N-30D 1 cim.txt CIM HIGH YIELD SECURITIES SEMI ANNUAL [LOGO OMITTED] [Logo of Invesco Omitted] CIM HIGH YIELD SECURITIES - 2002 SEMI-ANNUAL REPORT We are pleased to provide this semi-annual report for CIM High Yield Securities (the "Fund") as of June 30, 2002. The following pages contain a listing of the Fund's holdings as well as the financial statements for the six months ended June 30, 2002. MARKET REVIEW The high yield market remained volatile during the first half of 2002. Signs of an economic rebound, combined with expectations for a decline in default rates, led to investor optimism in the first quarter. For the first three months of the year, the Merrill Lynch U.S. High Yield Master II Index (the "High Yield Index") returned 1.73%, outperforming 10-year treasuries, investment grade corporate bonds and the S&P 500. The second quarter, however, was met with weaker consumer confidence, headlines associated with accounting issues and corporate governance, and growing uncertainty with respect to the U.S. economy. In addition, record levels of fallen angels (investment grade issuers whose credit ratings have been downgraded to high yield status) resulted in additional downward pressure on the high yield market. As a result, the High Yield Index performances for the June and second quarter time periods were the worst on record, -7.74% and -6.98%, respectively. Given this backdrop, the Fund's return at net asset value for the first half of the year was -3.98%, versus an average return of -5.66% for its peer group (Lipper High Current Yield Leverage Funds) and a return of -5.37% for the High Yield Index. During the second quarter, the Fund returned -5.72%, outpacing the -7.71% return experienced by its peer group and resulting in a first quartile performance ranking. Year-to-date, the Fund has experienced a market value return of -8.35%. OUTLOOK Despite our forecast for moderate economic growth and stabilizing credit fundamentals, we remain fairly cautious on the high yield market. Volatile equity markets, credit ratings pressure, and corporate oversight issues continue to dominate the market. Although the high yield market should benefit from a more sustained economic recovery, we expect performance to remain volatile overall and bifurcated among individual industries and issuers. Given these market conditions, we believe that a selective approach to credit risk is warranted. Within the high yield universe, the Fund will continue to emphasize a diversified strategy in the higher rated, consumer driven industries, and to the extent that we have exposure to cyclical issuers, the emphasis will be on higher quality issuers. As visibility improves with respect to our economic outlook, we will look to increase the Fund's exposure to lower rated issuers and companies best positioned to benefit from an economic turnaround. INVESCO Institutional (N.A.), Inc. * Market value return is based on market price and assumes investment at market price at the beginning of the period referenced, reinvestment of all distributions for the period, and sale of all shares at the closing common stock price at the end of the period referenced. INVESCO PRIVACY NOTICE At INVESCO 1, we recognize that you have entrusted with us your personal and financial data and we recognize our obligation to keep this information secure. Maintaining your privacy is important to us and we have established a policy to maintain the privacy of the information you share with us. PERSONAL INFORMATION WE COLLECT In the normal course of serving clients, we collect personal information about you, which may include: o Information we receive from you (such as your name and address) from your account application, investment management agreement or other documents you may deliver to us. o Information about your investment transactions with us. PERSONAL INFORMATION WE MAY DISCLOSE We do not sell any information to any third parties. However, we occasionally disclose nonpublic personal information about you to affiliates and non-affiliates only as permitted by law or regulation. Specifically, we may disclose nonpublic personal information including: o Information to service providers in order to process your account transactions. o Your name and address to companies that assist us with mailing statements to you. o Information in connection with legal proceedings, such as responding to a subpoena. The organizations that receive client information act on our behalf and use the information only to provide the services that we have asked them to perform for you and us. As emphasized above, we do not provide client or former client information including names, addresses, or client lists to outside