<PAGE> 1
AIM LIMITED MATURITY
TREASURY FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JANUARY 31, 1998
<PAGE> 2
-----------------------------------
AIM LIMITED MATURITY
TREASURY FUND
For shareholders who seek
high monthly income free from
state taxes while
maintaining relative stability of
principal by investing only in
U.S. Treasury notes with maturities
of three years or less.
-----------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Limited Maturity Treasury Fund's performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value. Unless otherwise indicated, the Fund's performance is computed at net
asset value without a sales charge. When sales charges are included in
performance figures, those figures reflect the maximum 1.00% sales charge.
o The 30-day yield is calculated on the basis of a formula defined by the
SEC. The formula is based on the portfolio's potential earnings from
dividends, interest, yield-to-maturity or yield-to-call of the bonds in the
portfolio, net of all expenses and expressed on an annualized basis.
o 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.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Standard & Poor's Corporation (S&P) is a widely known credit rating agency.
S&P's ratings are historical and are based on an annual analysis of the
Fund's credit quality, composition and management. Funds are rated from the
highest quality (AAA) to lowest quality (CCC).
o Government securities, such as U.S. Treasury bills, notes, 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.
o The Consumer Price Index (CPI) is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o Certificate of Deposit (CD) rates are calculated using the six-month average
CD rate reported by the Federal Reserve Board. Bank CDs, which are insured
by the FDIC for up to $100,000, are short-term investments that pay fixed
principal and interest but are subject to fluctuating rollover rates and
early withdrawal penalties. Shares of AIM Limited Maturity Treasury Fund
are not insured, and their value will vary with market conditions.
o Unless otherwise indicated, comparative index results include reinvested
dividends and do not reflect sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
It has been an eventful six months in securities markets.
[PHOTO OF Market sentiment focused on the potential negative impact of
Charles T. Asia's financial crisis, which began to unfold shortly before
Bauer, the opening of the six-month period covered by this report.
Chairman of As consensus remained elusive about how serious or widespread
the Board of this impact would be, stock markets the world over
THE FUND experienced continued volatility and uncertainty. In such an
APPEARS HERE] environment, U.S. Treasury markets typically serve as
relative safe havens, and once again they fulfilled this
role. Yields on these securities declined as their market
value climbed.
AIM Limited Maturity Treasury Fund performed well in
this environment, producing attractive current yield and
total return. On the following pages, your Fund's managers
discuss Fund performance in greater detail, describe their
investment strategies, and offer their outlook for the future.
In uncertain times like these, your financial consultant remains your best
source for up-to-date information on market trends and for professional advice
on how to invest strategically rather than emotionally. We encourage you to
visit with your financial consultant regularly to make sure you still have the
best fit between your chosen investments and your goals, risk tolerance, and
time horizon.
INVESTOR EDUCATION EVENT
In addition to professional guidance, every investor needs fundamental
information about the saving and investing choices offered by the marketplace.
AIM has always championed investor education, convinced that a more
knowledgeable shareholder is a better customer. A great deal of investment
information will be available during an upcoming event that we hope our
shareholders will participate in and learn from to the greatest extent
possible.
The event concerns citizens' financial planning for retirement, a subject
of growing urgency as the population ages and the solvency of the Social
Security system is increasingly debatable.
The first National Summit on Retirement Savings will be held at the White
House in July. Under the auspices of the Department of Labor working through
public/private partnership, the summit's goal is to advance the public's
knowledge of retirement savings through development of a broad-based education
program and to develop recommendations for public/private action that would
promote private retirement savings among American workers. We encourage you to
look for further information on this White House summit in the national and
local press.
We are pleased to send you this report on your AIM Fund. Please contact
our Client Services department at 800-959- 4246 if you have any questions or
comments. Remember that automated information about your account is available
24 hours a day on the AIM Investor Line, 800-246-5463. Account information and
much more can be accessed through our Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-------------------------------------
In uncertain times like these, your
financial consultant remains your best
source for up-to-date information on
market trends and for professional
advice on how to invest strategically
rather than emotionally.
-------------------------------------
<PAGE> 4
The Managers' Overview
FUND CELEBRATES 10 YEARS OF POSITIVE RETURNS
A roundtable discussion with the Fund management team for AIM Limited Maturity
Treasury Fund about the six-month period ended January 31, 1998.
