<PAGE> 1
[AIM LOGO APPEARS HERE]
LETTER
TO OUR
SHAREHOLDERS
July 31, 1996
Dear Fellow Shareholder:
During periods of market volatility, I am reminded of a
story. When asked what the market was going to do, J.P.
Morgan reportedly replied, "It will fluctuate." Fixed-income
investors can certainly agree with that statement: Bond
markets underwent major shifts in momentum at least twice in
[PHOTO OF just the first six months of 1996 as investors worried first
CHARLES T. about the possibility of recession and then about rising
BAUER, inflation.
Chairman of Those of you who are long-time investors, and those who
the Board of are brand-new AIM shareholders, should recognize that periods
the Fund, of falling prices in both the stock and bond markets are
APPEARS HERE] inevitable. Indeed, we can learn important lessons about
investing in periods of market uncertainty.
In our experience, we have observed that the best action
to take is to stay focused--not on the market, but on your
own long-term goals. The market can change from day to day.
Those who try to "time" the market, over time, tend to be
less successful than those who continue to follow a disciplined investment
strategy.
Short-term volatility in financial markets may tempt some investors to
liquidate investments regardless of their personal financial objectives.
Remember that time is the best medicine for uncertain markets. The market's
performance in recent months has been driven by concerns about the possibility
of an overheated economy and rising inflation. However, the latest economic data
suggest conditions that prompted 1995's strong market performance should
continue: corporate earnings are healthy and economic growth is moderate,
without significant inflation.
You may cushion the effects of changing markets and reduce your risk
exposure in any one type of security by diversification--spreading your assets
across several kinds of investments. Prudent investors maintain a balanced
portfolio of stock and bond investments, with due consideration for their
personal financial objectives, risk tolerance, and investment time horizon.
There is one constant you can count on, regardless of changing
markets--AIM's commitment to you, our shareholders. At AIM, we take our
responsibility to you very seriously in managing a well-conceived and
significantly diversified menu of mutual funds. AIM investment management teams
provide a blend of skills, education, experience, and maturity that produces a
balanced, thoughtful approach to decision-making and quality investment
products. Consistent performance, coupled with outstanding customer service and
a highly professional staff, has helped AIM build relationships with 3 million
shareholders over the past 20 years.
We are pleased to send you this report on Limited Maturity Treasury
Portfolio Institutional Shares. As always, we are ready to respond to your
questions and comments. Please call one of our representatives at 800-659-1005
if we may be of service.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
Government securities, such as U.S. Treasury bills and bonds, offer a high
degree of safety and are guaranteed as to the timely payment of principal and
interest if held to maturity. Fund shares are not insured and their value and
yield will vary with market conditions.
<PAGE> 2
The Manager's Overview:
FUND'S DISCIPLINE SERVES IT WELL IN
VOLATILE BOND MARKET
A roundtable discussion with the Fund management team for Limited Maturity
Treasury Portfolio Institutional Shares about the fiscal year ended July 31,
1996.
Q: HOW DID LIMITED MATURITY TREASURY PORTFOLIO INSTITUTIONAL SHARES PERFORM
DURING THE FISCAL YEAR COVERED BY THIS REPORT?
A: The Fund continued to provide steady monthly income combined with share
price stability.
As of July 31, the Fund's 30-day SEC yield was 5.83%. And during the
fiscal year, Fund share prices fluctuated within a very narrow range, a low
of $9.94 and a high of $10.14. That was impressive stability, especially
since fixed-income markets have undergone major shifts in momentum during
the fiscal year.
Q: PLEASE DESCRIBE THOSE MAJOR SHIFTS IN MARKET MOMENTUM.
A: The first occurred late in 1995. After a robust showing of 3.5% annualized
growth during the third quarter of 1995, the economy slowed to a mere 0.5%
rate of growth during the year's final quarter. There were various signals
of weakness: Consumer debt was growing, wages were stagnant, and some major
corporations were announcing extensive layoffs. On this evidence of a
potentially significant downturn, the Federal Reserve Board twice moved to
lower interest rates to boost the economy. On December 18, 1995, it reduced
the federal funds rate from 5.75% to 5.50%. On January 30, it reduced the
rate again, to 5.25%.
Q: HOW DID THE DIRECTION OF THE ECONOMY CHANGE?
A: During the second half of the Fund's fiscal year, the economy picked up
even more than market participants originally anticipated. Markets
focused on evidence indicating shortages in the labor market, especially
after reports of surprisingly strong job growth during February and March.