companies except in furtherance of our business relationship with you, or as otherwise permitted by law. Access to nonpublic personal information is restricted to employees who need to access that information to provide products or services to clients. To guard our clients' nonpublic personal information, physical, electronic, and procedural safeguards are in place that comply with federal standards. A client's right to privacy extends to all forms of contact with us, including telephone, written correspondence, and electronic media. We consider privacy a fundamental right of clients and take seriously the obligation to safeguard client information. We will adhere to the policies and practices above for both current and former clients. 1 This Privacy Notice applies to members of INVESCO Institutional (N.A.), Inc. of AMVESCAP PLC's family of investment adviser subsidiaries: INVESCO Institutional (N.A.), Inc., INVESCO Private Capital, Inc., INVESCO Senior Secured Management, Inc., and INVESCO Global Asset Management (N.A.), Inc. CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- -------- CORPORATE BONDS AND NOTES -- 121.5% CHEMICALS AND PLASTICS -- 10.6% $ 200,000 Equistar Chemical Funding, Sr. Notes, 10.125%, 09/01/08 ................................$ 192,000 500,000 Georgia Gulf Corp., Sr. Sub. Notes, 10.375%, 11/01/07 .................................. 537,500 300,000 Hercules, Inc., Sr. Notes, 11.125%, 11/15/07 ........................................... 337,500 500,000 Huntsman ICI Chemicals Ltd., Sr. Sub. Notes, 10.125%, 07/01/09 ......................... 450,000 400,000 Lyondell Chemical Co., Sr. Sub. Notes, 10.875%, 05/01/09 ............................... 356,000 200,000 OM Group, Sr. Sub. Notes, 9.250%, 12/15/11 ............................................. 208,000 400,000 Sovereign Specialty Chemicals, Sr. Sub. Notes, 11.875%, 03/15/10 ....................... 370,000 ------------ 2,451,000 ------------ LODGING AND CASINOS -- 9.9% 250,000 Ameristar Casinos, Inc., Sr. Sub. Notes, 10.750%, 02/15/09 ............................. 269,375 400,000 Argosy Gaming Co., Sr. Notes, 10.750%, 06/01/09 ........................................ 432,000 200,000 Extended Stay America, Sr. Sub. Notes, 9.875%, 06/15/11 ................................ 205,000 300,000 Felcor Lodging LP, Sr. Notes, 9.500%, 09/15/08 ......................................... 306,000 500,000 Host Marriott LP, Sr. Notes, 9.250%, 10/01/07 .......................................... 505,000 200,000 MGM Mirage, Sr. Sub. Notes, 9.750%, 06/01/07 ........................................... 212,000 150,000 Resort International Casino, Sr. Notes, 11.500%, 03/15/09** ............................ 137,250 200,000 Wheeling Island Gaming, Sr. Notes, 10.125%, 12/15/09 ................................... 207,000 ------------ 2,273,625 ------------ BUILDING AND DEVELOPMENT -- 9.5% 250,000 American Plumbing & Mechanics, Inc., Sr. Sub. Notes, 11.625%, 10/15/08 ................. 248,750 300,000 Associated Materials, Inc., Sr. Sub. Notes, 9.750%, 04/15/12 ........................... 309,000 500,000 Atrium Companies, Inc., Sr. Sub. Notes, 10.500%, 05/01/09 .............................. 513,125 100,000 D. R. Horton, Inc., Sr. Notes, 10.500%, 04/01/05 ....................................... 106,750 400,000 Nortek, Inc., Sr. Sub. Notes, 9.875%, 06/15/11 ......................................... 406,000 300,000 Standard Pacific Corp., Sr. Notes, 9.500%, 09/15/10 .................................... 312,750 300,000 WCI Communities, Inc., Sr. Sub. Notes, 9.125%, 05/01/12 ................................ 299,250 ------------ 2,195,625 ------------ ELECTRONICS/ELECTRIC -- 9.0% 250,000 Avaya, Inc., Sr. Notes, 11.125%, 04/01/09 .............................................. 230,000 400,000 Chippac International Ltd., Sr. Sub. Notes, 12.750%, 08/01/09 .......................... 422,000 675,000 Fairchild Semiconductor, Sr. Sub. Notes, 10.375%, 10/01/07 ............................. 705,375 375,000 SCG Holding & Semiconductor Co., Sr. Sub. Notes, 12.000%, 08/01/09 ..................... 249,375 200,000 Solectron Corp., Sr. Notes, 9.625%, 02/15/09 ........................................... 183,000 300,000 Wesco Distribution, Inc., Sr. Sub. Notes, 9.125%, 06/01/08 ............................. 289,500 ------------ 2,079,250 ------------ FOOD/DRUG RETAILERS -- 8.3% 200,000 American Seafood, Sr. Sub. Notes, 10.125%, 04/15/10** .................................. 203,000 400,000 Del Monte Corp., Sr. Sub. Notes, 9.250%, 05/15/11 ...................................... 418,000 300,000 Fleming Companies, Inc., Sr. Sub. Notes, 10.625%, 07/31/07 ............................. 295,500 100,000 Fleming Companies, Inc., Sr. Sub. Notes, 9.875%, 05/01/12** ............................ 95,000