- --------------------------------------------------------------------------------
Q. IT WAS A GOOD SIX MONTHS FOR FIXED-INCOME INVESTMENTS. HOW DID THE FUND
PERFORM DURING THE REPORTING PERIOD?
A. The period was particularly good for U.S. Treasury issues. The Fund stayed
right in step with this trend, once again providing attractive current
income, exempt from state taxes. In addition, the Fund preserved the
relative stability of its net asset value.
As of January 31, 1998, the 30-day yield of AIM Limited Maturity
Treasury Fund was 5.10%, based on maximum offering price. Cumulative total
return was 3.15% for the six-month period ended January 31, 1998. Net asset
value per share remained within a range of $10.03 and $10.13 during the
reporting period.
Q. WHY DID BONDS PERFORM SO WELL?
A. The low-inflation and falling interest-rate environment that defined much of
1997 provided nearly an ideal climate for bonds. For the 12-month period
ended January 31, 1998, the consumer price index (CPI) rose just 1.6%, the
smallest increase in 11 years. After raising interest rates in March of
1997, the Federal Reserve Board (the Fed) left monetary policy unchanged for
the remainder of 1997. Borrowing costs actually declined as the year
progressed, as it became evident that inflation was not a serious threat.
Bonds were given a boost in the summer by the agreement to balance the
federal budget and again in the fall by the turmoil that hit world stock
markets. Following the Asian currency devaluations, global stock markets
plunged in October. Investors began shifting more assets into bonds,
especially into U.S. Treasury securities.
Q. HOW DID THE ASIAN CRISIS AFFECT U.S. TREASURY SECURITIES?
A. U.S. Treasury securities were one of the chief beneficiaries of the economic
turmoil in Asia. When stock markets plummeted worldwide, investors in search
of quality began shifting their assets into U.S. Treasury issues. Foreign
investors increased their presence on the U.S. Treasury scene, seeking a
safe haven for their investments. Foreign demand remained strong because
U.S. Treasury securities offered significantly higher interest rates than
foreign-government issues. The increasing number of Treasury market
participants sent the prices of U.S. Treasury securities higher and their
yields lower.
-------------------------
U.S. Treasury securities
were one of the chief
beneficiaries of the
economic turmoil in Asia.
-------------------------
===============================================================================
Stability of Net Asset Value
1/31/88-1/31/98
- -------------------------------------------------------------------------------
1/88 $9.93
1/89 9.72
1/90 9.81
1/91 9.91
1/92 10.21
1/93 10.16
1/94 10.15
1/95 9.79
1/96 10.09
1/97 10.02
1/98 10.13
===============================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. There is no
guarantee the Fund will maintain a constant NAV. Investment return and
principal value will vary so that you may have a gain or loss when you sell
shares. Past performance cannot guarantee comparable future results.
See important fund and index disclosures inside front cover.
2
<PAGE> 5
Q. CLEARLY, THERE WAS A BIG INCREASE IN DEMAND IN THE TREASURY MARKET. WHAT WAS
HAPPENING TO SUPPLY?
A. At the same time that demand was increasing, the supply of U.S. Treasury
issues was diminishing, pushing prices even higher. The federal government
is seeing greater in-flows of tax receipts, a result of higher corporate
profits and personal incomes. With decreased borrowing needs, there has been
a reduction in U.S. Treasury security issuance. The balanced budget
agreement was another factor leading to a trimmer supply. We expect U.S.
Treasury supply to continue to shrink in 1998.
Q. WHAT WAS YOUR STRATEGY IN THIS ENVIRONMENT?
A. The Fund maintained its disciplined investment strategy, focusing on the
one- to two-year maturity range of the yield curve. Fund managers implement
a laddered maturity structure within this segment of the yield curve. This
means that the Fund invests in two-year notes, which are held until they
approach the 13-month maturity level. Then they are sold, and the assets
are reinvested in new two-year Treasuries.
Q. YIELDS HAVE BEEN FALLING ON TREASURY NOTES. GIVEN THE FUND'S STRATEGY, DOES
THIS SITUATION PRESENT ANY CHALLENGES?
