Corporation, Sr. Sub. Note, 9.875%, 350,000 12/15/2006***....................................... 360,500 ----------- TOTAL CORPORATE BONDS AND NOTES (Cost $51,843,233).................................. 53,249,188 ----------- UNITED STATES GOVERNMENT SECURITIES -- 2.1% UNITED STATES TREASURY BILLS: 843,000 4.540%++, 01/09/1997................................. 842,149 79,000 4.250%++, 01/16/1997................................. 78,860 ----------- TOTAL UNITED STATES GOVERNMENT SECURITIES (Cost $921,009)..................................... 921,009 ----------- SHARES ------ PREFERRED STOCK -- 1.3% (Cost $500,000) K-III Communications Corporation, Sr. Exchangeable 20,000 Preferred Stock, 11.500%............................ 537,500 ----------- COMMON STOCKS -- 1.2% 40,000 Dr. Pepper Bottling Holdings, Class A**.............. 480,000 1,601 Harvest Foods Inc., (02/20/1992, cost $36)**+........ 8,005 972 Thermadyne Holdings Corporation, New**............... 27,702 ----------- TOTAL COMMON STOCKS (Cost $36,332)................... 515,707 ----------- WARRANTS -- 0.0%# (Cost $0.00) Capital Gaming International Incorporated, Warrants, 1,250 expire 02/01/1999**................................. 1 -----------
TOTAL INVESTMENTS (Cost $53,300,574*)...................... 127.0% 55,223,405 OTHER ASSETS AND LIABILITIES (NET)......................... (27.0) (11,728,453) ----- ------------ NET ASSETS................................................. 100.0% $ 43,494,952 ===== ============
- -------- * Aggregate cost for Federal income tax purposes. ** Non-income producing security. *** Security purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. + Securities for which market quotations are not readily available are valued by or at the direction of the Board of Trustees. Parenthetical disclosure includes the acquisition date and cost of the security. The total fair value of such securities at December 31, 1996 is $8,005 which represents 0.02% of total net assets. ++ Rate represents annualized yield at date of purchase. # Amount represents less than 0.1% of total net assets. See Notes to Financial Statements. 4 CIM HIGH YIELD SECURITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 ASSETS: Investments, at value (Cost $53,300,574) (Note 1) See accompanying statement......................... $55,223,405 Cash................................................ 1,423 Interest receivable................................. 1,309,656 Prepaid expenses.................................... 13,225 ----------- Total Assets...................................... 56,547,709 LIABILITIES: Notes payable (including accrued interest of $4,731) (Note 5)........................................... $12,504,731 Dividends payable................................... 452,605 Investment advisory fee payable (Note 2)............ 18,352 Accrued Trustees' fees and expenses (Note 2)........ 7,500 Shareholder servicing agent fees payable (Note 2)... 4,834 Administration fee payable (Note 2)................. 3,333 Custodian fees payable (Note 2)..................... 2,654 Accrued expenses and other payables................. 58,748 ----------- Total Liabilities................................. 13,052,757 ----------- NET ASSETS............................................ $43,494,952 =========== NET ASSETS consist of: Distributions in excess of net investment income.... $ (7,286) Accumulated net realized loss on investments sold... (7,106,033) Unrealized appreciation of investments.............. 1,922,831 Shares of beneficial interest, $0.01 per share par value, issued and outstanding 5,657,569............ 56,576 Paid-in capital in excess of par value.............. 48,628,864 ----------- Total Net Assets.................................. $43,494,952 =========== NET ASSET VALUE PER SHARE ($43,494,952/5,657,569 shares of beneficial interest outstanding)................................ $ 7.69 ===========
See Notes to Financial Statements. 5 CIM HIGH YIELD SECURITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 INVESTMENT INCOME: Interest................................................ $5,624,736 Dividends............................................... 57,500 ---------- Total Investment Income............................... 5,682,236 EXPENSES: Interest expense (Note 5)............................... $869,140 Investment advisory fee (Note 2)........................ 208,100 Legal and audit fees.................................... 51,715 Trustees' fees and expenses (Note 2).................... 41,157 Administration fee (Note 2)............................. 40,000 Shareholder servicing agent fees (Note 2)............... 23,111 Custodian fees (Note 2)................................. 15,841 Miscellaneous........................................... 78,790 -------- Total Expenses........................................ 1,327,854 ---------- NET INVESTMENT INCOME..................................... 4,354,382 ---------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (Notes 1 and 3): Net realized loss on investments sold during the year... (242,657) Net change in unrealized appreciation of investments during the year........................................ 2,314,525 ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........... 2,071,868 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $6,426,250 ==========