See Notes to Financial Statements. 3 CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- -------- CORPORATE BONDS AND NOTES -- (CONTINUED) FOOD/DRUG RETAILERS -- (CONTINUED) $ 300,000 Friendly Ice Cream, Sr. Notes, 10.500%, 12/01/07 ..................................... $ 295,500 200,000 Great Atlantic & Pacific Tea Co., Sr. Notes, 9.125%, 12/15/11 ........................ 187,000 400,000 Stater Brothers Holdings, Sr. Notes, 10.750%, 08/15/06 ............................... 414,000 ------------ 1,908,000 ------------ CABLE AND SATELLITE TELEVISION -- 8.3% 500,000 Charter Communications, Sr. Notes, 11.125%, 01/15/11 ................................. 347,500 350,000 Charter Communications, Sr. Notes, 10.250%, 01/15/10 ................................. 239,750 500,000 Echostar Broadband Corp., Sr. Notes, 10.375%, 10/01/07 ............................... 480,000 500,000 Insight Midwest, Sr. Notes, 10.500%, 11/01/10 ........................................ 470,000 400,000 Mediacom LLC, Sr. Notes, 9.500%, 01/15/13 ............................................ 348,000 ------------ 1,885,250 ------------ OIL AND GAS -- 8.1% 525,000 Frontier Oil Corp., Sr. Notes, 11.750%, 11/15/09 ..................................... 560,437 250,000 Sesi LLC, Sr. Notes, 8.875%, 05/15/11 ................................................ 253,750 750,000 Swift Energy Co., Sr. Sub. Notes, 10.250%, 08/01/09 .................................. 735,000 100,000 Tesoro Petroleum Corp., Sr. Sub. Notes, 9.625%, 11/01/08 ............................. 93,000 250,000 Tesoro Petroleum Corp., Sr. Sub. Notes, 9.625%, 04/01/12** ........................... 230,000 ------------ 1,872,187 ------------ AUTO PARTS AND ACCESSORIES -- 7.8% 300,000 Advance Stores Co., Inc., Sr. Sub. Notes, 10.250%, 04/15/08 .......................... 316,500 100,000 Collins & Aikman Products, Sr. Notes, 10.750%, 12/31/11** ............................ 101,000 300,000 Collins & Aikman Products, Sr. Sub. Notes, 11.500%, 04/15/06 ......................... 285,750 100,000 Dana Corp., Sr. Notes, 10.125%, 03/15/10** ........................................... 102,500 100,000 Dana Corp., Sr. Notes, 9.000%, 08/15/11 .............................................. 99,000 200,000 Delco Remy International, Inc., Sr. Sub. Notes, 11.000%, 05/01/09 .................... 165,000 300,000 Dura Operating Corp., Sr. Sub. Notes, 9.000%, 05/01/09 ............................... 292,500 300,000 Foamex LP, Sr. Notes, 10.750%, 04/01/09** ............................................ 307,500 200,000 Venture Holdings Trust, Sr. Notes, 11.000%, 06/01/07 ................................. 121,000 ------------ 1,790,750 ------------ FOOD SERVICE -- 5.1% 100,000 Buffets, Inc., Sr. Sub. Notes, 11.250%, 07/15/10 ..................................... 100,500 250,000 Di Giorgio Corp., Sr. Notes, 10.000%, 06/15/07 ....................................... 255,000 300,000 Dominos, Inc., Sr. Sub. Notes, 10.375%, 01/15/09 ..................................... 324,000 500,000 Sbarro, Inc., Sr. Notes, 11.000%, 09/15/09 ........................................... 502,500 ------------ 1,182,000 ------------ INDUSTRIAL MACHINERY/COMPONENTS -- 4.1% 300,000 Dresser, Inc., Sr. Sub. Notes, 9.375%, 04/15/11 ...................................... 305,250 350,000 Terex Corp., Sr. Sub. Notes, 10.375%, 04/01/11 ....................................... 378,000 250,000 Trimas Corp., Sr. Sub. Notes, 9.875%, 06/15/12 ....................................... 250,625 ------------ 933,875 ------------
See Notes to Financial Statements. 4 CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- -------- CORPORATE BONDS AND NOTES -- (CONTINUED) WIRELINE -- 3.8% $ 750,000 Level 3 Communications, Sr. Notes, 11.250%, 03/15/10 ................................. $ 262,500 300,000 Qwest Capital Funding, Sr. Notes, 7.900%, 08/15/10 ................................... 171,000 500,000 Qwest Capital Funding, Sr. Notes, 7.000%, 08/03/09 ................................... 280,000 350,000 Time Warner Telecommunications, Inc., Sr. Notes, 10.125%, 02/01/11 ................... 166,250 ------------ 879,750 ------------ RAILROAD INDUSTRIES -- 3.4% 700,000 Railamerica Transport, Sr. Sub. Notes, 12.875%, 08/15/10 ............................. 773,500 ------------ CONTAINERS/GLASS PRODUCTS -- 3.2% 200,000 Plastipak Holdings, Inc., Sr. Notes, 10.750%, 09/01/11 ............................... 220,500 500,000 Riverwood International Corp., Sr. Sub. Notes, 10.625%, 08/01/07 ..................... 528,750 ------------ 749,250 ------------ PUBLISHING -- 3.2% 700,000 American Media Operation, Sr. Notes, 10.250%, 05/01/09 ............................... 