A. The rally in the U.S. Treasury market was reflected in the yield on the
two-year U.S. Treasury note, which fell from 5.72% at the beginning of the
period to 5.31% at its end. Overall, the yield curve has experienced a
significant flattening, with the average spread in yields between the
30-year bond and the two-year notes falling to just 50 basis points as of
January 31, 1998. (A basis point is one one-hundredth of a percentage
point.) In fact, toward the end of 1997, we actually saw an inverted yield
curve, where yields on short-term fixed-income securities were higher than
yields on longer-term fixed-income securities.
Because of its laddered maturity structure, the Fund may experience a
decline in yields over the next few months, since the new notes that we buy
during this period are likely to offer lower yields. However, when
lower-yielding notes in the portfolio reach the 13-month point, they will be
sold and we will buy new notes that should have higher yields. We remain
confident in this strategy. Our approach exposes the portfolio to the most
attractive part of the yield curve and renders the Fund less sensitive to
market price fluctuations.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. In a sense, we are in a brave new economic world. The U.S. economy is
growing at a healthy pace, but with very low inflation and nearly full
employment. While no one can be certain how long such conditions can
persist, many market participants expect prudent policy from the Fed, with
interest rates staying at or near their current levels. Moreover, the
continuing problems in Asia could slow economic growth and add fuel to the
strong rally in the U.S. Treasury market. In this environment, we continue
to be optimistic about U.S. Treasury issues.
===============================================================================
YIELD CURVE-U.S. TREASURY SECURITIES
AS OF 1/31/98
- -------------------------------------------------------------------------------
3 months 5.183%
6 months 5.219
1 year 5.215 ) AREA OF INVESTMENT FOCUS
2 years 5.308 )
3 years 5.324 )
5 years 5.377
10 years 5.512
30 years 5.805
===============================================================================
------------------------
Overall, the yield curve
has experienced a
significant
flattening.
------------------------
Source: Bloomberg.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
A DECADE OF GOOD PERFORMANCE
The Fund marked its 10th anniversary in December. We're pleased to report that
the Fund has produced a positive total return every calendar year since its
inception 10 years ago (see bar graph).
Over the course of its existence, the Fund has delivered about 90% of the
return of the 30-year U.S. Treasury bond with only about 25% of the risk.
During the 10-year period ended January 31, 1998, the Fund has handily beat out
inflation, bested returns on the six-month CD, and offered a very low
annualized volatility of only 1.6%.
The Fund's average annual total return for the 10-year period ended
January 31, 1998 was 6.43%. In comparison, the six-month CD provided an average
annual total return of 5.67% for the same period. The average inflation rate
for that period was 3.38%.
===============================================================================
ANNUAL TOTAL RETURNS
(EXCLUDING SALES CHARGES)
FOR CALENDAR YEARS 1988-1997
- -------------------------------------------------------------------------------
1988 5.89%
1989 9.63
1990 8.96
1991 10.48
1992 5.64
1993 4.46
1994 0.85
1995 9.40
1996 4.73
1997 5.97
===============================================================================
COMPARATIVE PERFORMANCE
The chart below compares your Fund to two benchmark measures--returns on
six-month certificates of deposit (CDs) and increases in the consumer price
index--over the period 1/31/88-1/31/98. The Fund outperformed six-month CDs and
beat inflation during this time frame.
GROWTH OF A $10,000 INVESTMENT
1/31/88 - 1/31/98
- --------------------------------------------------------------------------------
AIM LIMITED SIX-MONTH CONSUMER
MATURITY TREASURY CERTIFICATES PRICE INDEX
FUND OF DEPOSIT (CPI)
- --------------------------------------------------------------------------------
(In thousands)
1/88 $ 9,901 $10,000 $10,000
1/89 10,437 10,815 10,467
1/90 11,379 11,709 11,011
1/91 12,481 12,628 11,634
1/92 13,668 13,253 11,936
1/93 14,575 13,685 12,325
1/94 15,185 14,079 12,636
1/95 15,420 14,840 12,990
1/96 16,779 15,612 13,345
1/97 17,519 16,425 13,751
1/98 18,640 17,364 13,941
===============================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. The Fund's total
return includes sales charges, expenses, and management fees. For Fund
performance calculations and descriptions of benchmarks cited on this page,
please refer to the inside front cover.