See Notes to Financial Statements. 6 CIM HIGH YIELD SECURITIES STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 NET DECREASE IN CASH: Cash flows from operating activities: Interest and dividends received.................. $ 5,581,470 Operating expenses paid.......................... (436,041) ------------ Net cash provided by operating activities.......... $ 5,145,429 Cash flows from investing activities: Increase in short-term securities, net........... 3,217,942 Purchases of long-term securities................ (91,383,918) Proceeds from sales of long-term securities...... 87,589,831 ------------ Net cash used in investing activities.............. (576,145) ----------- Net cash provided by operating and investing activ- ities............................................. 4,569,284 Cash flows from financing activities: Interest payments on notes payable............... (1,094,249) Cash dividends paid*............................. (3,475,954) ------------ Net cash used in financing activities.............. (4,570,203) ----------- Net decrease in cash............................... (919) Cash--beginning of year............................ 2,342 ----------- Cash--end of year.................................. $ 1,423 =========== RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES: Net increase in net assets resulting from opera- tions............................................. $ 6,426,250 Interest expense................................. $ 869,140 Increase in investments.......................... (2,763,184) Decrease in interest and dividends receivable.... 14,405 Decrease in other assets......................... 2,501 Increase in accrued expenses and liabilities..... 20,172 ------------ Total adjustments.............................. (1,856,966) ----------- Net cash provided by operating and investing activities........................................ $ 4,569,284 ===========
- -------- * Non cash financing activities include reinvestments of dividends of $756,369. See Notes to Financial Statements. 7 CIM HIGH YIELD SECURITIES STATEMENT OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED DECEMBER 31, 1996 DECEMBER 31, 1995 ----------------- ----------------- Net investment income...................... $ 4,354,382 $ 4,210,792 Net realized loss on investments sold during the year........................... (242,657) (526,841) Net change in unrealized appreciation of investments during the year............... 2,314,525 1,706,331 ----------- ----------- Net increase in net assets resulting from operations................................ 6,426,250 5,390,282 Distributions to shareholders from net investment income......................... (4,323,851) (4,292,260) Net increase in net assets from Fund share transactions (Note 4)..................... 756,369 860,594 ----------- ----------- Net increase in net assets................. 2,858,768 1,958,616 NET ASSETS: Beginning of year.......................... 40,636,184 38,677,568 ----------- ----------- End of year (including distributions in excess of net investment income of $(7,286) and $(109,322), respectively).... $43,494,952 $40,636,184 =========== ===========
See Notes to Financial Statements. 8 [THIS PAGE INTENTIONALLY LEFT BLANK] 9 CIM HIGH YIELD SECURITIES FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR ENDED ENDED 12/31/96 12/31/95 -------- -------- Operating performance: Net asset value, beginning of year..................... $ 7.32 $ 7.11 ------- ------- Net investment income.................................. 0.78 0.77 Net realized and unrealized gain/(loss) on investments. 0.36 0.23 ------- ------- Net increase/(decrease) in net assets resulting from investment operations................................. 1.14 1.00 Change in net asset value from Fund share transaction.. -- -- Distributions: Dividends from net investment income................... (0.77) (0.79) Distributions from net realized capital gains.......... -- -- ------- ------- Total from distributions............................... (0.77) (0.79) ------- ------- Net asset value, end of year........................... $ 7.69 $ 7.32 ======= ======= Market value, end of year.............................. $ 8.125 $ 7.875 ======= ======= Total investment return................................ 14.38% 22.72% ======= ======= Ratios to average net assets/supplemental data: Net assets, end of year (in 000's)..................... $43,495 $40,636 Ratio of net investment income to average net assets... 10.46% 10.32% Ratio of operating expenses to average net assets...... 1.10%(3) 1.14%(3) Portfolio turnover rate (2)............................ 172.2% 79.9%