738,500 ------------ WIRELESS -- 3.0% 400,000 Crown Castle International Corp., Sr. Notes, 9.375%, 08/01/11 ........................ 254,000 500,000 Nextel Communications, Sr. Notes, 9.375%, 11/15/09 ................................... 255,000 250,000 Nextel Partners, Inc., Sr. Notes, 12.500%, 11/15/09 .................................. 106,250 175,000 Rural Cellular Corp., Sr. Sub. Notes, 9.750%, 01/15/10** ............................. 84,875 ------------ 700,125 ------------ UTILITIES -- 2.6% 250,000 AES Corp., Sr. Notes, 9.500%, 06/01/09 ............................................... 166,250 300,000 Calpine Corp., Sr. Notes, 8.625%, 08/15/10 ........................................... 196,500 300,000 CMS Energy Corp., Sr. Notes, 9.875%, 10/15/07 ........................................ 225,252 ------------ 588,002 ------------ HEALTHCARE -- 2.5% 250,000 Alaris Medical, Inc., Sr. Notes, 11.625%, 12/01/06 ................................... 282,500 300,000 Insight Health Services, Sr. Sub. Notes, 9.875%, 11/01/11 ............................ 303,000 ------------ 585,500 ------------ NON-FERROUS METALS/MINERALS -- 2.5% 150,000 Intermet Corp., Sr. Notes, 9.750%, 06/15/09** ........................................ 151,125 403,000 P&L Coal Holdings Corp., Sr. Sub. Notes, 9.625%, 05/15/08 ............................ 428,188 ------------ 579,313 ------------ AIRLINES -- 1.9% 250,000 Continental Airlines, Inc., Sr. Notes, 8.000%, 12/15/05 .............................. 221,250 250,000 Northwest Airlines, Inc., Sr. Notes, 9.875%, 03/15/07 ................................ 226,250 ------------ 447,500 ------------
See Notes to Financial Statements. 5 CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- -------- CORPORATE BONDS AND NOTES -- (CONTINUED) ECOLOGICAL SERVICES AND EQUIPMENT -- 1.9% $ 450,000 Allied Waste North America, Inc., Sr. Sub. Notes, 10.000%, 08/01/09 .................. $ 444,411 ------------ RETAILERS -- 1.9% 400,000 Stewart Enterprises, Sr. Sub. Notes, 10.750%, 07/01/08 ............................... 444,000 ------------ OFFICE/BUSINESS EQUIPMENT -- 1.8% 100,000 Mail-Well Corp., Sr. Notes, 9.625%, 03/15/12** ....................................... 101,000 150,000 Mail-Well Corp., Sr. Sub. Notes, 8.750%, 12/15/08 .................................... 134,250 225,000 Xerox Corp., Sr. Notes, 9.750%, 01/15/09** ........................................... 185,625 ------------ 420,875 ------------ LEISURE GOODS, ACTIVITIES, MOVIE -- 1.8% 400,000 Six Flags, Inc., Sr. Notes, 9.750%, 06/15/07 ......................................... 412,000 ------------ PAPER/FOREST PRODUCTS -- 1.7% 400,000 Fibermark, Inc., Sr. Notes, 10.750%, 04/15/11 ........................................ 387,000 ------------ COSMETICS/PERSONAL CARE -- 1.6% 400,000 Elizabeth Arden, Inc., Sr. Notes, 10.375%, 05/15/07 .................................. 372,000 ------------ TOBACCO -- 1.4% 300,000 Dimon, Inc., Sr. Notes, 9.625%, 10/15/11 ............................................. 315,750 ------------ APPAREL MANUFACTURERS -- 1.0% 200,000 William Carter, Sr. Sub. Notes, 10.875%, 08/15/11 .................................... 220,000 ------------ FINANCIAL INTERMEDIARIES -- 0.9% 200,000 Western Financial Bank, Sr. Sub. Notes, 9.625%, 05/15/12 ............................. 201,000 ------------ FARMING/AGRICULTURE -- 0.7% 200,000 Case Credit Corp., Sr. Notes, 6.750%, 10/21/07 ....................................... 168,561 ------------ TOTAL CORPORATE BONDS AND NOTES (Cost $29,786,129) ................................................................. 27,998,599 ------------ FOREIGN BONDS -- 9.1% CHEMICALS AND PLASTICS -- 2.2% 100,000 Acetex Corp., Sr. Notes, 10.875%, 08/01/09 ........................................... 105,000 400,000 Avecia Group PLC, Sr. Notes, 11.000%, 07/01/09 ....................................... 400,000 ------------ 505,000 ------------ CONTAINERS/GLASS PRODUCTS -- 1.4% 300,000 Kappa Beheer BV, Sr. Sub. Notes, 10.625%, 07/15/09 ................................... 328,500 ------------ CABLE AND SATELLITE TELEVISION -- 1.4% 375,000 Callahan Nordrhein, Sr. Notes, 14.000%, 07/15/10 ..................................... 16,875 375,000 Ekabel Hessen GMBH, Sr. Notes, 14.500%, 09/01/10 ..................................... 93,750 500,000 Telewest Communications PLC, Sr. Notes, 11.250%, 11/01/08 ............................ 202,500 ------------ 313,125 ------------
See Notes to Financial Statements. 6 CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS JUNE 30, 2002 (UNAUDITED)
