-----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, CEwdIJydIgHk7LUxWu6MgJ3kSXRh0GGceZLBF6vDebSWPO3ShxLERgwwveBpE0cX hTNXdogWXMlqtdagvFty5Q== 0000935069-05-000511.txt : 20050309 0000935069-05-000511.hdr.sgml : 20050309 20050309160717 ACCESSION NUMBER: 0000935069-05-000511 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050309 DATE AS OF CHANGE: 20050309 EFFECTIVENESS DATE: 20050309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIM HIGH YIELD SECURITIES CENTRAL INDEX KEY: 0000821466 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05328 FILM NUMBER: 05669499 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-CSR 1 g13851cim_ar04.txt CIM ANNUAL REPORT 04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05328 -------------- CIM High Yield Securities --------------------------------------------------- (Exact name of registrant as specified in charter) 400 W. Market Street, Suite 3300 Louisville, KY 40202 --------------------------------------------------- (Address of principal executive offices) (Zip code) Cindy Cameron INVESCO Institutional, (N.A.) Inc. 400 W. Market Street, Suite 3300 Louisville, KY 40202 --------------------------------------------------- (Name and address of agent for service) registrant's telephone number, including area code: 502-561-3210 ------------- Date of fiscal year end: December 31 ------------ Date of reporting period: December 31, 2004 ------------------ ITEM 1. REPORTS TO STOCKHOLDERS. A copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: CIM - -------------------------------------------------------------------------------- HIGH YIELD SECURITIES Annual Report December 31, 2004 [GRAPHIC OMITTED] INVESCO CIM HIGH YIELD SECURITIES - 2004 ANNUAL REPORT We are pleased to provide this annual report for CIM High Yield Securities (the "Fund") as of December 31, 2004. The following pages contain a listing of the Fund's holdings as well as the financial statements for the year. MARKET REVIEW High Yield markets ended the year much as they had most months in 2004: positively performing in almost all sectors and ratings classes. The JPM Global High Yield index returned 1.37% in December, bringing YTD totals to an astounding 13.8% -- a figure that few experts were predicting at the beginning of the year. This performance drove spreads dramatically tighter after a brief pause in April/May to end the year at 3.5bps. Along with decreased yields of the 5 and 10 year Treasury, these spreads have now reached near-historic lows. Calendar year 2004 also saw a record pace of new issuance with 583 issues coming to market representing $158.2 billion. It's remarkable that the market was able to absorb such a large pace of new issuance in 2004 and still perform as well as it did. This fact speaks to the huge level of assets searching for yield and coming to the market. However, those assets did not come from US retail investors: US High Yield mutual fund flows were flat on the year and negative in December. The mixed amount of assets that have flowed to US High Yield mutual funds speaks to the nature of new High Yield assets in 2004 -- while flows were heavy, they were not coming from the US retail investor, but from global sources including most notably, Asia. During calendar year 2004 the Fund's return at net asset value was 11.19%, versus an average return of 17.06% for its peer group (Lipper High Current Yield Leverage Funds). Considering our consevative approach, we were pleased to have participated in the broad-based market rally of 2004 to the extent that we did. As High Yield spreads grind lower, we are cognizant that the market has reached territory of record lows. We have concluded that the portfolio's strategy for 2005 will be more neutral toward ratings classes, with a redoubled effort on individual credit analysis. The environment we are about to enter will favor our ability to distinguish between winners and losers in our credit universe. OUTLOOK The 12 month rolling default rate is now at 2.9% and projected to decrease for the next 5 months. It should also be noted that the ratio of corporations being upgraded to those downgraded is positive: that is, S&P and Moody's are upgrading more companies than they are downgrading. We also track cash levels, which through re-financings and deleveraging are at record highs. Finally, the stocks of companies that use high yield on their balance sheets have also improved. We consider this a leading indicator of future bond performance. We believe the High Yield market will continue to outperform government and investment grade bonds as low yields and excellent credit conditions push investors into spread products. The search for yield will likely continue to drive spreads down further in the coming one to two months, but not forever. As spreads grind lower, we are cognizant that the market is in record low spread-level territory. We believe that because of excellent credit fundamentals, the lower duration of the High Yield asset class, and higher coupons, we should be able to weather a UST shock and end the year in positive performing territory. INVESCO Institutional (N.A.) Inc. 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 FUND PORTFOLIO SUMMARY (% OF TOTAL INVESTMENTS) DECEMBER 31, 2004 (UNAUDITED) CORPORATE BONDS AND NOTES Lodging and Casinos .................................. 7.0% Utilities ............................................ 6.3% Wireless Communications .............................. 6.0% Cable and Satellite Television ....................... 5.5% Wireline ............................................. 5.5% Chemicals and Plastics ............................... 5.4% Publishing & Printing ................................ 4.9% Industrial Machinery/Components ...................... 4.7% Consumer Products .................................... 3.9% Building and Development ............................. 3.9% Financial Intermediaries ............................. 3.6% Oil and Gas .......................................... 3.4% Food/Drug Retailers .................................. 3.2% Pipe Lines/Ex Natural Gas ............................ 3.2% Health Care .......................................... 3.0% Auto Parts & Accessories ............................. 2.9% Containers/Packaging ................................. 2.9% Paper & Forest Products .............................. 2.3% Leisure Goods, Activities, Movie ..................... 1.6% Broadcasting ......................................... 1.5% Office/Business Equipment ............................ 1.3% Ecological Services and Equipment .................... 1.2% Electronics/Electric ................................. 1.2% Food Service ......................................... 1.1% Aerospace/Defense .................................... 1.0% Steel ................................................ 0.9% Airlines ............................................. 0.8% Retail ............................................... 0.8% Equipment Leasing .................................... 0.7% Software/services .................................... 0.6% Agricultural Production - Crops ...................... 0.6% Personal Services .................................... 0.6% Marine Transportation ................................ 0.6% Property - Casualty Insurance ........................ 0.5% Insurance ............................................ 0.3% FOREIGN BONDS ........................................... 2.2% FOREIGN GOVERNMENT SECURITIES ........................... 1.5% SHORT TERM OBLIGATIONS .................................. 3.4% ------ TOTAL ................................................... 100.0% ====== 3 CIM HIGH YIELD SECURITIES PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- 120.3% LODGING AND CASINOS -- 9.1% $100,000 Aztar Corp., Sr. Sub. Notes, 7.875%, 06/15/14 ...................................... $ 110,750 250,000 Felcor Lodging LP., Sr. Notes, 9.000%, 06/01/11^ ................................... 284,375 275,000 Global Cash Account Finance, Sr. Sub Notes, 8.750%, 03/15/12 ....................... 297,687 100,000 Hard Rock Hotel, Inc., Sr. Notes, 8.875%, 06/01/13 ................................. 111,000 200,000 Host Marriott LP., Sr. Notes, 7.125%, 11/01/13 ..................................... 214,750 200,000 Jacobs Entertainment, Sr. Notes, 11.875%, 02/01/09 ................................. 227,000 175,000 Majestic Star Casino LLC., Sr. Notes, 9.500%, 10/15/10 ............................. 186,375 175,000 OED Corp./Diamond Jo, Sr. Notes, 8.750%, 04/15/12 .................................. 172,375 150,000 Resort International Hotel/Casino, Sr. Notes, 11.500%, 03/15/09 .................... 177,000 175,000 River Rock Entertainment, Sr. Notes, 9.750%, 11/01/11 .............................. 197,094 140,000 Riviera Holdings Corp., Sr. Notes, 11.000%, 06/15/10 ............................... 157,150 225,000 Seneca Gaming Corp., Sr. Notes, 7.250%, 05/01/12 ................................... 237,938 200,000 Wheeling Island Gaming, Sr. Notes, 10.125%, 12/15/09 ............................... 214,000 ----------- 2,587,494 ----------- UTILITIES -- 8.1% 200,000 AES Corporation, Sr. Notes, 9.000%, 05/15/15** ..................................... 230,000 104,000 AES Corporation, Sr. Notes, 8.750%, 06/15/08 ....................................... 114,400 300,000 Allegheny Energy Supply, Sr. Notes, 8.250%, 04/15/12**^ ............................ 336,750 150,000 Aquila Inc., Sr. Notes, 9.950%, 02/01/11^ .......................................... 170,625 400,000 Calpine Corp., Sr. Notes, 8.500%, 07/15/10** ....................................... 345,000 200,000 CMS Energy Corp., Sr. Notes, 9.875%, 10/15/07 ...................................... 224,500 75,000 Dynegy Holding, Inc., Sr. Notes, 10.125%, 07/15/13** ............................... 86,250 200,000 Midwest Generation Ll C., Sr. Notes, 8.750%, 05/01/34 .............................. 228,000 350,000 NRG Energy Inc., Sr. Notes, 8.000%, 12/15/13** ..................................... 383,250 75,000 PSEG Energy Holding, Sr. Notes, 10.000%, 10/01/09 .................................. 89,062 100,000 Texas Genco LLC Financing, Sr. Notes, 6.875%, 12/15/14** ........................... 103,875 ----------- 2,311,712 ----------- CHEMICALS AND PLASTICS -- 7.0% 275,000 Equistar Chemical Funding, Sr. Notes, 10.625%, 05/01/11 ............................ 320,375 215,000 Huntsman ICI Chemicals Ltd., Sr. Sub. Notes, 10.125%, 07/01/09 ..................... 227,362 75,000 Huntsman International LLC., Sr. Sub. Notes, 7.375%, 01/01/15** .................... 75,562 175,000 Innophos Inc., Sr. Sub. Notes, 8.875%, 08/15/14** .................................. 189,875 350,000 Lyondell Chemical Co., Sr. Sub. Notes, 10.875%, 05/01/09 ........................... 371,875 100,000 Nalco Company, Sr. Sub. Notes, 8.875%, 11/15/13 .................................... 110,250 200,000 Rhodia SA, Sr. Sub. Notes, 8.875%, 06/01/11 ........................................ 202,500 100,000 Rockwood Specialities GRP., Sr. Sub. Notes, 10.625%, 05/15/11 ...................... 115,500 100,000 Rockwood Specialties GRP., Sr. Sub. Notes, 7.500%, 11/15/14** ...................... 104,250 250,000 Sovereign Specialty Chemicals, Sr. Sub. Notes, 11.875%, 03/15/10 ................... 269,063 ----------- 1,986,612 -----------