Economic growth bounced back to an annualized rate of 2.0% the first
quarter of 1996.
Amid growing concern about possible wage inflation, the second change in
momentum took place. Credit markets raised interest rates in anticipation
of a Fed tightening. The yield to maturity of a 2-year U.S. Treasury note,
which had reached a low of 4.79% in January of 1996, rose to a high of
6.43% in July as the Fund's fiscal year was drawing to a close.
Q: DID YOU MANAGE THE FUND DIFFERENTLY IN RESPONSE TO THESE CHANGES IN THE
ECONOMIC ENVIRONMENT?
A: No. This Fund practices a clearly defined discipline. After analyzing the
risk and return characteristics, adjusted for market price volatility, of
various maturities of U.S. Treasury securities for a 15-year period, AIM
has concluded that the most favorable risk/return trade-off generally
occurs in the one- to two-year maturity range.
Usually the area of steepest slope in the yield curve, the two-year area
of the yield curve historically has produced 85% to 95% of the yield of
the 30-year Treasury bond. It did so during the fiscal year covered by
this report. The Fund maintains a laddered maturity structure within this
one- to two-year range on the yield curve.
2
<PAGE> 3
Q: WHAT IS A LADDERED MATURITY STRUCTURE?
A: The Fund buys two-year U.S. Treasury notes, holds them until they have one
year to maturity, then sells these notes and reinvests the proceeds in the
two-year range. Each month, approximately 8% of the Fund's portfolio
reaches the point of having one year to maturity and is turned over in this
way. Thus, reinvestments from the sale of securities in the portfolio take
place on a regular schedule, and the Fund consistently remains invested
along the whole one- to two-year stretch of the yield curve.
Q: WHY LADDER THE PORTFOLIO IN THIS WAY?
A: It acts as a cushion against volatility by keeping the
duration of the portfolio relatively short and constant. Duration is a
much-used gauge of bond and bond fund volatility expressed in years. The
laddered structure of the portfolio results in a duration of 1.4 years,
which means the Fund's net asset value (NAV) should decline 1.4% if
interest rates rise 1%, and its NAV should rise 1.4% if interest rates
decline 1%.
This carefully managed short Fund duration explains the Fund's stability.
Since inception in 1987, the Fund never has had a negative total return for
a rolling 12-month period, and the rolling 12-month net asset value of a
Fund share never has deviated more than 1.71%.
Q. WHAT IS YOUR MARKET OUTLOOK FOR THE NEXT FEW MONTHS?
A: Evidence indicates that the U.S. economy is growing reasonably and that
inflationary pressures remain modest. At its July meeting, and again in
August after the close of the fiscal year covered by this report, the Fed
elected to leave monetary policy unchanged. In its report prepared for the
August meeting, the Fed reported some softness in retail sales but
continued expansion in the manufacturing sector.
The only disturbing comments in the Fed's review concerned the labor
market, where shortages were appearing for both skilled and entry-level
positions. Should this cause wage inflation, the credit markets would raise
interest rates again. However, the Fed expects economic growth to slow
during the second half of the year, and that would lessen the likelihood
that monetary policy would be tightened.
The Fund will maintain its laddered maturity structure, offering
investors steady monthly income and relative net asset value stability.
YIELD CURVE- U.S. TREASURY ISSUES AS OF 7/31/96
MATURITY YIELD
3 Months 5.301%
6 Months 5.457 _____
1 Year 5.826
2 Years 6.216 AREA OF INVESTMENT FOCUS
3 Years 6.358 _____
5 Years 6.562
10 Years 6.794
30 Years 6.973
Source: Bloomberg
The yield curve graphically represents bond interest rates relative to maturity
(the length of time until repayment is scheduled) in three maturity ranges:
short-term (less than two years); intermediate term (two to 10 years); and
long-term (longer than 10 years). In most markets, the one- to two-year
maturity range usually exhibits the steepest slope. Historically, this area of
the curve has provided 85% to 95% of the yield of the entire Treasury curve,
and research by A I M Capital Management, Inc. concluded that the most
favorable risk/return trade-off for investors in U.S. Treasuries is generally
found in this portion of the curve. That research was the basis of the strict
investment discipline employed by AIM Limited Maturity Treasury Shares.