PRINCIPAL VALUE AMOUNT (NOTE 1) --------- -------- FOREIGN BONDS -- (CONTINUED) UTILITIES -- 1.2% $400,000 Calpine Corp., Sr. Notes, 8.500%, 05/01/08 ........................................... $ 276,000 ------------ PUBLISHING -- 1.2% 250,000 Yell Finance BV, Sr. Notes, 10.750%, 08/01/11 ........................................ 273,750 ------------ FOREST PRODUCTS AND PAPER -- 1.0% 250,000 Millar Western Forest, Sr. Notes, 9.875%, 05/15/08 ................................... 240,000 ------------ WIRELESS -- 0.4% 150,000 Rogers Cantel, Sr. Notes, 9.375%, 06/01/08 ........................................... 104,250 ------------ ELECTRONICS/ELECTRIC -- 0.3% 200,000 Marconi Corp., Sr. Notes, 7.750%, 09/15/10 ........................................... 61,000 ------------ TOTAL FOREIGN BONDS (Cost $3,104,543) .................................................................. 2,101,625 ------------ UNITED STATES GOVERNMENT SECURITIES -- 0.7% UNITED STATES TREASURY BILLS: 75,000 1.640%***, 07/05/02 .................................................................. 74,980 80,000 1.620%***, 07/05/02 .................................................................. 79,978 ------------ 154,958 ------------ TOTAL UNITED STATES GOVERNMENT SECURITIES (Cost $154,958) .................................................................... 154,958 ------------ TOTAL INVESTMENTS (Cost $33,045,630*) ................................................ 131.3% 30,255,182 OTHER ASSETS AND LIABILITIES (NET) ................................................... (31.3%) (7,217,097) ----- ------------ NET ASSETS ............................................................................ 100.0% $ 23,038,085 ===== ============
* Aggregate cost for Federal income tax purposes. ** 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. *** Rate represents annualized yield at date of purchase. At June 30, 2002, the Fund's credit quality allocation was as follows: STANDARD & POOR'S CREDIT RATING ------------------------------- AAA .............................................. 0.50% BBB .............................................. -- BB ............................................... 17.52% B ................................................ 75.32% CCC .............................................. 6.09% CC ............................................... 0.06% C ................................................ 0.51% See Notes to Financial Statements. 7 CIM HIGH YIELD SECURITIES STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2002 (UNAUDITED) ASSETS: Investments, at value (Cost $33,045,630) ........ $30,255,182 Cash ............................................ 16,354 Receivable for investments sold ................. 94,742 Interest receivable ............................. 875,932 Prepaid expenses ................................ 478 ----------- Total Assets ................................. 31,242,688 LIABILITIES: Notes payable (including accrued interest of $35,393) .......................... $8,085,393 Payable for securities purchased ................ 96,181 Investment advisory fee payable ................. 9,281 Administration fee payable ...................... 2,969 Custodian fees payable .......................... 938 Accrued expenses and other payables ............. 9,841 ---------- Total Liabilities ............................ 8,204,603 ----------- NET ASSETS ....................................... $23,038,085 =========== NET ASSETS consist of: Shares of beneficial interest, $0.01 per share par value, issued and outstanding 6,000,198 ............. 60,002 Paid-in capital in excess of par value .......... 46,037,695 Accumulated undistributed net investment loss ... (80,744) Accumulated net realized loss on investments sold .............................. (20,188,420) Unrealized depreciation of investments .......... (2,790,448) ----------- Total Net Assets ............................. $23,038,085 =========== NET ASSET VALUE PER SHARE ($23,038,085 / 6,000,198 shares of beneficial interest outstanding) ............... $ 3.84 =========== See Notes to Financial Statements. 8 CIM HIGH YIELD SECURITIES STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) INVESTMENT INCOME: Interest .......................................... $ 1,721,631 ------------ EXPENSES: Interest expense ..................................$ 94,377 Investment advisory fee ........................... 61,240 Legal and audit fees .............................. 45,303 Trustees' fees and expenses ....................... 21,913 Miscellaneous ..................................... 26,120 Administration fee ................................ 19,681 Shareholder servicing agent fees .................. 5,919 Custodian fees .................................... 5,878 ---------- Total Expenses .................................. 