See Notes to Financial Statements. 4 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) WIRELESS COMMUNICATIONS -- 7.8% $250,000 Alamosa Delaware, Inc., Sr. Notes, 8.500%, 01/31/12 ................................ $ 274,375 100,000 American Tower Corp., Sr. Notes, 7.250%, 12/01/11 .................................. 106,500 100,000 American Tower Corp., Sr. Notes., 7.125%, 10/15/12** ............................... 102,750 275,000 Crown Castle International Corp., Sr. Notes, 7.500%, 12/01/13 ...................... 297,000 100,000 IWO Escrow Co., Sr. Notes, 6.320%, 01/15/12**^ ..................................... 101,250 350,000 Nextel Communications, Sr. Notes, 7.375%, 08/01/15 ................................. 386,750 171,000 Nextel Partners, Inc., Sr. Notes, 12.500%, 11/15/09 ................................ 194,512 150,000 Nextel Partners, Inc., Sr. Notes, 8.125%, 07/01/11 ................................. 167,250 250,000 Rogers Wireless, Inc., Sr. Sub. Notes, 8.000%, 12/15/12** .......................... 265,625 150,000 Rural Cellular Corp., Sr. Notes, 9.875%, 02/01/10 .................................. 153,375 150,000 Western Wireless Corp., Sr. Notes, 9.250%, 07/15/13 ................................ 163,875 ----------- 2,213,262 ----------- CABLE AND SATELLITE TELEVISION -- 7.1% 250,000 Cablevision Systems Corp., Sr. Notes, 8.000%, 04/15/12** ........................... 268,125 350,000 Charter Communications Holdings II,, 10.250%, 09/15/10 ............................. 372,750 200,000 Charter Communications Holdings, Sr. Notes, 10.750%, 10/01/09 ...................... 183,000 350,000 Charter Communications Holdings, Sr. Notes, 10.250%, 01/15/10 ...................... 308,875 100,000 CSC Holdings, Inc., Sr. Notes, 7.250%, 07/15/08 .................................... 106,000 150,000 GCI Inc., Sr. Notes, 7.250%, 02/15/14 .............................................. 150,750 125,000 Insight Midwest, Sr. Notes, 10.500%, 11/01/10 ...................................... 137,500 150,000 Lodgenet Entertainment, Sr. Sub. Notes, 9.500%, 06/15/13 ........................... 166,500 100,000 Mediacom LLC., Sr. Notes, 9.500%, 01/15/13 ......................................... 100,875 200,000 NTL Cable PLC., Sr. Notes, 8.750%, 04/15/14** ...................................... 226,500 ----------- 2,020,875 ----------- WIRELINE -- 7.2% 200,000 AT & T Corp., Sr. Notes, 9.050%, 11/15/11^ ......................................... 231,250 200,000 Cincinnati Bell, Inc., Sr. Sub. Notes, 8.375%, 01/15/14 ............................ 203,500 150,000 Level 3 Communications, Sr. Notes, 11.250%, 03/15/10 ............................... 126,750 175,000 MCI Inc., Sr. Sr. Notes, 8.735%, 05/01/14^ ......................................... 188,562 275,000 Panamsat Corp., 9.000%, 08/15/14** ................................................. 308,344 200,000 Qwest Capital Funding, Sr. Notes, 7.900%, 08/15/10 ................................. 203,000 675,000 Qwest Capital Funding, Sr. Notes, 7.000%, 08/03/09 ................................. 669,938 100,000 Qwest Communications International, Sr. Notes, 7.250%, 02/15/11** .................. 103,000 ----------- 2,034,344 -----------
See Notes to Financial Statements. 5 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) PUBLISHING & PRINTING -- 6.3% $100,000 American Media Operation, Sr. Sub. Notes, 8.875%, 01/15/11 ......................... $ 106,875 100,000 American Media Operation, Sr. Sub. Notes, Series B, 10.250%, 05/01/09 .............. 105,875 250,000 Cenveo Corp., Sr. Sub. Notes, 7.875%, 12/01/13 ..................................... 233,750 200,000 Dex Media Inc., Sr. Notes, 8.000%, 11/15/13 ........................................ 217,500 147,000 Dex Media West, Sr. Sub Notes, Series B, 9.875%, 08/15/13 .......................... 170,152 200,000 Houghton Mifflin Co., Sr. Sub. Notes, 9.875%, 02/01/13 ............................. 220,000 100,000 Mail Well I, Corp. (Cenveo Corp.), Sr. Notes, 9.625%, 03/15/12 ..................... 110,250 400,000 Vertis, Inc., Sr. Notes, Series B, 10.875%, 06/15/09 ............................... 436,000 200,000 WDAC Subsidiary Corp., Sr. Notes, 8.375%, 12/01/14** ............................... 198,250 ----------- 1,798,652 ----------- INDUSTRIAL MACHINERY/COMPONENTS -- 6.1% 200,000 Case New Holland Inc., Sr. Notes, 9.250%, 08/01/11** ............................... 223,500 50,000 Dresser Rand Group Inc., Sr. Sub. Notes, 7.375%, 11/01/14** ........................ 51,250 150,000 Dresser, Inc., Sr. Sub. Notes, 9.375%, 04/15/11 .................................... 165,000 100,000 JLG Industries, Inc., Sr. Sub Notes, 8.375%, 06/15/12 .............................. 107,500 250,000 Mueller Group Inc., Sr. Sub. Notes, 10.000%, 05/01/12 .............................. 273,750 200,000 Sensus Metering Systems, Sr. Sub. Notes, 8.625%, 12/15/13 .......................... 206,000 150,000 Terex Corp., Sr. Sub. Notes, Series B, 10.375%, 04/01/11 ........................... 168,750 200,000 Trimas Corp. Sr. Sub. Notes, 9.875%, 06/15/12 ...................................... 213,000 300,000 Wesco Distribution, Inc., Sr. Sub. Notes, Series B, 9.125%, 06/01/08 ............... 310,500 ----------- 1,719,250 ----------- CONSUMER PRODUCTS -- 5.0% 250,000 Amscan Holdings Inc., Sr. Sub. Notes, 8.750%, 05/01/14 ............................. 251,250 100,000 B&G Foods Holding Corp., Sr. Notes, 8.000%, 10/01/11 ............................... 107,000 175,000 Chattem Inc., Sr. Sub. Notes, 7.000%, 03/01/14 ..................................... 181,125 100,000 Jostens IH Corp., Sr. Sub. Notes, 7.625%, 10/01/12** ............................... 104,500 225,000 Playtex Products, Inc. Sr. Sub Notes, 9.375%, 06/01/11 ............................. 241,312 275,000 Samsonite Corp., Sr. Sub. Notes, 8.875%, 06/01/11 .................................. 299,063 225,000 Sealy Mattress Co., Sr. Sub. Notes, 8.250%, 06/15/14 ............................... 239,625 ----------- 1,423,875 ----------- BUILDING AND DEVELOPMENT -- 5.0% 200,000 Associated Materials, Inc., Sr. Sub. Notes, 9.750%, 04/15/12 ....................... 224,500 225,000 Ply Gem Industries Inc., Sr. Sub Notes, 9.000%, 02/15/12 ........................... 229,500 175,000 THL Buildco (Nortek Inc.) Sr. Sub Notes, 8.500%, 09/01/14** ........................ 183,750 200,000 US Concrete Inc., Sr. Sub. Notes, 8.375%, 04/01/14 ................................. 216,500 300,000 WCI Communities, Inc., Sr. Sub. Notes, 9.125%, 05/01/12 ............................ 334,500 200,000 William Lyon Homes, Sr. Notes, 10.750%, 04/01/13 ................................... 225,750 ----------- 1,414,500 -----------
See Notes to Financial Statements. 6 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) FINANCIAL INTERMEDIARIES -- 4.7% $350,000 Americredit Corp., Sr. Notes, 9.250%, 05/01/09 ..................................... $ 377,125 250,000 BCP Crystal Holdings, Sr. Sub. Notes, 9.625%, 06/15/14** ........................... 283,125 200,000 Refco Finance Holdings,, 9.000%, 08/01/12** ........................................ 220,000 200,000 Thornburg Mortgage, Sr. Sub. Notes, 8.000%, 05/15/13 ............................... 213,500 200,000 Western Financial Bank, Sr. Sub. Notes, 9.625%, 05/15/12 ........................... 229,000 ----------- 1,322,750 ----------- OIL AND GAS -- 4.4% 100,000 Chesapeake Energy Corp., Sr. Notes, 7.000%, 08/15/14 ............................... 107,000 250,000 Ferrellgas Partners L.P., Sr. Notes, 8.750%, 06/15/12 .............................. 273,750 250,000 Sesi LLC., Sr. Notes, 8.875%, 05/15/11 ............................................. 275,000 250,000 Swift Energy Co., Sr. Sub. Notes, 9.375%, 05/01/12 ................................. 281,250 300,000 Transmontaigne, Inc., Sr. Sub. Notes, 9.125%, 06/01/10 ............................. 327,000 ----------- 1,264,000 ----------- FOOD/DRUG RETAILERS -- 4.2% 225,000 Di Giorgio Corp., Sr. Notes, Series B, 10.000%, 06/15/07 ........................... 226,125 275,000 Great Atlantic & Pacific Tea Co., Sr. Notes, 9.125%, 12/15/11 ...................... 259,187 100,000 Ingles Markets, Inc., Sr. Sub. Notes, 8.875%, 12/01/11 ............................. 107,500 225,000 Jean Coutu Group PJC Inc., Sr. Sub. Notes, 8.500%, 08/01/14** ...................... 231,750 150,000 Rite Aid Corp., Sr. Notes, 9.250%, 06/01/13 ........................................ 152,250 200,000 Strater Bros Holdings, Inc., 8.125%, 06/15/12 ...................................... 212,500 ----------- 1,189,312 ----------- PIPE LINES/EX NATURAL GAS -- 4.1% 100,000 El Paso CGP. Co., Sr. Notes, 7.625%, 09/01/08 ...................................... 105,000 450,000 El Paso Corp., Sr. Notes, 7.875%, 06/15/12 ......................................... 473,062 200,000 El Paso Production Holding, Sr. Notes, 7.750%, 06/01/13 ............................ 210,500 150,000 Sonat, Inc., Sr. Notes, 7.625%, 07/15/11 ........................................... 156,000 200,000 William Co., Inc., Sr. Notes, 8.125%, 03/15/12 ..................................... 232,000 ----------- 1,176,562 ----------- HEALTH CARE -- 3.8% 50,000 HCA Inc., Sub. Notes, 6.750%, 07/15/13 ............................................. 52,050 200,000 Iasis Healthcare Corp., Sr. Sub. Notes, 8.750%, 06/15/14 ........................... 219,000 200,000 Insight Health Services, Sr. Sub. Notes, Series B, 9.875%, 11/01/11 ................ 203,000 175,000 Tenet Healthcare Corp., Sr. Notes, 9.875%, 07/01/14** .............................. 191,625 100,000 Triad Hospitals, Inc., Sr. Sub. Notes, 7.000%, 11/15/13 ............................ 102,750 100,000 Vanguard Health Holding II, Sr. Sub. Notes, 9.000%, 10/01/14** ..................... 107,500 100,000 VWR International Inc., Sr. Sub Notes, 8.000%, 04/15/14** .......................... 107,250 100,000 VWR International Inc., Sr. Sub. Notes, 8.000%, 04/15/14 ........................... 107,250 ----------- 1,090,425 -----------