3
<PAGE> 4
GROWTH OF A $10,000 INVESTMENT
In thousands. 7/13/87 - 7/31/96
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS
<TABLE>
<CAPTION>
LEHMAN BROTHERS
LIMITED MATURITY COST OF 1-3 YEAR
YEARS TREASURY PORTFOLIO LIVING INDEX U.S. GOVERNMENT BOND INDEX*
<S> <C> <C> <C>
7/13/87 $10,000 $10,000 $10,000
7/31/87 10,005 10,026 10,000
7/88 10,634 10,441 10,698
7/89 11,638 10,960 11,813
7/90 12,548 11,489 12,766
7/91 13,700 12,000 14,025
7/92 15,024 12,379 15,521
7/93 15,756 12,722 16,387
7/94 16,143 13,075 16,749
7/95 17,210 13,436 17,942
7/31/96 18,117 13,806 18,924
</TABLE>
Source: Towers Data System HYPO --Registered Trademark-- for Cost of Living
Index; Lipper Analytical Services, Inc. for Lehman Brothers index
Limited Maturity Treasury Portfolio Institutional Shares' performance figures
are historical and reflect reinvestment of all distributions and changes in net
asset value. The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
The Lehman Brothers 1-3 Year U.S. Government Bond Index is an unmanaged
index composed of short-term U.S. agency and Treasury issues (maturities of one
to three years).
The Consumer Price Index is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 7/31/96
Inception (7/13/87) 6.79%
5 Years 5.75%
1 Year 5.27%
FOR PERIODS ENDED 6/30/96
(MOST RECENT CALENDAR
QUARTER-END)
Inception (7/13/87) 6.81%
5 Years 5.84%
1 Year 5.34%
STATE TAX INFORMATION: Of the total dividends paid, 100% was derived from
U.S. Treasury obligations.
4
<PAGE> 5
SCHEDULE OF INVESTMENTS
July 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (000s) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
U.S. TREASURY NOTES-98.82%
6.00% 08/31/97 $ 41,475 $ 41,494,908
- ------------------------------------------------------------------------------------------
5.75% 09/30/97 41,360 41,262,804
- ------------------------------------------------------------------------------------------
5.625% 10/31/97 42,175 41,988,165
- ------------------------------------------------------------------------------------------
5.375% 11/30/97 41,585 41,230,280
- ------------------------------------------------------------------------------------------
5.25% 12/31/97 41,850 41,405,553
- ------------------------------------------------------------------------------------------
5.00% 01/31/98 41,610 40,966,293
- ------------------------------------------------------------------------------------------
5.125% 02/28/98 41,525 40,905,032
- ------------------------------------------------------------------------------------------
6.125% 03/31/98 41,825 41,822,909
- ------------------------------------------------------------------------------------------
5.875% 04/30/98 41,400 41,211,216
- ------------------------------------------------------------------------------------------
6.00% 05/31/98 41,500 41,370,935
- ------------------------------------------------------------------------------------------
6.25% 06/30/98 41,330 41,381,249
- ------------------------------------------------------------------------------------------
6.25% 07/31/98 41,500 41,539,010
- ------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 496,578,354
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.82% 496,578,354
- ------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.18% 5,937,451
- ------------------------------------------------------------------------------------------
NET ASSETS-100.00% $502,515,805
==========================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $498,859,636) $496,578,354
- ----------------------------------------------------------------------------------
Cash 287
- ----------------------------------------------------------------------------------
Receivables for:
Fund shares sold 2,978,883
- ----------------------------------------------------------------------------------
Interest 5,958,137
- ----------------------------------------------------------------------------------
Investment in deferred compensation plan 14,009
- ----------------------------------------------------------------------------------
Other assets 135,367
- ----------------------------------------------------------------------------------
Total assets 505,665,037
- ----------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 1,889,916
- ----------------------------------------------------------------------------------
Dividends 1,015,880
- ----------------------------------------------------------------------------------
Deferred compensation 14,009
- ----------------------------------------------------------------------------------
Accrued advisory fees 83,900
- ----------------------------------------------------------------------------------
Accrued distribution fees 45,194
- ----------------------------------------------------------------------------------
Accrued transfer agent fees 33,086
- ----------------------------------------------------------------------------------
Accrued operating expenses 67,247
- ----------------------------------------------------------------------------------
Total liabilities 3,149,232
- ----------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $502,515,805
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL AIM
SHARES SHARES FUND
<S> <C> <C> <C>
NET ASSETS: $143,467,539 $359,048,266 $502,515,805
=========================================================================================
Shares outstanding, $0.01 par value per
share 14,388,919 36,010,350 50,399,269
=========================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 9.97
=========================================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $9.97 divided by 99.00%)* $ 10.07
=========================================================================================
* There is no sales charge or 12b-1 fee on sales of Institutional
Shares.