- -------- * For the period from November 18, 1987 (commencement of operations) to December 31, 1987. ** Chancellor Trust Company became the Fund's investment adviser effective September 30, 1988. (1) During the period ended December 31, 1987, the adviser waived $10,026 of fees. If these fees had not been waived, the ratio of operating expenses to average net assets would have been 2.40%, and the ratio of net investment income to average net assets would have been 6.19%. (2) This rate is, in general, the percentage computed by taking the lesser of the cost of purchases or proceeds from the sales of portfolio securities for a period and dividing it by the monthly average value of such securities during the year, excluding short-term securities. (3) The annualized operating expense ratio excludes interest expense. The annualized ratios including interest expense were 3.19%, 3.52%, 2.80%, 2.63% and 2.06% for the years ended December 31, 1996, 1995, 1994, 1993, and 1992, respectively. (4) The total return for the year ended December 31, 1993, adjusted for the dilutive effect of the rights offering completed in August of 1993, is 21.07%. + Annualized. See Notes to Financial Statements. 10
YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88** 12/31/87* -------- -------- -------- -------- -------- -------- ---------- --------- $ 8.02 $ 7.58 $ 7.10 $ 5.65 $ 7.38 $ 9.41 $ 9.35 $ 9.33 ------- ------- ------- ------- ------- ------- ------- ------- 0.82 0.87 0.83 0.84 0.86 1.13 1.16 0.08 (0.89) 0.71 0.46 1.44 (1.72) (1.96) 0.12 0.03 ------- ------- ------- ------- ------- ------- ------- ------- (0.07) 1.58 1.29 2.28 (0.86) (0.83) 1.28 0.11 -- (0.31) -- -- -- -- -- -- (0.84) (0.83) (0.81) (0.83) (0.87) (1.15) (1.13) (0.09) -- -- -- -- -- (0.05) (0.09) -- ------- ------- ------- ------- ------- ------- ------- ------- (0.84) (0.83) (0.81) (0.83) (0.87) (1.20) (1.22) (0.09) ------- ------- ------- ------- ------- ------- ------- ------- $ 7.11 $ 8.02 $ 7.58 $ 7.10 $ 5.65 $ 7.38 $ 9.41 $ 9.35 ======= ======= ======= ======= ======= ======= ======= ======= $ 7.125 $ 7.875 $ 7.500 $ 6.625 $ 4.750 $ 7.000 $ 9.500 $ 9.625 ======= ======= ======= ======= ======= ======= ======= ======= 0.99% 16.55%(4) 25.70% 58.61% (20.89)% (15.18)% 11.67% (2.76)% ======= ======= ======= ======= ======= ======= ======= ======= $38,678 $42,901 $30,024 $28,015 $22,283 $29,122 $36,394 $34,220 10.82% 11.17% 11.00% 12.59% 13.00% 12.78% 12.07% 6.41%(1)+ 0.95%(3) 1.09%(3) 1.65%(3) 2.46% 2.35% 2.28% 2.36% 2.18%(1)+ 50.6% 114.3% 40.6% 51.2% 34.9% 77.4% 209.6% 6.0%
See Notes to Financial Statements. 11 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. Significant Accounting Policies CIM High Yield Securities (the "Fund") was organized under the laws of the Commonwealth of Massachusetts on September 11, 1987 and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Portfolio valuation: Fixed-income securities (other than short-term obligations, but including listed issues) are valued based on prices obtained by one or more independent pricing services approved by the Board of Trustees. Securities (other than fixed-income securities) for which the principal market is one or more securities exchanges are valued at the last reported sale price (or if there has been no current sale, at the closing bid price) on the primary exchange on which such securities are traded. If a securities exchange is not the principal market for a security, such security will, if market quotations are readily available, be valued at the closing bid price in the over-the-counter market (or the last sale price in the case of securities reported on the NASDAQ national market system for which any sales occurred during the day). Portfolio securities for which there are no such valuations are valued at fair value as determined in good faith by or at the direction of the Board of Trustees. Short-term obligations with maturities of less than 60 days are valued at amortized cost which approximates market value. Securities transactions and investment income: Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including, where applicable, amortization of premium and accretion of discount on investments, is recorded on the accrual basis. Short-term investments that have a maturity of 60 days or less are valued at amortized cost. Dividends and distributions to shareholders: The Fund distributes monthly to shareholders substantially all of its net investment income. Capital gains, if any, net of capital losses, are distributed annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. Federal income taxes: It is the Fund's policy to comply with the require- ments of the Internal Revenue Service applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax should be payable by the Fund. 12 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) Cash flow information: Cash, as used in the Statement of Cash Flows, is the amount reported in the Statement of Assets and Liabilities. The Fund invests in securities and distributes dividends from net investment income and net realized gains (which are either paid in cash or reinvested at the discretion of shareholders). These activities are reported in the Statement of Changes in Net Assets. Information on cash payments is presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include unrealized gain or loss on investment securities and accretion income recognized on investment securities. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates. 2. Investment Advisory Fee, Administration Fee and Other Related Party Transactions The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with Chancellor LGT Asset Management, Inc. (the "Adviser"). The Advisory Agreement provides that the Fund will pay the Adviser a fee, computed and payable monthly, at the annual rate of .50% of the Fund's average weekly net assets. The Fund has also entered into an Administration and Support Agreement with First Data Investor Services Group, Inc., a wholly-owned subsidiary of First Data Corporation, to provide all administrative services to the Fund other than those related to the investment decisions. First Data Investor Services Group, Inc. is paid a fee computed and payable monthly at an annual rate of .09% of the Fund's average weekly net assets, but no less than $40,000 per annum. The Fund pays each Trustee not affiliated with the Adviser $6,000 per year plus $1,000 per meeting and committee meeting attended, and reimburses each such Trustee for travel and out-of-pocket expenses relating to their attendance at such meetings. The Fund pays the actual out-of-pocket expenses of the Trustees affiliated with the Adviser relating to their attendance at such meetings. Boston Safe Deposit & Trust Company, an indirect wholly-owned subsidiary of Mellon Bank Corporation, serves as the Fund's custodian. First Data Investor Services Group, Inc. serves as the Fund's shareholder servicing agent (transfer agent). 3. Purchase and Sales of Securities Cost of purchases and proceeds from sales of investment securities, excluding short-term investments, during the year ended December 31, 1996 amounted to $91,383,918 and $87,589,831, respectively. At December 31, 1996, aggregate gross unrealized appreciation for all securities (other than restricted securities), in which there is an excess of value over tax cost amounted to $2,953,517, and the aggregate gross unrealized depreciation for all securities (other than restricted securities) in which there is an excess of tax cost over value amounted to $1,038,655. At December 31, 1996, the aggregate gross unrealized appreciation for restricted securities in which there is an excess of value over tax cost amounted to $7,969. 13 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:
YEAR ENDED YEAR ENDED DECEMBER 31, 1996 DECEMBER 31, 1995 ------------------ ------------------ SHARES AMOUNT SHARES AMOUNT -------- --------- -------- --------- Issued as reinvestment of dividends....... 102,537 $ 756,369 116,463 $ 860,594 -------- --------- -------- --------- Net increase.............................. 102,537 $ 756,369 116,463 $ 860,594 ======== ========= ======== =========
5. Notes Payable The Fund currently has a $12.5 million ("commitment amount") line of credit provided by The First National Bank of Boston (the "Bank") under an Amended Credit Agreement (the "Agreement") dated September 18, 1992, primarily to leverage its investment portfolio. Under this Agreement the Fund may borrow up to the lesser of $12.5 million or 25% of its gross assets. Interest is payable at either the Bank's Base Rate or its applicable Money Market Rate, as selected by the Fund from time to time in its loan requests. The Fund is charged a commitment fee of one quarter of one percent per annum of the average daily unused commitment amount. The Agreement requires, among other provisions, that the percentage obtained by dividing total indebtedness for money borrowed by total assets of the Fund shall not exceed 30%. At December 31, 1996, the Fund had borrowings of $12,500,000 outstanding under this Agreement. During the year ended December 31, 1996, the Fund had an average outstanding daily balance of $12,500,000 with interest rates ranging from 6.688% to 6.875% and average debt per share of $2.23. For the year ended December 31, 1996, interest expense totaled $869,140 under this Agreement. 6. Capital Loss Carryforward Capital loss carryforwards are available to offset future realized capital gains. To the extent that these carryforwards are used to offset future capital gains, it is probable that the amount which is offset will not be distributed to shareholders. At December 31, 1996, the Fund had available for Federal tax purposes unused capital loss carryforwards of $984,970, $3,316,747, $1,552,171, $330,065, $679,423 and $242,657 expiring in 1998, 1999, 2000, 2002, 2003, and 2004, respectively. 7. Concentration of Risk The Fund invests in securities offering high current income which generally will be in the lower rating categories of recognized ratings agencies (so- called "junk bonds"). These securities generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for high yield securities may be relatively less liquid than the market for higher-rated securities. The Fund's use of leverage also increases exposure to capital risk. 14 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (CONCLUDED) 8. Quarterly Results of Operations (Unaudited)