See Notes to Financial Statements. 7 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) AUTO PARTS & ACCESSORIES -- 3.8% $150,000 CSK Auto Inc., Sr. Notes, 7.000%, 01/15/14 ......................................... $ 147,937 200,000 Delco Remy International, Inc., Sr. Sub. Notes, 11.000%, 05/01/09 .................. 214,000 100,000 Dura Operating Corp., Sr. Sub. Notes, Series B, 8.625%, 04/15/12 ................... 104,500 250,000 Goodyear Tire & Rubber Sr. Notes, 7.857%, 08/15/11 ................................. 255,000 125,000 Navistar International, Sr. Notes, 7.500%, 06/15/11 ................................ 134,688 175,000 Tenneco Automotive, Inc., Sr. Notes, Series B, 10.250%, 07/15/13 ................... 207,375 200,000 Venture Holdings Trust, Sr. Notes, 11.000%, 06/01/07+ .............................. 9,000 ----------- 1,072,500 ----------- CONTAINERS/PACKAGING -- 3.7% 200,000 Berry Plastic, Sr. Sub. Notes, 10.750%, 07/15/12 ................................... 230,000 225,000 Constar International, Sr. Sub Notes, 11.000%, 12/01/12 ............................ 234,563 100,000 Graham Packaging Co., Sr. Notes, 8.500%, 10/15/12** ................................ 105,500 250,000 Plastipak Holdings, Inc., Sr. Notes, 10.750%, 09/01/11 ............................. 282,500 200,000 Solo Cup Company Sr. Sub. Notes, 8.500%, 02/15/14 .................................. 209,000 ----------- 1,061,563 ----------- PAPER & FOREST PRODUCTS -- 3.0% 200,000 Appleton Papers Inc., Sr. Notes, 8.125%, 06/15/11 .................................. 216,500 100,000 Boise Cascade LLC., Sr. Sub. Notes, 7.125%, 10/15/14** ............................. 106,250 175,000 Graphic Packaging International Sr. Sub. Notes, 9.500%, 08/15/13 ................... 199,938 125,000 Millar Western Forest, Sr. Notes, 7.750%, 11/15/13 ................................. 134,375 100,000 Tembec Industries, Inc., Sr. Notes, 8.625%, 06/30/09 ............................... 101,000 100,000 Tembec Industries, Inc., Sr. Notes, 8.500%, 02/01/11 ............................... 101,000 ----------- 859,063 ----------- LEISURE GOODS, ACTIVITIES, MOVIE -- 2.1% 100,000 LCE Acquisition Corp., 9.000%, 08/01/14** .......................................... 108,750 175,000 NCL Corp., Sr. Notes, 10.625%, 07/15/14** .......................................... 175,875 300,000 Six Flags, Inc., Sr. Notes, 9.625%, 06/01/14 ....................................... 303,000 ----------- 587,625 ----------- BROADCASTING -- 1.9% 75,000 New Skies Satellites NV., Sr. Sub. Notes, 9.125%, 11/01/12** ....................... 76,875 100,000 Nexstar Finance Inc., Sr. Sub. Notes, 7.000%, 01/15/14 ............................. 99,500 200,000 Rainbow National Services LLC., Sr. Notes, 8.750%, 09/01/12** ...................... 220,500 125,000 Sinclair Broadcast Group, 8.000%, 03/15/12 ......................................... 133,438 ----------- 530,313 ----------- OFFICE/BUSINESS EQUIPMENT -- 1.7% 125,000 Danka Business Systems, Sr. Notes, 11.000%, 06/15/10 ............................... 133,125 300,000 Xerox Corp., Sr. Notes, 9.750%, 01/15/09 ........................................... 354,000 ----------- 487,125 -----------
See Notes to Financial Statements. 8 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) ECOLOGICAL SERVICES AND EQUIPMENT -- 1.5% $300,000 Allied Waste North America, Inc., Sr. Notes, Series B, 9.250%, 09/01/12 ............ $ 326,250 100,000 Casella Waste Systems, Sr. Sub. Notes, 9.750%, 02/01/13 ............................ 111,000 ----------- 437,250 ----------- ELECTRONICS/ELECTRIC -- 1.5% 100,000 Amkor Technologies Inc., Sr. Notes, 7.125%, 03/15/11 ............................... 94,500 200,000 Celestica, Inc., Sr. Sub. Notes, 7.875%, 07/01/11 .................................. 215,500 125,000 New Asat Finance LTD., Sr. Notes, 9.250%, 02/01/11** ............................... 114,063 ----------- 424,063 ----------- FOOD SERVICE -- 1.4% 200,000 Buffets, Inc., Sr. Sub. Notes, 11.250%, 07/15/10 ................................... 215,000 175,000 Friendly Ice Cream Corp., Sr. Notes, 8.375%, 06/15/12 .............................. 172,594 ----------- 387,594 ----------- AEROSPACE/DEFENSE -- 1.4% 100,000 BE Aerospace, Inc., Sr. Sub. Notes, Series b, 8.875%, 05/01/11 ..................... 105,000 150,000 BE Aerospace, Sr. Sub. Notes, Series B, 8.000%, 03/01/08 ........................... 150,937 125,000 K & F Acquisition, Inc., Sr. Sub. Notes, 7.750%, 11/15/14** ........................ 129,688 ----------- 385,625 ----------- STEEL -- 1.2% 100,000 Ak Steel Corp. Sr. Notes, 7.875%, 02/15/09 ......................................... 102,375 100,000 International Steel Group, Sr. Notes, 6.500%, 04/15/14 ............................. 107,750 125,000 Ryerson Tull Inc., Sr. Notes, 8.250%, 12/15/11** ................................... 126,875 ----------- 337,000 ----------- AIRLINES -- 1.1% 125,000 Continental Airlines, Inc., Sr. Notes, 8.000%, 12/15/05 ............................ 122,500 100,000 Delta Airlines, Sr. Notes, 7.700%, 12/15/05 ........................................ 93,000 100,000 Northwest Airlines, Inc., Sr. Notes, 9.875%, 03/15/07 .............................. 90,750 ----------- 306,250 ----------- RETAIL -- 1.0% 100,000 Finlay Fine Jewelry Corp., Sr. Notes, 8.375%, 06/01/12 ............................. 108,500 175,000 Petro Shopping Center, Sr. Notes, 9.000%, 02/15/12 ................................. 185,938 ----------- 294,438 ----------- EQUIPMENT LEASING -- 0.9% 125,000 United Rentals Inc., Sr. Sub. Notes, 7.000%, 02/15/14 .............................. 117,500 150,000 United Rentals N.A. Inc., Sr. Sub. Notes, 7.750%, 11/15/13 ......................... 147,750 ----------- 265,250 -----------
See Notes to Financial Statements. 9 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- CORPORATE BONDS AND NOTES -- (CONTINUED) SOFTWARE/SERVICES -- 0.8% $200,000 UGS Corp., Sr. Sub. Notes, 10.000%, 06/01/12** ..................................... $ 228,500 ----------- AGRICULTURAL PRODUCTION - CROPS -- 0.8% 200,000 Hines Nurseries, Inc.. Sr. Notes, 10.250%, 10/01/11 ................................ 219,500 ----------- PERSONAL SERVICES -- 0.8% 100,000 Service Corp. International, Sr. Notes, 7.700%, 04/15/09 ........................... 108,500 100,000 Service Corp. International, Sr. Notes, 7.700%, 04/15/09 ........................... 108,500 ----------- 217,000 ----------- MARINE TRANSPORTATION -- 0.7% 100,000 General Maritime, Sr. Notes, 10.000%, 03/15/13 ..................................... 115,500 100,000 Great Lakes Dredge & Dock, Sr. Sub Notes, 7.750%, 12/15/13 ......................... 91,500 ----------- 207,000 ----------- PROPERTY - CASUALTY INSURANCE -- 0.7% 175,000 Crum & Forster Holding Corp., Sr. Notes, 10.375%, 06/15/13 ......................... 196,000 ----------- INSURANCE -- 0.4% 100,000 Fairfax Financial Holdings, Sr. Notes, 7.750%, 04/26/12 ............................ 102,500 ----------- TOTAL CORPORATE BONDS AND NOTES (Cost $32,103,290) ............................................................... 34,159,784 ----------- FOREIGN BONDS -- 2.9% FOREST PRODUCTS & PAPER -- 1.1% 300,000 Kappa Beheer BV, Sr. Sub. Notes, 10.625%, 07/15/09 (Netherlands) ................... 319,500 ----------- CONTAINERS/PACKAGING -- 0.9% 225,000 Crown Euro Holdings SA., Sr. Notes, 10.875%, 03/01/13 (France) ..................... 267,187 ----------- CHEMICALS AND PLASTICS -- 0.6% 150,000 Acetex Corp., Sr. Notes, 10.875%, 08/01/09 (Canada) ................................ 163,875 ----------- UTILITIES -- 0.3% 100,000 Calpine Corp., Sr. Notes, 8.500%, 05/01/08 (Canada) ................................ 82,500 ----------- TOTAL FOREIGN BONDS (Cost $776,775) .................................................................. 833,062 -----------
See Notes to Financial Statements. 10 CIM HIGH YIELD SECURITIES -- (CONTINUED) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2004
PRINCIPAL VALUE AMOUNT (NOTE 1) - --------- ----------- FOREIGN GOVERNMENT SECURITIES -- 2.0% FOREIGN SOVEREIGN -- 2.0% $ 360,000 ARG Boden, 2.008%, 08/03/12^ ....................................................... $ 308,111 71,000 Republic of Brazil, 11.000%, 08/17/40 .............................................. 84,330 100,272 Republic of Brazil, Series C, 8.000%, 04/15/14 ..................................... 103,259 70,000 Republic of Peru, 4.500%, 03/07/17^ ................................................ 66,036 ----------- TOTAL FOREIGN GOVERNMENT SECURITIES (Cost $465,301) .................................................................. 561,736 ----------- SHORT TERM OBLIGATIONS -- 4.3% 115,000 United States Treasury Bill, 1.900%***, 01/13/05 ................................... 114,927 230,000 United States Treasury Bill, 1.710%***, 01/13/05 ................................... 229,869 310,000 United States Treasury Bill, 1.620%***, 01/13/05 ................................... 309,833 580,000 United States Treasury Bill, 1.830%***, 01/13/05 ................................... 579,646 ----------- TOTAL SHORT TERM OBLIGATIONS (Cost $1,234,275) ................................................................ 1,234,275 ----------- TOTAL INVESTMENTS (Cost $34,579,641) .................................................. 129.5% 36,788,857 LIABILITIES LESS OTHER ASSETS (NET) ................................................... (29.5)% (8,380,729) ----- ----------- NET ASSETS ............................................................................ 100.0% $28,408,128 ===== =========== ** 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. The market value of these securities is $6,525,782. *** Rate represents annualized yield at date of purchase. + Securities in default. ^ Variable rate security - the interest rate shown is the rate at December 31, 2004.