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
STATEMENT OF OPERATIONS
For the year ended July 31, 1996
<TABLE>
<CAPTION>
INSTITUTIONAL AIM
SHARES SHARES FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,467,903 $ 19,481,627 $ 27,949,530
- ---------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 283,049 650,158 933,207
- ---------------------------------------------------------------------------------------------
Administrative service fees 18,681 42,176 60,857
- ---------------------------------------------------------------------------------------------
Custodian fees 6,923 29,591 36,514
- ---------------------------------------------------------------------------------------------
Transfer agent fees 10,350 255,502 265,852
- ---------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,802 6,544 9,346
- ---------------------------------------------------------------------------------------------
Distribution fees -- 488,557 488,557
- ---------------------------------------------------------------------------------------------
Other 61,928 275,898 337,826
- ---------------------------------------------------------------------------------------------
Total expenses 383,733 1,748,426 2,132,159
- ---------------------------------------------------------------------------------------------
Net investment income $ 8,084,170 $ 17,733,201 25,817,371
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on sales of investment securities 3,022,827
- ---------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (6,292,910)
- ---------------------------------------------------------------------------------------------
Net gain (loss) on investment securities (3,270,083)
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 22,547,288
=============================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
STATEMENT OF CHANGES IN NET ASSETS
For the years ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 25,817,371 $ 22,353,697
- -------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities 3,022,827 (7,239,070)
- -------------------------------------------------------------------------------------
Net unrealized (depreciation) appreciation of
investment securities (6,292,910) 9,384,912
- -------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 22,547,288 24,499,539
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Institutional Shares (8,084,170) (7,065,914)
- -------------------------------------------------------------------------------------
AIM Shares (17,733,201) (15,287,783)
- -------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Institutional Shares 14,818,211 (6,229,532)
- -------------------------------------------------------------------------------------
AIM Shares 86,957,303 (56,819,839)
- -------------------------------------------------------------------------------------
Net increase (decrease) in net assets 98,505,431 (60,903,529)
- -------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 404,010,374 464,913,903
- -------------------------------------------------------------------------------------
End of period $502,515,805 $404,010,374
=====================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $511,800,420 $410,024,906
- -------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of
investment securities (7,003,333) (10,026,160)
- -------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (2,281,282) 4,011,628
- -------------------------------------------------------------------------------------
$502,515,805 $404,010,374
=====================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Investment Securities Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Trust is organized as a Delaware business
trust consisting of one portfolio, the Limited Maturity Treasury Portfolio (the
"Fund"). The investment objective of the Fund is to seek liquidity with minimum
fluctuation in principal value and, consistent with this investment objective,
the highest total return achievable. The Fund currently offers two different
classes of shares: the AIM Limited Maturity Treasury Shares (the "AIM Shares")
and the Institutional Shares. Matters affecting each class are voted on
exclusively by such shareholders.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of these financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuations--Debt obligations that are issued or guaranteed by the
U.S. Treasury are valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate and maturity date.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations are
not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers
in a manner specifically authorized by the Board of Trustees. Securities with
a remaining maturity of 60 days or less are valued at amortized cost which
approximates market value.
B. Securities Transactions and Investment Income--Securities transactions are
accounted for on a trade date basis. Interest income, adjusted for
amortization of discounts on investments, is earned from settlement date and
is recorded on the accrual basis. It is the policy of the Fund not to
amortize bond premiums for financial reporting purposes. Interest income is
allocated to each class daily, based upon each class' pro-rata share of the
total shares of the Fund outstanding. Realized gains and losses from
securities transactions are recorded on the identified cost basis.
C. Dividends and Distributions to Shareholders--It is the policy of the Fund to
declare daily dividends from net investment income. Such dividends are paid
monthly. Distributions from net realized capital gains, if any, are recorded
on ex-dividend date and are paid annually.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward (which may
be carried forward to offset
9
<PAGE> 10
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-(continued)
future taxable capital gains, if any) of $6,725,562, which expires, if not
previously utilized, through the year 2004.
E. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more than
one class, e.g., advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM") with respect to the Fund. Under the terms of the master
investment advisory agreement, the Fund pays AIM an advisory fee at the annual
rate of 0.20% of the first $500 million of the Fund's average daily net assets
plus 0.175% of the Fund's average daily net assets in excess of $500 million.