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 1/31/98, including sales charges
10 Years 6.43%
5 Years 4.84
1 Year 5.35*
*6.40%, excluding sales charges
===============================================================================
===============================================================================
For periods ended 12/31/97
(most recent calendar quarter)
10 Years 6.46%
5 Years 4.84
1 Year 4.93**
**5.97%, excluding sales charges
===============================================================================
4
<PAGE> 7
For Consideration
THE ROTH IRA: THE POWER TO KEEP MORE
CONTRIBUTE AFTER-TAX DOLLARS NOW . . . SO YOU CAN GET FEDERALLY TAX-FREE
SAVINGS LATER
A new and potentially more powerful type of IRA--the Roth IRA--became available
on January 1, 1998. What makes it more powerful? The Roth IRA gives you the
opportunity to keep more of what you earn.
Are you eligible to open a Roth IRA? The answer is yes if you or your
spouse has earned income for the tax year for which you want to make the
contribution, and your adjusted gross income is below $110,000 if you are a
single tax filer, $160,000 if you file jointly.
TWO KEY ROTH IRA BENEFITS:
TAX-FREE AND PENALTY-FREE WITHDRAWALS
o Of earnings after five years. Earnings on your Roth IRA are federally
tax-free if your Roth IRA account has been open for five years and you are
at least 59 1/2 years old, or in the case of death or disability. You may
also use up to $10,000 of your earnings to buy a first home (after five
years).
o Of contributions at any time. For instance, if you make annual contributions
of $2,000 for the next three years, you may take out up to $6,000 and use
that money for any purpose.
HOW YOU MIGHT PUT BOTH BENEFITS TO WORK FOR YOU
Here's an example of how you may take full advantage of a Roth IRA. You are 39
1/2 years old. You contribute $2,000 after-tax annually in your Roth IRA every
year for 20 years, earning an average annual return of 10%. After 20 years,
your account has grown to $126,005. Now at age 59 1/2 you can begin taking
withdrawals and pay no federal income tax or penalty on any of your $126,005.
Or you can keep your money invested and take it out whenever you need it.
THE ROTH IRA: TO CONVERT OR NOT TO CONVERT
Can you convert your Traditional IRA to a Roth IRA? The answer is yes if you
meet these requirements:
You must pay taxes on the amount you convert. If you convert in 1998, you
can spread your tax payments over the next four years. This four-year allowance
will not be available after December 31, 1998.
You cannot convert to a Roth IRA if you are married and file your tax
return separately, or if your annual gross income is over $100,000.
SOME ROTH IRA CONVERSION GUIDELINES
If you can check most of these boxes, converting your
Traditional IRA to a Roth IRA may make sense for you.
[ ] You have assets outside your retirement savings with which you can
easily afford to pay the taxes due when you convert.
[ ] You have 10 years or more before you retire. The longer you invest
tax-free, the more you benefit.
[ ] Your tax rate will probably be higher in retirement than it is now. If
so, you'll pay less taxes now to convert than you would pay at
retirement if you withdrew from a traditional IRA.
[ ] You plan to convert in 1998. On January 1, 1999, the ability to spread
tax payments over four years disappears.
[ ] You want to keep making contributions after age 70 1/2 and may wish to
pass your IRA assets on to your heirs after your death.
The Roth IRA Analyzer & Calculator at AIM's Internet Web site--
www.aimfunds.com-- can help you determine your IRA eligibility status and
whether it makes sense for you to convert an existing IRA into a Roth IRA.
MAKE YOUR IRA CONVERSION DECISION A TRULY INFORMED ONE
Talk to your financial consultant, who knows your specific needs and goals. You
may also wish to talk with a tax adviser.
This discussion does not constitute tax advice. Your tax adviser can provide
guidance concerning your particular situation.