At December 31, 2004, the Fund's credit quality allocation was as follows: STANDARD & POOR'S CREDIT RATING (UNAUDITED) ------------------------------- BB ............................................. 9.88% B .............................................. 68.98% CCC ............................................ 15.19% CC ............................................. 0.60% Not Rated ...................................... 5.35% See Notes to Financial Statements. 11 CIM HIGH YIELD SECURITIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2004 ASSETS: Investments, at value (Cost $ 34,579,641) ................................. $ 36,788,857 Cash ...................................................................... 507,138 Interest receivable ....................................................... 701,819 Prepaid expenses .......................................................... 19,070 ------------ Total Assets ........................................................... 38,016,884 ------------ LIABILITIES: Notes payable (including accrued interest of $64,406) ..................... $9,254,406 Payables for securities purchased ......................................... 310,840 Investment advisory fee payable ........................................... 12,236 Administration fee payable ................................................ 3,686 Custodian fees payable .................................................... 1,160 Accrued expenses and other payables ....................................... 26,428 ---------- Total Liabilities ...................................................... 9,608,756 ------------ NET ASSETS ..................................................................... $ 28,408,128 ============ NET ASSETS consist of: Shares of beneficial interest, $0.01 per share par value, issued and outstanding 6,134,216 ....................................... $ 61,342 Paid-in capital in excess of par value .................................... 45,575,764 Accumulated undistributed net investment income ........................... 8,257 Accumulated net realized loss on investments sold ......................... (19,446,451) Unrealized appreciation of investments .................................... 2,209,216 ------------ Total Net Assets ....................................................... $ 28,408,128 ============ NET ASSET VALUE PER SHARE ($28,408,128 / 6,134,216 shares of beneficial interest outstanding) ......... $ 4.63 ============ MARKET VALUE PER SHARE ......................................................... $ 4.28 ============
See Notes to Financial Statements. 12 CIM HIGH YIELD SECURITIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 INVESTMENT INCOME: Interest .......................................... $3,329,807 ---------- EXPENSES: Interest expense ..................................... $195,792 Investment advisory fee .............................. 136,892 Legal and audit fees ................................. 129,978 Trustees' fees and expenses .......................... 70,000 Miscellaneous ........................................ 59,687 Administration fee ................................... 40,300 Printing fee ......................................... 27,365 Shareholder servicing agent fees ..................... 25,386 Fund accounting fee .................................. 24,000 Custodian fees ....................................... 13,750 -------- Total Expenses .................................... 723,150 ---------- NET INVESTMENT INCOME ..................................... 2,606,657 ---------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments sold during the period 449,306 Net change in unrealized appreciation/(depreciation) of investments during the period ..................... (118,636) ---------- 330,670 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $2,937,327 ==========
See Notes to Financial Statements. 13 CIM HIGH YIELD SECURITIES STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2004 NET INCREASE IN CASH: Cash flows from operating activities: Interest received ......................................................... $ 3,322,904 Dividends received ........................................................ 11,750 Operating expenses paid ................................................... (564,725) Increase in short-term securities, net .................................... (775,534) Purchases of long-term securities ......................................... (19,030,898) Proceeds from sales of long-term securities ............................... 20,193,473 Interest payments on notes payable ........................................ (171,456) ------------ Net cash provided by operating activities ...................................... $ 2,985,514 ----------- Cash flows from financing activities: Principal payments on loan ................................................ (70,000) Distributions paid ........................................................ (2,624,996) ------------ Net cash used in financing activities .......................................... (2,694,996) ----------- Net increase in cash ........................................................... 290,518 Cash -- beginning of year ...................................................... 216,620 ----------- Cash -- end of year ............................................................ $ 507,138 =========== RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net increase in net assets resulting from operations ........................... $ 2,937,327 Decrease in interest receivable ........................................... 118,274 Decrease in dividend receivable ........................................... 5,875 Increase in prepaid expenses .............................................. (17,747) Increase in accrued interest .............................................. 24,336 Increase in investment advisory fee payable ............................... 247 Increase in administration fee payable .................................... 273 Decrease in custodian fee payable ......................................... (140) Decrease in accrued expenses and other payables ........................... (20,000) Increase in payable for securities purchased .............................. 310,840 Amortization of discount/premium .......................................... (119,302) Increase in short-term securities, net .................................... (775,534) Purchases of long-term securities ......................................... (19,341,738) Proceeds from sales of long-term securities ............................... 20,193,473 Net realized gain on investments sold ..................................... (449,306) Net change in unrealized appreciation/depreciation of investments ......... 118,636 ------------ Total adjustments .................................................... 48,187 ----------- Net cash provided by operating activities ...................................... $ 2,985,514 ===========
See Notes to Financial Statements. 14 CIM HIGH YIELD SECURITIES STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- Increase in net assets from operations: Net investment income ....................................... $ 2,606,657 $ 2,896,080 Net realized gain on investments sold during the year ....... 449,306 41,526 Net change in unrealized appreciation/(depreciation) of investments during the year ............................ (118,636) 5,412,063 ----------- ----------- Net increase in net assets resulting from operations ........ 2,937,327 8,349,669 ----------- ----------- Distributions to shareholders from: Net investment income .................................. (2,602,643) (2,891,837) ----------- ----------- Total distributions ................................. (2,602,643) (2,891,837) ----------- ----------- Fund share transactions: Shares issued as reinvestment of dividends ............. 190,864 313,493 ----------- ----------- Net increase in net assets from Fund share transactions ..... 190,864 313,493 ----------- ----------- Net increase in net assets .................................. 525,548 5,771,325 NET ASSETS: Beginning of year ........................................... 27,882,580 22,111,255 ----------- ----------- End of year ................................................. $28,408,128 $27,882,580 =========== =========== Accumulated undistributed net investment income ............. $8,257 $4,243
See Notes to Financial Statements. 15 CIM HIGH YIELD SECURITIES FINANCIAL HIGHLIGHTS FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 2/31/99 12/31/98* 12/31/97 12/31/96 12/31/95 -------- -------- -------- -------- -------- ------- -------- -------- -------- -------- Operating performance: Net asset value, beginning of year ................... $ 4.58 $ 3.68 $ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 $ 7.11 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income ....... 0.43 0.48 0.48 0.51 0.69 0.72 0.71 0.78 0.78 0.77 Net realized and unrealized gain/(loss) on investments ............ 0.05 0.90 (0.57) (0.46) (1.82) (0.39) (1.07) 0.30 0.36 0.23 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net increase/(decrease) in net assets resulting from investment operations ................ 0.48 1.38 (0.09) 0.05 (1.13) 0.33 (0.36) 1.08 1.14 1.00 Distributions: Dividends from net investment income ......... (0.43) (0.48) (0.48) (0.51) (0.63) (0.71) (0.69) (0.78) (0.77) (0.79) Return of capital ........... -- -- --# --# (0.06) -- -- (0.03) -- -- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total from distributions .... (0.43) (0.48) (0.48) (0.51) (0.69) (0.71) (0.69) (0.81) (0.77) (0.79) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net asset value, end of year** .................... $ 4.63 $ 4.58 $ 3.68 $ 4.25 $ 4.71 $ 6.53 $ 6.91 $ 7.96 $ 7.69 $ 7.32 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Market value, end of year** .................... $ 4.28 $ 4.77 $ 3.64 $ 4.29 $ 4.87 $ 5.25 $ 7.19 $ 8.31 $ 8.12 $ 7.87 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Total investment return (net asset value) ......... 11.19% 39.39% (2.06)% 0.72% (18.76)% 4.93% (4.95)% 14.50% 16.46% 14.31% ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Total investment return (market value) ............ (1.20)% 46.15% (4.12)% (1.78)% 4.58% (18.89)% (5.45)% 13.31% 14.38% 22.72% ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Ratios to average net assets/supplemental data: Net assets, end of year (in 000's) ................ $28,408 $27,883 $22,111 $25,293 $27,707 $38,389 $40,567 $45,848 $43,495 $40,636 Ratio of net investment income to average net assets ................ 9.52% 11.47% 12.22% 11.11% 11.10% 10.76% 9.37% 10.08% 10.46% 10.32% Ratio of operating expenses to average net assets (2) . 1.93% 1.58% 1.55% 1.44% 1.22% 1.02% 1.02% 1.06% 1.10% 1.14% Portfolio turnover rate (1) . 55.1% 70.1% 40.2% 75.2% 118.8% 98.0% 62.4% 154.5% 172.2% 79.9% (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 last 13 months, excluding short term securities. (2) The annualized operating expense ratio excludes interest expense. The annualized ratios including interest expense were 2.64%, 2.21%, 2.37%, 3.17%, 3.89%, 3.13%, 2.98%, 3.06%, 3.19% and 3.52% for the years ended December 31, 2004, 2003, 2002, 2001, 2000, 1999, 1998, 1997, 1996 and 1995, respectively. * 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. ** Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for the purpose of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. # Amount rounds to less than $0.005 per share.