This agreement requires AIM to reduce its fee or, if necessary, make payments to
the extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Fund shares are
qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended July 31, 1996, the Fund
reimbursed AIM $60,857 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the AIM Shares. During the year ended July 31, 1996, AFS
was paid $160,400 for such services. During the year ended July 31, 1996, the
Fund paid A I M Institutional Fund Services, Inc. ("AIFS") $10,350 pursuant to a
transfer agency and shareholder services agreement with respect to the
Institutional Shares.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the AIM
Shares and a master distribution agreement with Fund Management Company ("FMC")
to serve as the distributor for the Institutional Shares. The Trust has adopted
a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to
the AIM Shares. The Fund pays AIM Distributors compensation at an annual rate of
0.15% of the average net assets attributable to the AIM Shares. The Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own AIM Shares of the Fund. Any amounts not paid as a
service fee under such Plan would constitute an asset-based sales charge. The
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Fund. During the year ended
July 31, 1996, the AIM Shares paid AIM Distributors $488,557 as compensation
under the Plan.
AIM Distributors received commissions of $193,686 during the year ended July
31, 1996 from sales of AIM Shares. Such commissions are not an expense of the
Fund. They are deducted from, and are not included in, proceeds from sales of
AIM shares. Certain officers and trustees of the Trust are officers and
directors of AIM, AIM Distributors, FMC, AFS and AIFS.
During the year ended July 31, 1996, the Fund paid legal fees of $4,141 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Trustees. A member of that firm is a trustee of the Trust.
10
<PAGE> 11
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank d/b/a Chemical Bank. The Fund
may borrow up to the lesser of (i) $325,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which are
parties to the line of credit may borrow on a first come, first served basis.
Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the year ended July 31, 1996, the Fund did not borrow
under the line of credit agreement. The funds which are party to the line of
credit are charged a commitment fee of 0.08% on the unused balance of the
committed line. The commitment fee is allocated among the funds based on their
respective average net assets for the period. Prior to an amendment of the line
of credit on July 19, 1996, the Fund was limited to borrowing $6,700,000.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended July 31, 1996 was
$648,234,412 and $546,804,207, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of July 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ --
- -----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,558,630)
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(2,558,630)
=============================================================================
</TABLE>
Cost of investments for tax purposes is $499,136,984.
NOTE 5-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-SHARE INFORMATION
Changes in the Institutional Shares outstanding during the years ended July 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
---------------------------- ----------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold 5,925,940 $ 59,531,203 1,443,720 $ 14,412,733
- -------------------------------------------------------- ----------------------------
Issued as reinvestment of
dividends 113,885 1,142,722 113,174 1,124,015
- -------------------------------------------------------- ----------------------------
Reacquired (4,566,815) (45,855,714) (2,194,873) (21,766,280)
- -------------------------------------------------------- ----------------------------
1,473,010 $ 14,818,211 (637,979) $ (6,229,532)
======================================================== ============================
</TABLE>
11
<PAGE> 12
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of Institutional
Shares outstanding during each of the years in the two year period ended July
31, 1996, the eleven months ended July 31, 1994, each of the years in the
six-year period ended August 31, 1993 and the period July 13, 1987 (date
operations commenced) through August 31, 1987.
<TABLE>
<CAPTION>
JULY 31, AUGUST 31,
---------------------------------- -----------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79 $ 9.78
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.58 0.57 0.37 0.44 0.60 0.73 0.79
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.06) 0.07 (0.20) 0.05 0.29 0.22 0.01
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.52 0.64 0.17 0.49 0.89 0.95 0.80
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.58) (0.57) (0.37) (0.44) (0.60) (0.73) (0.79)
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains -- -- (0.08) (0.02) (0.09) -- --
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.58) (0.57) (0.45) (0.46) (0.69) (0.73) (0.79)
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.97 $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79
=================================== ======== ======== ======== ======== ======== ======== ========
Total return(a) 5.27% 6.61% 1.72% 4.88% 9.14% 10.08% 8.52%
=================================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $143,468 $129,530 $134,971 $130,690 $ 89,352 $ 25,528 $ 10,378
=================================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 0.27%(b) 0.28% 0.25%(c) 0.24% 0.28% 0.41%(d) 0.31%(e)
=================================== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 5.72%(b) 5.70% 3.98%(c) 4.30% 5.76% 7.36%(d) 8.12%(e)