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
January 31, 1998
(unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
U.S. TREASURY NOTES-106.76%
5.875% 1/31/99 $36,400,000 $ 36,618,764
- ---------------------------------------------------------------------------------------------------
5.875% 2/28/99 36,150,000 36,383,529
- ---------------------------------------------------------------------------------------------------
6.25% 3/31/99 35,350,000 35,742,738
- ---------------------------------------------------------------------------------------------------
6.375% 4/30/99 35,300,000 35,764,195
- ---------------------------------------------------------------------------------------------------
6.25% 5/31/99 36,425,000 36,870,478
- ---------------------------------------------------------------------------------------------------
6.00% 6/30/99 35,300,000 35,645,234
- ---------------------------------------------------------------------------------------------------
5.875% 7/31/99 36,200,000 36,497,564
- ---------------------------------------------------------------------------------------------------
5.875% 8/31/99 35,800,000 36,112,534
- ---------------------------------------------------------------------------------------------------
5.75% 9/30/99 36,100,000 36,351,978
- ---------------------------------------------------------------------------------------------------
5.625% 10/31/99 35,750,000 35,923,745
- ---------------------------------------------------------------------------------------------------
5.625% 11/30/99 36,000,000 36,187,560
- ---------------------------------------------------------------------------------------------------
5.625% 12/31/99 36,000,000 36,200,880
- ---------------------------------------------------------------------------------------------------
5.375% 1/31/00 36,500,000 36,551,465
- ---------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 470,850,664
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-106.76% 470,850,664
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(6.76)% (29,812,990)
- ---------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $441,037,674
===================================================================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$466,934,133) $ 470,850,664
- --------------------------------------------------------
Cash 14,049
- --------------------------------------------------------
Receivables for:
Fund shares sold 2,085,338
- --------------------------------------------------------
Interest 7,606,856
- --------------------------------------------------------
Investment in deferred compensation plan 23,565
- --------------------------------------------------------
Other assets 77,212
- --------------------------------------------------------
Total assets 480,657,684
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 36,461,826
- --------------------------------------------------------
Fund shares reacquired 2,124,029
- --------------------------------------------------------
Dividends 644,191
- --------------------------------------------------------
Deferred compensation 23,565
- --------------------------------------------------------
Accrued administrative service fees 4,757
- --------------------------------------------------------
Accrued advisory fees 75,006
- --------------------------------------------------------
Accrued distribution fees 49,568
- --------------------------------------------------------
Accrued transfer agent fees 31,707
- --------------------------------------------------------
Accrued operating expenses 205,361
- --------------------------------------------------------
Total liabilities 39,620,010
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 441,037,674
========================================================
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL
CLASS A CLASS FUND
<S> <C> <C> <C>
NET ASSETS $388,242,970 $52,794,704 $441,037,674
==================================================================
Shares outstanding,
$0.01 par value per
share 38,398,629 5,221,584 43,620,213
==================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.11
==================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.11 divided by 99.00%) $ 10.21
==================================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $12,963,755
- -------------------------------------------------------
EXPENSES:
Advisory fees 437,779
- -------------------------------------------------------
Administrative service fees 28,374
- -------------------------------------------------------
Custodian fees 22,466
- -------------------------------------------------------
Transfer agent fees-Class A 161,679
- -------------------------------------------------------
Transfer agent fees-Institutional Class 2,282
- -------------------------------------------------------
Trustees' fees and expenses 27,476
- -------------------------------------------------------
Distribution fees-Class A 290,305
- -------------------------------------------------------
Other 153,536
- -------------------------------------------------------
Total expenses 1,123,897
- -------------------------------------------------------
Less: Expenses paid indirectly (1,946)
- -------------------------------------------------------
Net expenses 1,121,951
- -------------------------------------------------------
Net investment income 11,841,804
- -------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 462,572
- -------------------------------------------------------
Net unrealized appreciation of investment
securities 1,422,600
- -------------------------------------------------------
Net gain on investment securities 1,885,172
- -------------------------------------------------------
Net increase in net assets resulting from
operations $13,726,976
=======================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 AND THE YEAR ENDED JULY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1998 1997
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,841,804 $ 22,525,910
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 462,572 (328,964)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 1,422,600 4,775,213
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 13,726,976 26,972,159
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (10,419,222) (19,613,259)
- --------------------------------------------------------------------------------------------
Institutional Class (1,422,582) (2,912,651)
- --------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (3,227,839) 27,226,897
- --------------------------------------------------------------------------------------------
Institutional Class 3,703,118 (95,511,728)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,360,451 (63,838,582)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 438,677,223 502,515,805
- --------------------------------------------------------------------------------------------
End of period $441,037,674 $ 438,677,223
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $443,990,868 $ 443,515,589
- --------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (6,869,725) (7,332,297)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 3,916,531 2,493,931
- --------------------------------------------------------------------------------------------
$441,037,674 $ 438,677,223
============================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
(UNAUDITED)
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 AIM Limited Maturity Treasury Fund (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 Class A shares and the Institutional Class. Matters
affecting each class are voted on exclusively by such shareholders.