See Notes to Financial Statements. 16 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 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. 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. 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 Statements 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 U.S. 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. 17 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 0.50% 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 0.09% 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 year ended December 31, 2004, amounted to $19,341,738 and $20,033,422, respectively. As of December 31, 2004, net unrealized appreciation was $2,208,626, of which $2,589,587 related to unrealized appreciation of investments and $380,961 related to unrealized depreciation of investments. The cost of securities on a federal tax basis at December 31, 2004 was $34,580,231. The difference between book-basis and tax-basis unrealized depreciation is attributable to the tax deferral of losses on wash sales. 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, 2004 DECEMBER 31, 2003 -------------------- -------------------- SHARES AMOUNT SHARES AMOUNT ------ -------- ------ -------- Issued as reinvestment of dividends ................... 42,292 $190,864 75,542 $313,493 ------ -------- ------ -------- Net increase .......................................... 42,292 $190,864 75,542 $313,493 ====== ======== ====== ========
18 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (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, 2002, as amended, primarily to leverage its investment portfolio. Under this Agreement, the Fund may borrow up to the lesser of $11 million or 25% of its total 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 December 31, 2004, the Fund had borrowings of $9,190,000 outstanding under this Agreement. During the year ended December 31, 2004, the Fund had an average outstanding daily balance of $9,059,169 with an average rate of 2.11% and average debt per share of $1.48. For the year ended December 31, 2004, interest expense totaled $195,792 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, 2004, the Fund had available for Federal tax purposes unused capital loss carryforwards of $2,303,012, $133,391, $4,838,652, $7,509,786, $4,573,327 and $87,693 expiring in 2006, 2007, 2008, 2009, 2010 and 2011, 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. 19 CIM HIGH YIELD SECURITIES NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. DISTRIBUTIONS TO SHAREHOLDERS The tax character of distributions paid for the year ended December 31, 2004 and year ended 2003 are as follows: 2004 2003 ---------- ---------- DISTRIBUTIONS PAID FROM: Ordinary income .................................. $2,602,643 $2,891,837 ---------- ---------- Total ............................................ $2,602,643 $2,891,837 ========== ========== As of December 31, 2004, the components of accumulated earnings/(deficit) on a tax basis were as follows: Capital loss carryforwards $(19,445,861) Undistributed net investment income 8,257 Unrealized appreciation 2,208,626 ------------ Total accumulated deficit $(17,228,978) ============ The components of accumulated earnings/deficit on a tax basis differ from book basis as a result of wash sales. 9. INDEMNIFICATION CONTINGENCIES In the normal course of business, the Fund enters into contracts that provide for general indemnifications to the counterparties to those contracts. The Fund's maximum exposure under these arrangements is dependent upon claims that may be made against the Fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote. 20 CIM HIGH YIELD SECURITIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees CIM High Yield Securities We have audited the accompanying statement of assets and liabilities of CIM High Yield Securities (the "Fund"), including the portfolio of investments, as of December 31, 2004, 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 two years in the period then ended, and the financial highlights for each of the four years in the 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. The financial highlights of the Fund for the periods ended prior to December 31, 2001, were audited by other auditors whose report thereon dated February 2, 2001, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies were not received. 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 at December 31, 2004, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP February 14, 2005 Philadelphia, Pennsylvania 21 CIM HIGH YIELD SECURITIES ADDITIONAL FUND INFORMATION (UNAUDITED) The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees. Information pertaining to the Trustees and officers of the Fund is set forth below. Additional information about the Funds' directors is available in the Statement of Additional Information and is available, without charge, upon request, by calling 1-800-331-1710.
NUMBER TERM OF OF PORTFOLIOS OFFICE AND IN FUND POSITION(S) LENGTH OF COMPLEX HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS NAME, ADDRESS 1, AND AGE THE FUND SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------ ----------- ---------------- ----------------------------- ------------- ---------------------------- TRUSTEES: - --------- DR. DONALD RATAJCZAK Chairman Term: 2002-2005; Consulting Economist 1 Director, Assurance America Age: 62 of the Trustee (self-employed), April (auto insurance); Director, Board of since 1987. 2003-present; Former Chairman Ruby Tuesday, Inc. Trustees and CEO of Brainworks (restaurant); Director, Ventures, an enterprise and Morgan, Keegan & Company asset management business from (investment firm) until April 2000 to April 2003; March 30, 2001, remains a Former Director, Economic consulting economist; Forecasting Center, Georgia Director, Crown Crafts State University from July (consumer products company); 1973 to June 2000; Professor, Director, TBC Corporation Georgia State University (tire marketing and (retired June 30, 2000). distribution company); Director, Citizens Bancshares Corp. (Community Bank); Director, Regan Holdings (insurance marketing company). ROBERT G. WADE, JR. Trustee Term: Consultant to INVESCO, Inc. 1 N/A Age.: 78 2002-2005; from November 1996 to December Trustee 1998; retired in 1998. since 1987. - ----------- 1 The address for each Trustee is 1166 Avenue of the Americas, 27th Floor, New York, NY 10036.
22 CIM HIGH YIELD SECURITIES ADDITIONAL FUND INFORMATION (UNAUDITED)
NUMBER TERM OF OF PORTFOLIOS OFFICE AND IN FUND POSITION(S) LENGTH OF COMPLEX HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS NAME, ADDRESS 1, AND AGE THE FUND SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------ ----------- ---------------- ----------------------------- ------------- ---------------------------- TRUSTEES: - --------- JOHN F. NICKOLL Trustee Term: Director, Chairman, President 1 Chairman of Wells Fargo Age: 70 2003-2006; and Chief Executive Officer of Business Credit. Trustee The Foothill Group Inc., a since 1987. commercial finance and asset management company. DR. BRUCE H. OLSON Trustee Term: Professor of Finance, 1 N/A Age: 70 2004-2007; Miami University (Ohio). Trustee since 1987. - ---------------- 1 The address for each Trustee is 1166 Avenue of the Americas, 27th Floor, New York, NY 10036.
23 CIM HIGH YIELD SECURITIES ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
POSITION HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE THE FUND LENGTH OF TIME SERVED DURING PAST FIVE YEARS - ---------------------- ----------- ------------------------ ---------------------------------------------------------------- OFFICERS: - --------- A. GEORGE BAUMANN 2 President Term: Until successor is Head of Institutional Fixed Income at INVESCO since January Age: 48 elected; Since 2002. 2001; President and CEO of PRIMCO Capital Management, January 1998-December 2000; President of PRIMCO Capital Management, 1995-1998. CINDY M. CAMERON 2 Treasurer Term: Until successor is Deputy Finance Director, INVESCO North America since January Age: 40 elected; Since 2002. 2004; Chief Financial Officer of INVESCO's Institutional Fixed Income Division January 2000-December 2003; Controller of PRIMCO Capital Management, January 1996-December 1999. JEFFREY H. KUPOR 3 Secretary Term: Until successor is General Counsel, INVESCO Institutional (N.A.), Inc., since Age: 37 elected; Since 2003. December 2003; Asst. General Counsel of AMVESCAP Group Services, Inc., January 2002-December 2003; General Counsel and Secretary, Z-Tel Technologies, Inc., November 1999-December 2001; Counsel of AIM Management Group Inc., January 1998-November 1999. - ---------------- 1 The address for each Trustee is 1166 Avenue of the Americas, 27th Floor, New York, NY 10036. 2 The address for these officers is 400 W. Market St., Suite 3300, Louisville, KY 40202-1662. 3 The address for this officer is 1360 Peachtree Street, NE, Suite 100, Atlanta, GA 303463.
24 To Shareholders of CIM High Yield Securities (the "Fund") About the Fund's Dividend Reinvestment Plan 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 PFPC (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 25 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. 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 PFPC Inc. at 1-800-331-1710, or by writing the Fund, c/o PFPC Inc., 101 Federal Street, Boston, MA 02110. 26 CIM HIGH YIELD SECURITIES SHAREHOLDER VOTING RESULTS (UNAUDITED) At the Annual Meeting of Shareholders, held on October 9, 2004, the following matter was voted on and approved: The election of the following Trustee: TRUSTEE FOR ABSTAINED ------- --- --------- Dr. Bruce H. Olson 5,579,412* 77,869 *Represents 91.13% of the outstanding shares of the Fund. PROXY VOTING POLICY AND VOTINGRECORD A description of the policies and procedures used by the fund's adviser in determining how to vote proxies relating to the fund's portfolio securities is available without charge, upon request, by calling 1-800-331-1710. It is also available on the SEC's website at WWW.SEC.GOV. In addition, the Fund's complete proxy voting record for the 12 months ended June 30, 2004 is available without charge, upon request, by calling toll free 1-800-331-1710. It is also available on the SEC's website at WWW.SEC.GOV. QUARTERLY PORTFOLIO DISCLOSURE The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within 60 days of the end of the fiscal quarter. The Fund's Form N-Q is available on the SEC's website at WWW.SEC.GOV, and may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, the Fund's Form N-Q is available, without charge, upon request, by calling toll free 1-800-331-1710. 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 12/04 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (c) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's board of trustees has determined that Donald Ratajczak, a member of the Registrant's Audit Committee, meets the definition of an audit committee financial expert as defined in the instructions to Item 3 of Form N-CSR. In addition, Dr. Ratajczak is an "independent" member of the Audit Committee, as defined in the instructions to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees - ---------- (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $35,000 in 2004 and $32,500 in 2003. Audit-Related Fees - ------------------ (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 in 2004 and $0 in 2003. Tax Fees - -------- (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 in 2004 and $0 in 2003. All Other Fees - -------------- (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2004 and $0 in 2003. (e)(1) The Audit Committee Charter provides that the Audit Committee shall pre-approve, or establish pre-approval policies and procedures concerning, the following: all audit and permitted non-audit services to be provided the Fund, and all permitted non-audit services to be provided by the Fund's independent accountant to the adviser and to entities controlling, controlled by or under common control with the adviser that provide ongoing services to the Fund, if the services relate directly to the operations and financial reporting of the Fund, except that de minimis non-audit services, may, to the extent permitted by applicable law, be approved prior to completion of the audit; and ensure that the Board is fully informed about any findings or recommendations of the independent accountant. The Audit Committee has not established pre-approval policies and procedures; therefore, the full Audit Committee pre-approves each of the audit and non-audit services to be provided by the principal accountant. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) N/A (c) N/A (d) N/A (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0% (zero). (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $9,115,917 for 2004 and $5,754,520 for 2003. (h) The registrant's audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately designated audit committee consisting of all the independent trustees of the registrant. The members of the audit committee are: Dr. Bruce H. Olson, John F. Nickoll, Dr. Donald Ratajczak, and Robert G. Wade, Jr. ITEM 6. SCHEDULE OF INVESTMENTS. The registrant's Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Proxy Voting Policies are attached herewith. INVESCO PROXY VOTING POLICIES AND PROCEDURES February 1, 2003 GENERAL POLICY INVESCO Institutional (NA), Inc. and its wholly-owned subsidiaries, and INVESCO Global Asset Management (N.A.), Inc. ("INVESCO") each has responsibility for making investment decisions that are in the best interest of its clients. As part of the investment management services it provides to clients, INVESCO may be authorized by clients to vote proxies appurtenant to the shares for which the clients are beneficial owners. As a fiduciary, INVESCO believes that it has a duty to manage clients' assets solely in the best interest of the clients and that the ability to vote proxies is a client asset. Accordingly, INVESCO has a duty to vote proxies in a manner in which it believes will add value to the client's investment. INVESCO is regulated by various state and federal laws, such as the investment Advisers Act of 1940, the Investment Company Act of 1940, and the Employee Retirement Income Security Act of 1974 ("ERISA"). Because there may be different proxy voting standards for ERISA and non-ERISA clients, INVESCO's policy is to apply the proxy voting policies and procedures described herein to all of its clients. Any discussion herein which refers to an ERISA or non-ERISA situation is used for reference only. INVESCO may amend its proxy policies and procedures from time to time without prior notice to its clients. BACKGROUND ERISA fiduciary standards relating to proxy voting have not been interpreted until more recent times. Due to the large number of mergers and acquisitions in the 1980s and the growing importance of institutional investors in the equity markets, the Department of Labor ("DOL"), which enforces fiduciary standards for ERISA plan sponsors and managers, took the position that the right to vote shares of stock owned by a pension plan is, in itself, an asset of the plan. Thus, the "Wall Street Rule" of "vote with management (or abstain from voting) or sell the stock" was under scrutiny. In 1988, the DOL stated, in the "Avon Letter", that the fiduciary act of managing plan assets that are shares of corporate stock includes the voting of proxies appurtenant to those shares of stock. Accordingly, where the authority to manage plan assets has been delegated to an investment manager pursuant to ERISA, no person other than the investment manager has authority to vote proxies appurtenant to such plan assets, except to the extent the named fiduciary has reserved to itself the right to direct a plan trustee regarding the voting of proxies. In 1990, in the "Monks Letter", the DOL stated that an ERISA violation would occur if the investment manager is explicitly or implicitly assigned the authority to vote proxies appurtenant to certain plan-owned stock and the named fiduciary, trustee or any person other than the 2 investment manager makes the decision on how to vote the same proxies. Thus, according to the DOL, if the investment management contract expressly provides that the investment manager is not required to vote proxies, but does not expressly preclude the investment manager from voting the relevant proxies, the investment manager would have the exclusive fiduciary responsibility for voting the proxies. In contrast, the DOL pointed out that if either the plan document or the investment management contract expressly precludes the investment manager from voting proxies, the responsibility for voting proxies lies exclusively with the trustee. In 1994, in its Interpretive Bulletin 94-2 ("94-2"), the DOL reiterated and supplemented the Avon and Monks Letters. In addition, 94-2 extended the principles put forth in the Avon and Monks Letters to voting of proxies on shares of foreign corporations. However, the DOL recognized that the cost of exercising a vote on a particular proxy proposal could exceed any benefit that the plan could expect to gain in voting on the proposal. Therefore, the plan fiduciary had to weigh the costs and benefits of voting on proxy proposals relating to foreign securities and make an informed decision with respect to whether voting a given proxy proposal is prudent and solely in the interest of the plan's participants and beneficiaries. In January 2003, the Securities and Exchange Commission ("SEC") adopted regulations regarding Proxy Voting by investment advisers (SEC Release No. IA-2106). These regulations required investment advisers to (1) adopt written proxy voting policies and procedures which describe how the adviser addresses material conflicts between its interests and those of its clients with respect to proxy voting and which also addresses how the adviser resolves those conflicts in the bet interest of clients; (2) disclose to clients how they can obtain information from the adviser on how the adviser voted the proxies; and (3) describe to clients its proxy voting policies and procedure to clients and, upon request, furnish a copy of them to clients. PROXY VOTING POLICY Consistent with the fiduciary standards discussed above, INVESCO will vote proxies unless either the named fiduciary (e.g., the plan sponsor) retains in writing the right to direct the plan trustee or a third party to vote proxies or INVESCO determines that any benefit the client might gain from voting a proxy would be outweighed by the costs associated therewith (i.e., foreign proxies). In voting such proxies, INVESCO will act prudently, taking into consideration those factors that may affect the value of the security and will vote such proxies in a manner in which, in its opinion, is in the best interests of clients. PROXY COMMITTEE The INVESCO Proxy Committee will establish guidelines and procedures for voting proxies and will periodically review records on how proxies were voted. The Proxy Committee will consist of certain of INVESCO's equity investment professionals and non-equity investment professionals. 3 PROXY MANAGER The Proxy Committee will appoint a Proxy Manager and/or hire a third-party Proxy Agent to analyze proxies, act as a liaison to the Proxy Committee and manage the proxy voting process, which process includes the voting of proxies and the maintenance of appropriate records. The Proxy Manager will exercise discretion to vote proxies within the guidelines established by the Proxy Committee. The Proxy Manager will consult with the Proxy Committee in determining how to vote proxies for issues not specifically covered by the proxy voting guidelines adopted by the Proxy Committee or in situations where the Proxy Manager or members of the Committee determine that consultation is prudent. CONFLICTS OF INTEREST In effecting our policy of voting proxies in the best interests of our clients, there may be occasions where the voting of such proxies may present an actual or perceived conflict of interest between INVESCO, as the investment manager, and clients. Some of these potential conflicts of interest situations include, but are not limited to, (1) where INVESCO (or an affiliate) manage assets, administer employee benefit plans, or provides other financial services or products to companies whose management is soliciting proxies and failure to vote proxies in favor of the management of such a company may harm our (or an affiliate's) relationship with the company; (2) where INVESCO (or an affiliate) may have a business relationship, not with the company, but with a proponent of a proxy proposal and where INVESCO (or an affiliate) may manage assets for the proponent or (3) where INVESCO (or an affiliate) or any member of the Proxy Committee may have personal or business relationships with participants in proxy contests, corporate directors or candidates for corporate directorships, or where INVESCO (or an affiliate) or any member of the Proxy Committee may have a personal interest in the outcome of a particular matter before shareholders. In order to avoid even the appearance of impropriety, in the event that INVESCO (or an affiliate) manages assets for a company, its pension plan, or related entity or where any member of the Proxy Committee has a personal conflict of interest, and where we have invested clients' funds in that company's shares, the Proxy Committee will not take into consideration this relationship and will vote proxies in that company solely in the best interest of all of our clients. In addition, members of the Proxy Committee must notify INVESCO's Chief Compliance Officer, with impunity and without fear of retribution or retaliation, of any direct, indirect or perceived improper influence made by anyone within INVESCO or by an affiliated company's representatives with regard to how INVESCO should vote proxies. The Chief Compliance Officer will investigate the allegations and will report his or her findings the INVESCO Management Committee. In the event that it is determined that improper influence was made, the Management Committee will determine the appropriate action to take which may include, but is not limited to, (1) notifying the affiliated company's Chief Executive Officer, its Management Committee or Board of Directors, (2) taking remedial action, if necessary, to correct the result of any improper influence where the clients have been harmed, or (3) notifying the appropriate 4 regulatory agencies of the improper influence and to fully cooperate with these regulatory agencies as required. In all cases, the Proxy Committee shall not take into consideration the improper influence in determining how to vote proxies and will vote proxies solely in the best interest of clients. Furthermore, members of the Proxy Committee must advise INVESCO's Chief Compliance Officer and fellow Committee members of any actual or potential conflicts of interest he or she may have with regard to how proxies are to be voted regarding certain companies (e.g., personal security ownership in a company, or personal or business relationships with participants in proxy contests, corporate directors or candidates for corporate directorships). After reviewing such conflict, upon advice from the Chief Compliance Officer, the Committee may require such Committee member to recuse himself or herself from participating in the discussions regarding the proxy vote item and from casting a vote regarding how INVESCO should vote such proxy. PROXY VOTING PROCEDURES The Proxy Manager will: o Vote proxies; o Take reasonable steps to reconcile proxies received by INVESCO and/or a third-party Proxy Agent who administers the vote with shares held in the accounts; o Document the vote and rationale for each proxy voted (routine matters are considered to be documented if a proxy is voted in accordance with the Proxy Voting Guidelines established by the Proxy Committee); o If requested, provide to clients a report of the proxies voted on their behalf. PROXY VOTING GUIDELINES The Proxy Committee has adopted the following guidelines in voting proxies: I. Corporate Governance INVESCO will evaluate each proposal separately. However, INVESCO will generally vote FOR a management sponsored proposal unless it believes that adoption of the proposal may have a negative impact on the economic interests of shareholders. INVESCO will generally vote FOR o Annual election of directors o Appointment of auditors 5 o Indemnification of management or directors or both against negligent or unreasonable action o Confidentiality of voting o Equal access to proxy statements o Cumulative voting o Declassification of Boards o Majority of Independent Directors INVESCO will generally vote AGAINST o Removal of directors from office only for cause or by a supermajority vote o "Sweeteners" to attract support for proposals o Unequal voting rights proposals ("superstock") o Staggered or classified election of directors o Limitation of shareholder rights to remove directors, amend by-laws, call special meetings, nominate directors, or other actions to limit or abolish shareholder rights to act independently such as acting by written consent o Proposals to vote unmarked proxies in favor of management o Proposals to eliminate existing pre-emptive rights II. Takeover Defense and Related Actions INVESCO will evaluate each proposal separately. Generally, INVESCO will vote FOR a management sponsored anti-takeover proposal which (1) enhances management's bargaining position and (2) when combined with other anti-takeover provisions, including state takeover laws, does not discourage serious offers. INVESCO believes that generally four or more anti-takeover measures, which can only be repealed by a super-majority vote, are considered sufficient to discourage serious offers and therefore should be voted AGAINST. INVESCO will generally vote FOR o Fair price provisions o Certain increases in authorized shares and/or creation of new classes of common or preferred stock 6 o Proposals to eliminate greenmail provisions o Proposals to eliminate poison pill provisions o Proposals to re-evaluate or eliminate in-place "shark repellents" INVESCO will generally vote AGAINST o Proposals authorizing the company's board of directors to adopt, amend or repeal by-laws without shareholders' approval o Proposals authorizing the company's management or board of directors to buy back shares at premium prices without shareholders' approval III. Compensation Plans INVESCO will evaluate each proposal separately. INVESCO believes that in order for companies to recruit, promote and retain competent personnel, companies must provide appropriate and competitive compensation plans. INVESCO will generally vote FOR management sponsored compensation plans, which are reasonable, industry competitive and not unduly burdensome to the company in order for the company to recruit, promote and retain competent personnel. INVESCO will generally vote FOR o Stock option plans and/or stock appreciation right plans o Profit incentive plans provided the option is priced at 100% fair market value o Extension of stock option grants to non-employee directors in lieu of their cash compensation provided the option is priced at or about the then fair market value o Profit sharing, thrift or similar savings plans INVESCO will generally vote AGAINST o Stock option plans that permit issuance of loans to management or selected employees with authority to sell stock purchased by the loan without immediate repayment, or that are overly generous (below market price or with appreciation rights paying the difference between option price and the stock, or permit pyramiding or the directors to lower the purchase price of outstanding options without a simultaneous and proportionate reduction in the number of shares available) o Incentive plans which become effective in the event of hostile takeovers or mergers (golden and tin parachutes) o Proposals creating an unusually favorable compensation structure in advance of a sale of the company 7 