=================================== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 117.09% 120.01% 120.40% 122.99% 119.62% 214.74% 192.46%
=================================== ======== ======== ======== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) -- -- -- -- -- -- --
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Average amount of debt outstanding
during the period (000s
omitted)(g) -- -- -- -- -- -- $ 834
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Average number of shares
outstanding during the period
(000s omitted)(g) 13,982 12,540 16,864 9,785 6,097 1,477 1,208
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Average amount of debt per share
during the period -- -- -- -- -- -- $ 0.69
=================================== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
AUGUST 31,
-------------------------------
1989 1988 1987
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 9.80 $ 9.92 $ 10.00
- ----------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.85 0.73 0.09
- ----------------------------------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) (0.02) (0.12) (0.08)
- ----------------------------------- ------- ------- -------
Total from investment operations 0.83 0.61 0.01
- ----------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.85) (0.83) (0.09)
- ----------------------------------- ------- ------- -------
Distributions from net realized
capital gains -- -- --
- ----------------------------------- ------- ------- -------
Total distributions (0.73) (0.73) (0.09)
- ----------------------------------- ------- ------- -------
Net asset value, end of period $ 9.78 $ 9.80 $ 9.92
=================================== ======= ======= =======
Total return(a) 8.87% 6.34% 0.14%
=================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $16,065 $35,310 $ 4,202
=================================== ======= ======= =======
Ratio of expenses to average net
assets 0.31%(f) 0.31%(f) 0.25%(c)(f)
=================================== ======= ======= =======
Ratio of net investment income to
average net assets 8.69%(f) 7.46%(f) 6.98%(c)(f)
=================================== ======= ======= =======
Portfolio turnover rate 219.53% 140.83% 28.29%
=================================== ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at
end of period (000s omitted) $ 2,257 $10,892 --
- ----------------------------------- ------- ------- -------
Average amount of debt outstanding
during the period (000s
omitted)(g) 3,562 3,754
- ----------------------------------- ------- ------- -------
Average number of shares
outstanding during the period
(000s omitted)(g) 1,817 2,118 390
- ----------------------------------- ------- ------- -------
Average amount of debt per share
during the period $ 1.96 $ 1.69 --
=================================== ======= ======= =======
</TABLE>
(a) For periods less than one year, the total return is not annualized.
(b) Ratios are based on average net assets of $140,898,895.
(c) Annualized.
(d) After expense reimbursements.
(e) After waiver of advisory fees and expense reimbursements.
(f) After waiver of advisory fees.
(g) Averages computed on a daily basis.
12
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Investment Securities Funds
We have audited the accompanying statement of assets and liabilities of the
Limited Maturity Treasury Portfolio (a series of AIM Investment Securities
Funds), including the schedule of investments, as of July 31, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the two-year period then
ended, the eleven months ended July 31, 1994, each of the years in the six-year
period ended August 31, 1993 and the period July 13, 1987 (date operations
commenced) through August 31, 1987. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Limited Maturity Treasury Portfolio as of July 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the two-year period then ended, the eleven months ended
July 31, 1994, each of the years in the six-year period ended August 31, 1993
and the period July 13, 1987 (date operations commenced) through August 31,
1987, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
August 23, 1996
Houston, Texas
13
<PAGE> 14
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14
<PAGE> 15
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15
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C>
TRUSTEES
Charles T. Bauer John F. Kroeger AIM INVESTMENT
Bruce L. Crockett Lewis F. Pennock SECURITIES FUNDS
Owen Daly II Ian W. Robinson
Carl Frischling Louis S. Sklar
Robert H. Graham
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
John J. Arthur Sr. Vice President & Treasurer
Gary T. Crum Sr. Vice President
Carol F. Relihan Vice President & Secretary
Melville B. Cox Vice President
Karen Dunn Kelley Vice President
Dana R. Sutton Vice President & Assistant Treasurer
P. Michelle Grace Assistant Secretary Limited Maturity
David L. Kite Assistant Secretary Treasury Portfolio
Nancy L. Martin Assistant Secretary ---------------------------------
Ofelia M. Mayo Assistant Secretary Institutional ANNUAL
Kathleen J. Pflueger Assistant Secretary Shares REPORT
Samuel D. Sirko Assistant Secretary
Stephen I. Winer Assistant Secretary
Mary J. Benson Assistant Treasurer
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
800-347-1919
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza, Suite 1919
Houston, TX 77046
800-659-1005
CUSTODIAN July 31, 1996
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
LEGAL COUNSEL TO FUND
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103-7599
LEGAL COUNSEL TO TRUSTEES
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Institutional Fund Services, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
This report may be distributed only to current shareholders [LOGO APPEARS HERE]
or to persons who have received a current Fund prospectus. Fund Management Company
</TABLE>