NET INCREASE/ NET REALIZED (DECREASE) NET AND UNREALIZED IN NET ASSETS INVESTMENT INVESTMENT GAIN/(LOSS) RESULTING FROM INCOME INCOME ON INVESTMENTS OPERATIONS ------------ ------------ ---------------- ---------------- TOTAL PER TOTAL PER TOTAL PER TOTAL PER (000) SHARE (000) SHARE (000) SHARE (000) SHARE ------ ----- ------ ----- ------- ------- ------- ------- 1996 -- QUARTER ENDED March 31, 1996.......... $1,419 $0.25 $1,100 $0.20 $ 1,406 $ 0.25 $ 2,506 $ 0.45 June 30, 1996........... 1,368 0.24 1,035 0.18 (1,616) (0.29) (581) (0.11) September 30, 1996...... 1,433 0.26 1,098 0.20 1,648 0.29 2,746 0.49 December 31, 1996....... 1,462 0.26 1,121 0.20 634 0.11 1,755 0.31 1995 -- QUARTER ENDED March 31, 1995.......... 1,435 0.26 1,092 0.20 1,203 0.22 2,295 0.42 June 30, 1995........... 1,422 0.26 1,028 0.19 1,073 0.19 2,101 0.38 September 30, 1995...... 1,410 0.26 1,072 0.20 (254) (0.04) 818 0.16 December 31, 1995....... 1,379 0.25 1,019 0.18 (843) (0.14) 176 0.04
15 INDEPENDENT AUDITOR'S REPORT The Shareholders and Board of Trustees of CIM High Yield Securities: We have audited the accompanying statement of assets and liabilities including the statement of investments of CIM High Yield Securities, as of December 31, 1996, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two year period then ended and financial highlights for each of the years in the nine year period then ended and for the period from November 18, 1987 (commencement of operations) to December 31, 1987. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1996 by correspondence with the custodian. An audit also includes assessing the accounting principles used, and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of CIM High Yield Securities as of December 31, 1996, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two year period then ended and financial highlights for each of the years in the nine year period then ended and for the period from November 18, 1987 (commencement of operations) to December 31, 1987, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP New York, New York January 31, 1997 16 To Shareholders of CIM High Yield Securities (the "Fund") About the Fund's Dividend Reinvestment Plan (unaudited) Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), shareholders of the Fund ("Shareholders") whose shares are registered in their own name will automatically have all dividends and other distributions reinvested in additional shares of the Fund by First Data Investor Services Group, Inc. (the "Agent") as agent under the Plan, unless such shareholder terminates participation in the Plan as provided below. Shareholders whose shares are registered in the name of a broker-dealer or other nominee (i.e., in "Street Name") will not participate in the Plan unless the requisite election is made by the broker-dealer and only if such a service is provided by the broker- dealer. Shareholders who own Fund shares registered in Street Name and who desire that their distributions be reinvested should consult their broker- dealers. Shareholders who do not participate in the Plan will receive all distributions by check mailed directly to the shareholder by the Agent. Whenever the Fund declares a capital gains distribution or an income dividend payable in shares or cash, participating Shareholders will take such distribution or dividend entirely in shares and the Agent shall automatically receive such shares, including fractions, for the shareholder's account, except in the circumstances described in the paragraph below. Whenever the market price of the shares on the record date for the dividend or distribution is equal to or exceeds their net asset value, participants will be issued shares of the Fund at the higher of net asset value or 95% of the market price. This discount reflects savings in underwriting or other costs which the Fund would otherwise be required to incur to raise additional capital. If net asset value exceeds the market price of Fund shares at such time or if the Fund should declare a dividend or other distribution payable only in cash, the Agent will buy Fund shares in the open market, on the American Stock Exchange (the "Exchange") or elsewhere, for the Shareholder's account. If before the Agent has completed its purchases, the market price exceeds the net asset value of the Fund's shares, the average per share