280,431 ------------ NET INVESTMENT INCOME ............................. 1,441,200 ------------ REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss on investments sold during the year .......................... (1,213,374) Net change in unrealized appreciation/ depreciation of investments during the period ............................. (1,185,573) ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS ... (2,398,947) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ (957,747) ============ See Notes to Financial Statements. 9 CIM HIGH YIELD SECURITIES STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) NET INCREASE IN CASH: Cash flows from operating activities: Interest received ..............................$ 1,522,531 Operating expenses paid ........................ (226,072) ------------ Net cash provided by operating activities ....... $ 1,296,459 Cash flows from investing activities: Increase in short-term securities, net ......... (53,338) Purchases of long-term securities .............. (7,184,439) Proceeds from sales of long-term securities .... 7,106,394 ------------ Net cash provided by investing activities ....... (131,383) ------------ Net cash provided by operating and investing activities ...................... 1,165,076 Cash flows from financing activities: Interest payments on notes payable ............. (59,420) Proceeds from borrowing ........................ 200,000 Cash dividends paid ............................ (1,297,158) ------------ Net cash used in financing activities ........... (1,156,578) ------------ Net increase in cash ............................ 8,498 Cash -- beginning of period ..................... 7,856 ------------ Cash -- end of period ........................... $ 16,354 ============ RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING AND INVESTING ACTIVITIES: Net decrease in net assets resulting from operations .............................. $ (957,747) Interest expense ............................... 94,377 Decrease in investments ........................ 2,055,058 Decrease in interest receivable ................ 11,968 Decrease in prepaid expenses ................... 809 Decrease in investment advisory fee payable .... (1,523) Decrease in administration fees payable ........ (264) Increase in payable for securities purchased ... 96,181 Increase in receivable for securities sold ..... (94,742) Decrease in accrued expenses and other payables ........................... (39,041) ------------ Total adjustments 2,122,823 ------------ Net cash provided by operating and investing activities ..................... $ 1,165,076 ============ See Notes to Financial Statements. 10 CIM HIGH YIELD SECURITIES STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2002 YEAR ENDED (UNAUDITED) DECEMBER 31, 2001 ------------- ----------------- Increase/(decrease) in net assets from operations: Net investment income ...................................................... $ 1,441,200 $ 3,023,149 Net realized loss on investments sold during the period .................... (1,213,374) (7,027,410) Net change in unrealized appreciation/depreciation of investments during the period ....................................................... (1,185,573) 4,306,026 ------------- ------------- Net increase/(decrease) in net assets resulting from operations ............ (957,747) 301,765 ------------- ------------- Distributions to shareholders from: Net investment income ................................................... (1,521,944) (3,019,618) Return of capital ....................................................... 0 (7,214) Capital share transactions: Shares issued as reinvestment of dividends .............................. 224,786 310,689 ------------- ------------- Net increase in net assets from Fund share transactions .................... 224,786 310,689 ------------- ------------- Net decrease in net assets ................................................. (2,254,905) (2,414,378) NET ASSETS: Beginning of period ........................................................ 25,292,990 27,707,368 ------------- ------------- End of period .............................................................. $ 23,038,085 $ 25,292,990 ============= =============
See Notes to Financial Statements. 11 CIM HIGH YIELD SECURITIES FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