o Proposals that fail to link executive compensation to management performance o Acceleration of stock options/awards if the majority of the board of directors changes within a two year period o Grant of stock options to non-employee directors in lieu of their cash compensation at a price below 100% fair market value o Adoption of a stock purchase plan at less than 85% of fair market value IV. Capital Structure, Classes of Stock and Recapitalization INVESCO will evaluate each proposal separately. INVESCO recognizes that from time to time companies must reorganize their capital structure in order to avail themselves of access to the capital markets and in order to restructure their financial position in order to raise capital and to be better capitalized. Generally, INVESCO will vote FOR such management sponsored reorganization proposals if such proposals will help the company gain better access to the capital markets and to attain a better financial position. INVESCO will generally vote AGAINST such proposals that appear to entrench management and do not provide shareholders with economic value. INVESCO will generally vote FOR o Proposals to reincorporate or reorganize into a holding company o Authorization of additional common or preferred shares to accommodate a stock split or other business purposes not related to anti-takeover measures as long as the increase is not excessive and a valid need has been proven INVESCO will generally vote AGAINST o Proposals designed to discourage mergers and acquisitions in advance o Proposals to change state of incorporation to a state less favorable to shareholders' interests o Reincorporating in another state to implement anti-takeover measures V. Social Responsibility INVESCO will evaluate each proposal separately. INVESCO believes that a corporation, if it is in a solid financial position and can afford to do so, has an obligation to return certain largesse to the communities in which it operates. INVESCO believes that the primary mission of a company is to be profitable. However, where a company has proven that it is able to sustain a level of profitability and the market price of the company's shares reflect an appropriate economic value for such shares, INVESCO will generally 8 vote FOR certain social responsibility initiatives. INVESCO will generally vote AGAINST proposed social responsibility initiatives if it believes that the company already has adequate policies and procedures in place and it should focus its efforts on enhancing shareholder value where the assets and resources involved could be put to better use in obtaining profits. INVESCO will generally vote FOR o International Labor Organization Principles o Resolutions seeking Basic Labor Protections and Equal Employment Opportunity o Expanding EEO/Social Responsibility Reporting RECORD KEEPING The Proxy Manager will take necessary steps to retain proxy voting records for the period of time as required by regulations. 9 ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not yet applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES - ----------------------------------------------------------------------------------------------------------------------- (C) TOTAL NUMBER OF SHARES (D) MAXIMUM NUMBER (OR (A) TOTAL NUMBER (B) AVERAGE (OR UNITS) PURCHASED AS PART APPROXIMATE DOLLAR VALUE) OF SHARES OF SHARES (OR PRICE PAID PER OF PUBLICLY ANNOUNCED PLANS (OR UNITS) THAT MAY YET BE PURCHASED PERIOD UNITS) PURCHASED SHARE (OR UNIT) OR PROGRAMS UNDER THE PLANS OR PROGRAMS - ----------------------------------------------------------------------------------------------------------------------- Month #1 N/A N/A N/A N/A 7/1/04- 7/31/04 - ----------------------------------------------------------------------------------------------------------------------- Month #2 N/A N/A N/A N/A 8/1/04- 8/31/04 - ----------------------------------------------------------------------------------------------------------------------- Month #3 N/A N/A N/A N/A 9/1/04- 9/30/04 - ----------------------------------------------------------------------------------------------------------------------- Month #4 N/A N/A N/A N/A 10/1/04- 10/31/04 - ----------------------------------------------------------------------------------------------------------------------- Month #5 N/A N/A N/A N/A 11/1/04- 11/30/04 - ----------------------------------------------------------------------------------------------------------------------- Month #6 N/A N/A N/A N/A 12/1/04- 12/31/04 - ----------------------------------------------------------------------------------------------------------------------- Total N/A N/A N/A N/A - -----------------------------------------------------------------------------------------------------------------------
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, since the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) CIM High Yield Securities -------------------------------------------------------------------- By (Signature and Title) /s/ George Baumann -------------------------------------------------------- George Baumann, President (principal executive officer) Date March 8, 2005 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ George Baumann -------------------------------------------------------- George Baumann, President (principal executive officer) Date March 8, 2005 ---------------------------------------------------------------------------- By (Signature and Title) /s/ Cindy Cameron -------------------------------------------------------- Cindy Cameron, Treasurer (principal financial officer) Date March 8, 2005 ---------------------------------------------------------------------------- EX-99.CODE ETH 2 g13851cim_ethics.txt CODE OF ETHICS EX-99.CODE ETH CIM HIGH YIELD SECURITIES AMENDED AND RESTATED CODE OF ETHICS I. INTRODUCTION ------------ A. GENERAL PRINCIPLES ------------------ This Code of Ethics ("Code") establishes rules of conduct for "Covered Persons" (as defined herein) of CIM High Yield Securities (the "Fund") and is designed to govern the personal securities activities of Covered Persons. In general, in connection with personal securities transactions, Covered Persons should (1) always place the interests of the Fund's shareholders first; (2) ensure that all personal securities transactions are conducted consistent with this Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of a Covered Person's position of trust and responsibility; and (3) not take inappropriate advantage of their positions. B. APPLICABILITY ------------- For purposes of this Code, "Covered Person" shall mean: 1. Any officer or employee of the Fund or of any investment adviser, subadviser or co-adviser to the Fund or of any company in a control relationship to the Fund or such investment adviser, subadviser or co-adviser who, in connection with his or her regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of securities by the Fund or whose functions relate to the making of any recommendation to the Fund regarding the purchase or sale of securities, including the person or persons with the direct responsibility and authority to make investment decisions affecting the Fund (the "Portfolio Manager"); 2. Any natural person in a control relationship to the Fund or of any investment adviser, subadviser or co-adviser to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security by the Fund; and 3. Any Trustee of the Fund. For purposes of this Code, (a) an "Advisory Person" means any employee of the Fund or of any investment adviser, subadviser or co-adviser to the Fund described in paragraph 1 above and any natural person described in paragraph 2 above; (b) a person who normally assists in the preparation of public reports or who receives public reports but who receives no information about current recommendations or trading or who obtains knowledge of current recommendations or trading activity once or infrequently or inadvertently shall not be deemed to be either an Advisory Person or a Covered Person, and (C) the defined terms "Covered Person", "Advisory Person" and "Portfolio Manager" shall not include any person who is subject to securities transaction pre-clearance requirements and securities transaction reporting requirements of a code of ethics adopted by an investment adviser or subadviser or co-adviser to the Fund (an "Investment Adviser") or an administrator of the Fund (an "Administrator") in compliance with Rule 17j-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), and/or Rule 204-2(a)(12) of the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as long as such Investment Adviser or Administrator, as applicable, complies with the provisions of Article V of this Code. II. RESTRICTIONS ON ACTIVITIES -------------------------- A. BLACKOUT PERIODS ---------------- 1. No Covered Person shall purchase or sell, directly or indirectly, any security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership (as defined in Attachment A to this Code) on a day during which the Fund has a pending "buy" or "sell" order in that same security until that order is executed or withdrawn. The foregoing shall not apply to a person who is a Covered Person with respect to the Fund by virtue of being a Trustee of the Fund, but who is not an "interested person" (as defined in the 1940 Act) of the Fund (a "Disinterested Trustee"). 2. No Portfolio Manager shall purchase or sell, directly or indirectly, any security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership (Attachment A to this Code) in within fifteen (15) calendar days before or after the Fund trades in that security. B. INTERESTED TRANSACTIONS ----------------------- No Covered Person shall recommend any securities transactions by the Fund without having disclosed his or her interest, if any, in such securities or the issuer thereof, including without limitation: -2- 1. any direct or indirect beneficial ownership (as defined in Attachment A to this Code) of any securities of such issuer; 2. any contemplated transaction by such person in such securities; 3. any position with such issuer or its affiliates; and 4. any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest. C. INITIAL PUBLIC OFFERINGS ------------------------ No Advisory Person shall acquire any securities in an initial public offering for his or her personal account. D. PRIVATE PLACEMENTS ------------------ No Advisory Person shall acquire, directly or indirectly, beneficial ownership of any securities in a private placement without the prior approval of the Designated Review Officer (as hereinafter defined) who has been provided by such Advisory Person with full details of the proposed transaction (including written certification that the investment opportunity did not arise by virtue of the Advisory Person's activities on behalf of the Fund) and has concluded after consultation with other investment advisory personnel of the Fund that the Fund has no foreseeable interest in purchasing such securities. E. SHORT-TERM TRADING PROFITS -------------------------- No Advisory Person shall profit from the purchase and sale, or sale and purchase, of the same (or equivalent) securities of which such Advisory Person has beneficial ownership within 60 calendar days. Any profit so realized shall, unless the Fund's Board approves otherwise, be paid over to the Fund or to a charitable organization of the Advisory Person's choosing. F. GIFTS ----- No Advisory Person shall receive any gift or other things of more than DE MINIMIS value from any person or entity that does business with or on behalf of the Fund. -3- G. SERVICE AS A DIRECTOR --------------------- No Advisory Person shall serve on the board of directors of any publicly traded company without prior authorization from the Designated Review Officer (as defined below) based upon a determination that such board service would be consistent with the interests of the Fund and its shareholders. III. EXEMPT TRANSACTIONS ------------------- A. For purposes of this Code, the term "security" shall have the same meaning as that set forth in ss.2(a)(36) of the 1940 Act except that it shall not include the following: 1. direct obligations of the Government of the United States; 2. bankers' acceptances; 3. bank certificates of deposit; 4. commercial paper and high quality short-term debt instruments; and 5. shares of registered open-end investment companies. B. The prohibitions described in paragraphs (A) and (E) of Article II shall not apply to: 1. Purchases or sales effected in any account over which the Covered Person has no direct or indirect influence or control; 2. Purchases or sales that are non-volitional on the part of the Covered Person; 3. Purchases that are part of an automatic dividend reinvestment plan; 4. Purchases effected upon the exercise of rights issued by an issuer PRO RATA to all holders of a class of its securities, to the extent such rights were acquired from the issuer, and sales of such rights so acquired; or 5. Subject to the advance approval by a Designated Review Officer (as defined below) purchases or sales which are only remotely potentially harmful to the Fund because such purchases or sales would be unlikely to affect a highly institutional market, or because such purchases or sales are clearly not related economically to the securities held, purchased or sold by the Fund. -4- IV. COMPLIANCE PROCEDURES --------------------- A. PRECLEARANCE ------------ A Covered Person may, directly or indirectly, acquire or dispose of beneficial ownership of a security, including shares of the Fund, only if (1) such purchase or sale has been approved by a review officer designated by the Fund or, in the case of a Covered Person employed by an Investment Adviser, by such Investment Adviser (each, a "Designated Review Officer"), (2) the approved transaction is completed by the close of business on the next business day after approval is received and (3) the Designated Review Officer has not rescinded such approval prior to execution of the transaction. B. REPORTING OBLIGATIONS --------------------- 1. Unless excepted