purchase price paid by the Agent may exceed the net asset value of the Fund's shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. For all purposes of the Plan: (a) the market price of the Fund shares on a particular date shall be the last sales price on the Exchange on the close of the previous trading day or, if there is no sale on the Exchange on that date, then the mean between the closing bid and asked quotations for such stock on the Exchange on such date and (b) net asset value per Fund share on a particular date shall be as determined by or on behalf of the Fund. The Fund will not charge participants for reinvesting dividends or distributions. The Agent's service fee for handling capital gains distributions or income dividends will be paid by the Fund. There will be no brokerage commissions charged with respect to shares issued directly by the Fund. However, Shareholders will be charged a pro rata share of brokerage commissions incurred by the Agent on all open market purchases. In addition, Shareholders requesting certificates or redeeming shares issued under the Plan will be charged a $5.00 service fee by the Agent. The automatic reinvestment of dividends and capital gains distributions does not relieve Plan participants of any income tax that may be payable on the dividends or capital gains distributions. Distributions of net investment income and net realized capital gains, if any, will be taxable, whether received in cash or reinvested in shares under the Plan. When distributions are received in the form of shares issued by the Fund (as opposed to purchased on the open market) under such Plan, however, the amount of the distribution deemed to have been received by participating Shareholders is the fair market value of the shares received rather than the amount of cash which would otherwise have been received. In such case, participating Shareholders will have a basis for federal income tax purposes in each share received from the Fund equal to the fair market value of such share on the payment date. 17 A Shareholder may terminate participation in the Plan at any time by notifying the Agent in writing. Such termination will become effective immediately if notice is received by the Agent not less than 10 business days before the next following dividend or distribution record date. Otherwise, the termination will be effective, with respect to any subsequent dividend or distributions, on the first trading day after the dividend paid for such record date has been credited to the Shareholder's account. Upon any termination the Agent will, upon the request of the Shareholder, cause a certificate or certificates for the full shares held for the Shareholder under the Plan and cash adjustment for any fraction to be delivered to her or him. If, upon termination, the Shareholder requests a certificate for shares held in the account, a $5.00 service fee will be charged to the Shareholder by the Agent. If the Shareholder elects by notice to the Agent in writing in advance of such termination to have the Agent sell part or all of her or his shares and remit the proceeds to her or him, the Agent is authorized to deduct a $5.00 fee plus brokerage commissions for this transaction from the proceeds. The Fund reserves the right to amend or terminate the Plan as applied to any dividend or distribution for which the record date is at least 90 days after written notice of the change is sent to the participants in the Plan. Information concerning the Plan may be obtained by calling First Data Investor Services Group, Inc. at 1-800-331-1710, or by writing the Fund, c/o First Data Investor Services Group, Inc., One Exchange Place, Boston, MA 02109. - ------------------------------------------------------------------------------- SHAREHOLDER VOTING RESULTS At the Annual Meeting of Shareholders, held on September 25, 1996, the following matters were voted on and approved: PROPOSAL NO. 1 The election of the following Trustees*:
FOR WITHHELD --- -------- Dr. Donald Ratajczak 4,988,271 58,737 Robert G. Wade, Jr. 4,984,742 62,266
*Represents 88.70% of shares voting at the meeting PROPOSAL NO. 2 To ratify the selection of KPMG Peat Marwick LLP as the Fund's independent auditors**:
FOR AGAINST ABSTAINED --- ------- --------- 4,962,160 36,333 48,515
**Represents 88.27% of shares voting at the meeting PROPOSAL NO. 3 To approve a new investment advisory agreement between the Fund and Chancellor LGT Asset Management, Inc.***:
FOR AGAINST ABSTAINED --- ------- --------- 4,517,492 430,195 99,320
***Represents 80.40% of shares voting at the meeting 18 CIM ---------------------------------------------------------------------- ---------------------------------------------------------------------- HIGH YIELD SECURITIES ANNUAL REPORT DECEMBER 31, 1996 This report is sent to shareholders of CIM High Yield Securities for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. -----END PRIVACY-ENHANCED MESSAGE-----