SIX MONTHS ENDED YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 6/30/02 ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 12/31/01 12/31/00 12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 ----------- -------- -------- -------- --------- -------- -------- -------- -------- -------- -------- Operating performance: Net asset value, beginning of period .................$ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58 $ 7.10 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net investment income ........ 0.24 0.51 0.69 0.72 0.71 0.78 0.78 0.77 0.82 0.87 0.83 Net realized and unrealized gain/(loss) on investments ............ (0.40) (0.46) (1.82) (0.39) (1.07) 0.30 0.36 0.23 (0.89) 0.71 0.46 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from investment operations ................ (0.16) 0.05 (1.13) 0.33 (0.36) 1.08 1.14 1.00 (0.07) 1.58 1.29 Change in net asset value from Fund share transactions .............. -- -- -- -- -- -- -- -- -- (0.31) -- Distributions: Dividends from net investment income ......... (0.25) (0.51) (0.63) (0.71) (0.69) (0.78) (0.77) (0.79) (0.84) (0.83) (0.81) Dividends from return of capital ................... -- --# (0.06) -- -- (0.03) -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total from distributions ..... (0.25) (0.51) (0.69) (0.71) (0.69) (0.81) (0.77) (0.79) (0.84) (0.83) (0.81) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period ....................$ 3.84 $ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11 $ 8.02 $ 7.58 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= Market value, end of period ....................$ 3.700 $ 4.290 $ 4.875 $ 5.250 $ 7.190 $ 8.313 $ 8.125 $ 7.875 $ 7.125 $ 7.875 $ 7.500 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= Total investment return (net asset value) ......... (3.98)% 0.72% (18.76)% 4.93% (4.95)% 14.50% 16.46% 14.31% (0.86)% 17.22%(3) 18.60 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= Total investment return (market value) ............ (8.35)% (1.78)% 4.58% (18.89)% (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 period (in 000's) ................$23,038 $25,293 $27,707 $38,389 $40,567 $45,848 $43,495 $40,636 $38,678 $42,901 $30,024 Ratio of net investment income to average net assets ................ 11.66%+ 11.11% 11.10% 10.76% 9.37% 10.08% 10.46% 10.32% 10.82% 11.17% 11.00% Ratio of operating expenses to average net assets (2).. 1.50%+ 1.44% 1.22% 1.02% 1.02% 1.06% 1.10% 1.14% 0.95% 1.09% 1.65% Portfolio turnover rate (1)... 20.4% 75.2% 118.8% 98.0% 62.4% 154.5% 172.2% 79.9% 50.6% 114.3% 40.6%
---------------------------- (1) This rate is, in general, the percentage computed by taking the lesser of the cost of purchases or proceeds from the sales of portfolio securities for a period and dividing it by the monthly average value of such securities during the year, excluding short term securities. (2) The annualized operating expense ratio excludes interest expense. The annualized ratios including interest expense were 2.27%, 3.17%, 3.89%, 3.13%, 2.98%, 3.06%, 3.19%, 3.52%, 2.80%, 2.63% and 2.06% for the six months ended June 30, 2002 and the years ended December 31, 2001, 2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993, and 1992, respectively. (3) The total market value 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%. The total net asset value return for the year ended December 31, 1993, adjusted for the dilutive effect of the rights offering completed in August of 1993, is 21.89%. * On May 29, 1998 the Fund entered into a new investment advisory agreement with INVESCO (NY), Inc. (now known as INVESCO Institutional (N.A.), Inc.) due to the acquisition of Chancellor LGT Asset Management, Inc. by AMVESCAP PLC. + Annualized. # Amount rounds to less than $0.005 per share. See Notes to Financial Statements. 12 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 1. SIGNIFICANT ACCOUNTING POLICIES CIM High Yield Securities (the "Fund") was organized under the laws of the Commonwealth of Massachusetts on September 11, 1987 and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. PORTFOLIO VALUATION: Fixed-income securities (other than short-term obligations, but including listed issues) are valued based on prices obtained by one or more of the independent pricing services approved by the Board of Trustees. Such securities are valued at the mean of the closing bid and closing ask prices on the exchange where primarily traded. 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 accounting principles generally accepted in the United States. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. FEDERAL INCOME TAXES: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax should be payable by the Fund. CASH FLOW INFORMATION: Cash, as used in the Statement of Cash Flows, is the amount reported in the Statement of Assets and Liabilities. The Fund invests in securities and distributes dividends from net investment income and net realized gains (which are either paid in cash or reinvested at the discretion of shareholders). These activities are reported in the 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. 