by Section 2 of this Paragraph B, every Covered Person must report to the Designated Review Officer as described below. (a) INITIAL HOLDINGS REPORTS. Not later than 10 days after the person becomes an Covered Person, the following information: (i) the title, number of shares and principal amount of each security in which the Covered Person had any direct or indirect beneficial ownership when the person became a Covered Person; (ii) the name of any broker, dealer or bank with whom the Covered Person maintained an account in which any securities were held for the direct or indirect benefit of the Covered Person as of the date the person became a Covered Person; and (iii) the date that the report is signed and submitted by the Covered Person. (b) QUARTERLY TRANSACTION REPORTS. Not later than 10 days after the end of each calendar quarter, the following information: (i) With respect to any transaction during the quarter in a security in which the Covered Person had any direct or indirect beneficial ownership: (1) the date of the transaction, the title, the interest rate and maturity date (if -5- applicable), the number of shares and the principal amount of each security involved; (2) the nature of the transaction (I.E., purchase, sale or any other type of acquisition or disposition); (3) the price of the security at which the transaction was effected; (4) the name of the broker, dealer or bank with or through which the transaction was effected; and (5) the date that the report is signed and submitted by the Covered Person. (ii) With respect to any account established by the Covered Person in which any securities were held during the quarter for the direct or indirect benefit of the Covered Person: (1) the name of the broker, dealer or bank with whom the Covered Person established the account; (2) the date that the account was established; and (3) the date that the report is signed and submitted by the Covered Person. (iii) In the event that no reportable transactions occurred during the quarter, the report should be so noted and returned signed and dated. (c) ANNUAL HOLDINGS REPORTS. Not later than each January 30th, the following information (which information must be current as of a date no more than 30 days before the report is submitted): (i) the title, number of shares and principal amount of each security in which the Covered Person had any direct or indirect beneficial ownership; -6- (ii) the name of any broker, dealer or bank with whom the Covered Person maintains an account in which any securities are held for the direct or indirect benefit of the Covered Person; and (iii) the date on which the report is signed and submitted by the Covered Person. 2. The following are the exceptions to the reporting requirements outlined in Section 1 of this Paragraph B: (a) A person need not make any report required under Section 1 of this Paragraph B with respect to transactions effected for, and securities held in, any account over which the person has no direct influence or control, including such an account in which the person has any beneficial ownership. (b) A person who would otherwise be required to make the reports described in this Paragraph B shall not be required to file reports pursuant to this Paragraph B if such person is required to file reports pursuant to a code of ethics described in Article V hereof. (c) A Disinterested Trustee who would be required to make the reports required under Section 1 of this Paragraph B solely by reason of being a trustee of the Fund need not make: (i) an initial holdings report under Section 1(a) of this Paragraph B or an annual holdings report under Section 1(c) of this Paragraph B; or (ii) a quarterly transaction report under Section 1(b) of this Paragraph B, unless the Disinterested Trustee knew or, in the ordinary course of fulfilling his or her official duties as a Trustee of the Fund, should have known, that during the 15-day period immediately before or after the Trustee's transaction in a security, the Fund purchased or sold the security or the Fund or its investment adviser, subadviser or co-adviser considered purchasing or selling the security. (d) A person need not make a quarterly transaction report under Section 1(b) of this Paragraph B if the report would duplicate information contained in broker trade confirmations or account statements received by the Designated Review Officer with respect to the person in the time period required under Section 1(b), if all of the -7- information required under Section 1(b) is contained in the broker trade confirmations or account statements or in the records of the Fund. 3. Any report delivered pursuant to this Paragraph B may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the securities to which the report relates. C. CERTIFICATION OF COMPLIANCE --------------------------- Each Covered Person is required to certify annually that he or she has read and understood the Fund's Code and recognizes that he or she is subject to such Code. Further, each Covered Person is required to certify annually that he or she has complied with all the requirements of the Code and that he or she has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code. D. REVIEW BY THE BOARD OF TRUSTEES ------------------------------- At least annually, an officer of the Fund shall furnish a written report to the Board of Trustees that: 1. describes any issues arising under this Code of Ethics since the last report to the Board of Trustees, including, but not limited to, information about material violations of this Code of Ethics and sanctions imposed in response to the material violations; and 2. certifies that the Fund has adopted procedures reasonably necessary to prevent its Covered Persons from violating this Code of Ethics. V. INVESTMENT ADVISER'S AND ADMINISTRATOR'S CODES OF ETHICS -------------------------------------------------------- Each Investment Adviser and Administrator shall: (1) submit to the Board of Trustees of the Fund a copy of the Code of Ethics adopted by such Investment Adviser or Administrator pursuant to Rule 17j-1 of the 1940 Act and/or Rule 204-2(a)(12) of the Advisers Act, which Code of Ethics shall comply with the recommendations of the Investment Company Institute's Advisory Group on Personal Investing or be accompanied by a statement explaining any difference and supplying the rationale therefor; (2) promptly report to the Board of Trustees of the Fund in writing any material amendments to such Investment Adviser's or Administrator's Code of Ethics; -8- (3) promptly furnish to the Board of Trustees of the Fund, upon request, copies of any reports made pursuant to such Investment Adviser's or Administrator's Code of Ethics by any person who would be a Covered Person, Advisory Person or Portfolio Manager hereunder if such person were not subject to such Investment Adviser's or Administrator's Code of Ethics; and (4) immediately furnish to the Board of Trustees of the Fund all material information regarding any violation of such Investment Adviser's or Administrator's Code of Ethics by any person who would be a Covered Person, Advisory Person or Portfolio Manager hereunder if such person were not subject to such Investment Adviser's or Administrator's Code of Ethics. VI. SANCTIONS --------- Upon discovering that a Covered Person has not complied with the requirements of this Code, the Designated Review Officer shall submit findings to the Board of Trustees of the Fund. With respect to officers, employees or Trustees of the Fund, the Board of Trustees of the Fund may impose on that Covered Person whatever sanctions the Board of Trustees of the Fund deems appropriate, including, among other things, disgorgement of profits, censure, suspension or termination of employment. VII. CONFIDENTIALITY --------------- All information obtained from any Covered Person hereunder or from an Investment Adviser pursuant to Article V hereof shall be kept in strict confidence, except that reports of securities transactions hereunder may be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization, and may otherwise be disclosed to the extent required by law or regulation. VIII. OTHER LAWS, RULE AND STATEMENTS OF POLICY ----------------------------------------- Nothing contained in this Code shall be interpreted as relieving any Covered Person from acting in accordance with the provision of any applicable law, rule, or regulation or any other statement of policy or procedures governing the conduct of such person adopted by the Fund. -9- IX. RECORDS ------- The Fund shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm under the conditions described in Rule 31a-2 under the 1940 Act and shall be available for examination by representatives of the Securities and Exchange Commission. 1. A copy of this Code of Ethics and any other Code of Ethics which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place. 2. A record of any violation of this Code of Ethics, and of any action taken as a result of such violation, shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs. 3. A copy of each report made by a Covered Person pursuant to this Code of Ethics shall be preserved for a period of not less than five years from the end of the fiscal year in which the report is made, the first two years in an easily accessible place. 4. A list of all persons who are, or within the past five years have been, required to make reports pursuant to this Code of Ethics shall be maintained in an easily accessible place. 5. A copy of each report required under Paragraph D of Article IV shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an early accessible place. 6. A record of any decision, and the reasons supporting the decision, to approve the acquisition by Advisory Person of securities under Paragraph D of Article II, shall be preserved for a period of not less than five years from the end of the fiscal year in which the approval is granted. X. FURTHER INFORMATION ------------------- If any person has any questions with regard to the applicability of the provisions of this Code generally or with regard to any securities transaction or transactions such person should consult the applicable Designated Review Officer. Dated: April 5, 1995 as amended July 5, 1995 as further amended January 11, 2000 -10- ATTACHMENT A ------------ The term "beneficial ownership" as used in the attached Code of Ethics (the "Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 (the "Rule"), except that the determination of direct or indirect beneficial ownership for purposes of the Code must be made with respect to all securities that a Covered Person has or acquires. Under the Rule, a person is generally deemed to have beneficial ownership of securities if the person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the securities. The term "pecuniary interest" in particular securities is generally defined in the Rule to mean the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the securities. A person is refutably deemed to have an "indirect pecuniary interest" within the meaning of the Rule in any securities held by members of the person's immediate family sharing the same household, the term "immediate family" including any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, as well as adoptive relationships. Under the Rule, an indirect pecuniary interest also includes, among other things: a general partner's proportionate interest in the portfolio securities held by a general or limited partnership; a performance-related fee, other than an asset-based fee, received by any broker, dealer, bank, insurance company, investment company, investment adviser, investment manager, trustee or person or entity performing a similar function; a person's right to dividends that is separated or separable from the underlying securities; a person's interest in securities held by certain trusts; and a person's right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable, the term "derivative security being generally defined as any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege at a price related to an equity security, or similar securities with, or value derived from, the value of an equity security. For purposes of the Rule, a person who is a shareholder of a corporation or similar entity is NOT deemed to have a pecuniary interest in portfolio securities held by the corporation or entity, so long as the shareholder is not a controlling shareholder of the corporation or the entity and does not have or share investment control over the corporation's or the entity portfolio. EX-99.CERT 3 g13851cim_302cert.txt SECTION 302 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, George Baumann, certify that: 1. I have reviewed this report on Form N-CSR of CIM High Yield Securities; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2005 /s/ George Baumann ---------------------- ---------------------------------------------- George Baumann, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Cindy Cameron, certify that: 1. I have reviewed this report on Form N-CSR of CIM High Yield Securities; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 8, 2005 /s/ Cindy Cameron ---------------------- ---------------------------------------------- Cindy Cameron, Treasurer (principal financial officer) EX-99.906CERT 4 g13851cim_906cert.txt SECTION 906 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, George Baumann, President of CIM High Yield Securities (the "Registrant"), certify that: 1. This report on Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: March 8, 2005 /s/ George Baumann ---------------------- ---------------------------------------------- George Baumann, President (principal executive officer) I, Cindy Cameron, Treasurer of CIM High Yield Securities (the "Registrant"), certify that: 1. This report on Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: March 8, 2005 /s/ Cindy Cameron ---------------------- ---------------------------------------------- Cindy Cameron, Treasurer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----