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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
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 future taxable capital
gains, if any) of $7,172,445, which expires, if not previously utilized,
through the year 2005.
E. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated between
the classes.
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.
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 six months ended January 31, 1998,
the Fund reimbursed AIM $28,374 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 Fund. On September 20, 1997, the Board of Trustees
of the Fund approved the appointment of AFS as transfer agent of the
Institutional Class effective December 29, 1997. During the six months ended
January 31, 1998, AFS was paid $86,889 with respect to Class A shares, and for
the period December 29, 1997 through January 31, 1998, AFS was paid $440 with
respect to the Institutional Class. Prior to effective date of the agreement
with AFS, the Fund paid A I M Institutional Fund Services, Inc. $1,842 pursuant
to a transfer agency and shareholder services agreement with respect to the
Institutional Class for the period August 1, 1997 through December 28, 1997.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and a master distribution agreement with Fund Management Company
("FMC") to serve as the distributor for the Institutional Class. The Trust has
adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with
respect to the Class A shares. The Fund pays AIM Distributors compensation at an
annual rate of 0.15% of the average daily net assets attributable to the Class A
shares. The Plan is designed to compensate AIM Distributors for certain
promotional and other sales related costs and provides periodic payments to
selected
9
<PAGE> 12
dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. Any amounts not paid as a service fee under the 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 six months ended January 31, 1998, the Fund paid AIM
Distributors $290,305 as compensation under the Plan.
AIM Distributors received commissions of $6,130 during the six months ended
January 31, 1998 from sales of Class A shares. Such commissions are not an
expense of the Fund. They are deducted from, and are not included in, proceeds
from sales of Class A shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors, FMC and AFS.
During the six months ended January 31, 1998, the Fund paid legal fees of
$2,334 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.
NOTE 3-INDIRECT EXPENSES
The Fund received reductions in transfer agency fees from AFS (an affiliate of
AIM) of $1,946 under an expense offset arrangement. The effect of the above
arrangement resulted in a reduction of the Fund's total expenses of $1,946
during the six months ended January 31, 1998.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 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 six months ended January 31, 1998, the Fund did not borrow under the
line of credit agreement. The funds which are parties to the line of credit are
charged a commitment fee of 0.05% on the unused balance of the committed line.
The commitment fee is allocated among such funds based on their respective
average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended January 31, 1998 was
$278,313,096 and $243,919,088, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis as, of January 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 3,865,036
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities 0
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 3,865,036
=========================================================
</TABLE>
Cost of investments for tax purposes is $466,985,628.
10
<PAGE> 13
NOTE 6-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 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended January 31, 1998 and
the year ended July 31, 1997 were as follows:
<TABLE>
<CAPTION>
JANUARY 31, 1998 JULY 31, 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 11,569,826 $ 116,259,156 22,795,689 $ 228,371,816
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 876,896 8,825,360 2,663,678 26,662,958
- ---------------------------------------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 852,019 8,740,480 1,600,608 16,029,270
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 2,352 23,670 16,172 161,587
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,741,886) (128,227,475) (21,687,977) (217,174,189)
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (511,317) (5,145,912) (12,215,116) (122,336,273)
- ---------------------------------------------------------------------------------------------------------------------
47,890 $ 475,279 (6,826,946) $ (68,284,831)
=====================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A shares
outstanding during the six month period ended January 31, 1998, each of the
years in the three-year period ended July 31, 1997, the eleven months ended July
31, 1994 and each of the years in the two-year period ended August 31, 1993.