13 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 Institutional (N.A.), Inc. (the "Adviser"). The Advisory Agreement provides that the Fund will pay the Adviser a fee, computed and payable monthly, at the annual rate of .50% of the Fund's average weekly net assets. The Fund has also entered into an Administration and Support Agreement with PFPC Inc. ("PFPC"), to provide all administrative services to the Fund other than those related to the investment decisions. PFPC is paid a fee computed and payable monthly at an annual rate of .09% of the Fund's average weekly net assets, but no less than $40,000 per annum. The Fund pays each Trustee not affiliated with the Adviser $6,000 per year plus $1,000 per board meeting and committee meeting attended, and reimburses each such Trustee for travel and out-of-pocket expenses relating to their attendance at such meetings. 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. PFPC serves as the Fund's shareholder servicing agent (transfer agent). 3. PURCHASE AND SALES OF SECURITIES Cost of purchases and proceeds from sales of investment securities, excluding U.S. Government and short-term investments, during the six months ended June 30, 2002, amounted to $8,262,364 and $6,520,687, respectively. As of June 30, 2002, net unrealized depreciation was $2,790,448, of which $879,229 related to unrealized appreciation of investments and $3,669,677 related to unrealized depreciation of investments. As of June 30, 2002, book cost basis did not differ from tax cost basis. 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: SIX MONTHS ENDED YEAR ENDED JUNE 30, 2002 DECEMBER 31, 2001 -------------------- --------------------- SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Issued as reinvestment of dividends ................ 53,878 $224,786 67,995 $310,689 ------ -------- ------ -------- Net increase ................... 53,878 $224,786 67,995 $310,689 ====== ======== ====== ======== 14 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. NOTES PAYABLE The Fund currently has an $11 million ("commitment amount") line of credit provided by Fleet National Bank (the "Bank") under an Amended and Restated Credit Agreement (the "Agreement") dated as of September 18, 1992 and amended and restated as of May 23, 2001, primarily to leverage its investment portfolio. Under this Agreement, the Fund may borrow up to the lesser of $11 million or 25% of its gross assets. Interest is payable at either the federal funds rate plus 0.75% or its applicable LIBOR rate plus 0.75%, as selected by the Fund from time to time in its loan requests. The Fund is charged a commitment fee of one tenth of one percent per annum of the average daily unused commitment amount. At June 30, 2002, the Fund had borrowings of $8,050,000 outstanding under this Agreement. During the six months ended June 30, 2002, the Fund had an average outstanding daily balance of $8,032,320 with interest rates ranging from 1.870% to 2.750% and average debt per share of $1.35. For the six months ended June 30, 2002, interest expense totaled $94,377 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, 2001, the Fund had available for Federal tax purposes unused capital loss carryforwards of $330,065, $679,423, $253,172, $2,499,736, $133,391, $4,838,652, and $7,509,786 expiring in 2002, 2003, 2004, 2006, 2007, 2008, and 2009, respectively. 7. RISK FACTORS The Fund invests in securities offering high current income which generally will be in the lower rating categories of recognized ratings agencies (below investment-grade bonds). These securities generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for high yield securities may be relatively less liquid than the market for higher-rated securities. The Fund will provide notice to shareholders at least 60 days prior to any change in its policy of investing primarily (at least 80% of its total assets under normal circumstances) in "high yield", high risk fixed income securities. The Fund's use of leverage also increases exposure to capital risk. The Fund may invest 2-3% of its assets in emerging markets. Emerging markets may be subject to a substantially greater degree of social, political, and economic instability than is the case in domestic markets. 15 CIM -------------------------------------------------------------------------------- HIGH YIELD SECURITIES Semi-Annual Report June 30, 2002 This report is sent to shareholders of CIM High Yield Securities for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or any securities mentioned in the report. For Additional Information about CIM High Yield Securities Call 1-800-331-1710. CIM 3192 6/02