<TABLE>
<CAPTION>
JULY 31, AUGUST 31,
JANUARY 31, ----------------------------------------- -------------------
1998 1997 1996 1995 1994 1993 1992
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.07 $ 9.97 $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.27 0.54 0.55 0.54 0.35 0.42 0.58
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) 0.04 0.10 (0.06) 0.07 (0.20) 0.05 0.29
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.31 0.64 0.49 0.61 0.15 0.47 0.87
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.27) (0.54) (0.55) (0.54) (0.35) (0.42) (0.58)
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- (0.08) (0.02) (0.09)
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Total distributions (0.27) (0.54) (0.55) (0.54) (0.43) (0.44) (0.67)
- ------------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.11 $ 10.07 $ 9.97 $ 10.03 $ 9.96 $ 10.24 $ 10.21
================================================= ========== ======== ======== ======== ======== ======== ========
Total return(a) 3.15% 6.55% 4.98% 6.36% 1.52% 4.65% 8.93%
================================================= ========== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 388,243 $389,812 $359,048 $274,480 $329,942 $348,937 $260,454
================================================= ========== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.54%(b)(c) 0.54% 0.54% 0.51% 0.47%(d) 0.46% 0.48%
================================================= ========== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets 5.36%(b) 5.35% 5.45% 5.44% 3.75%(d) 4.07% 5.60%
================================================= ========== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 53% 130% 117% 120% 120% 123% 120%
================================================= ========== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges and are not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $383,918,484.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(d) Annualized.
11
<PAGE> 14
Trustees & Officers
<TABLE>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly, Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Melville B. Cox Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global Inc.; CUSTODIAN
Formerly, Member of the Karen Dunn Kelley
U.S. House of Representatives Vice President The Bank of New York
90 Washington Street, 11th Floor
Carl Frischling Dana R. Sutton New York, NY 10286
Partner Vice President and
Kramer, Levin, Naftalis & Frankel Assistant Treasurer COUNSEL TO THE FUND
Robert H. Graham P. Michelle Grace Ballard Spahr
President and Chief Executive Officer Assistant Secretary Andrews & Ingersoll
A I M Management Group Inc. 1735 Market Street
Nancy L. Martin Philadelphia, PA 19103
John F. Kroeger Assistant Secretary
Formerly, Consultant COUNSEL TO THE TRUSTEES
Wendell & Stockel Associates, Inc. Ofelia M. Mayo
Assistant Secretary Kramer, Levin, Naftalis & Frankel
Lewis F. Pennock 919 Third Avenue
Attorney Kathleen J. Pflueger New York, NY 10022
Assistant Secretary
Ian W. Robinson DISTRIBUTOR
Consultant; Formerly, Executive Vice President Samuel D. Sirko
and Chief Financial Officer Assistant Secretary A I M Distributors, Inc.
Bell Atlantic Management 11 Greenway Plaza
Services, Inc. Stephen I. Winer Suite 100
Assistant Secretary Houston, TX 77046
Louis S. Sklar
Executive Vice President Mary J. Benson
Hines Interests Assistant Treasurer
Limited Partnership
</TABLE>
12
<PAGE> 15
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds.
o RETIREMENT PLANS. You may purchase shares of the fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hours-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24-hours-a-day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
--------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
--------------------
<PAGE> 16
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Asian Growth Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
AIM Blue Chip Fund
[PHOTO OF AIM Global Growth Fund
11 GREENWAY AIM Growth Fund
PLAZA APPEARS AIM International Equity Fund
HERE] AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Shares
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided *AIM Aggressive Growth Fund was closed to new
leadership in the mutual fund industry since 1976 investors on June 5, 1997. For more complete
and managed approximately $83 billion in assets information about any AIM Fund(s), including sales
for more than 3.7 million shareholders, including charges and expenses, ask your financial
individual investors, corporate clients, and consultant or securities dealer for a free
financial institutions as of December 31, 1997. prospectus(es). Please read the prospectus(es)
The AIM Family of Funds--Registered Trademark-- carefully before you invest or send money.
is distributed nationwide, and AIM today ranks
among the nation's top 15 mutual fund companies in INVEST WITH DISCIPLINE-SM-
assets under management, according to Lipper
Analytical Services, Inc.
</TABLE>
