<PAGE> 1
[AIM LOGO APPEARS HERE]
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
BAUER, feel comfortable. We are pleased to be able to report to
Chairman of you that as of June 1999 we achieved a major milestone
the Board of toward year 2000 compliance status: we have successfully
THE FUND completed the testing of all of our mission-critical
APPEARS HERE] systems.
Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems
might be affected by the changeover to the year 2000 (Y2K).
Everything went as well as we had hoped; in general, the
industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in
planning for year 2000 concerns. Thus, it was no surprise
to most participants that the test was an overwhelming
success.
The general purpose of the process was to test electronic interfaces among
financial industry members in the United States and to follow transactions
through a typical trading cycle--from order entry to the settlement process.
Investment banks, broker-dealers, custodian banks and mutual fund companies all
worked together to make this possible. Approximately 400 firms were involved in
the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing
the year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
We are pleased to send you this report covering your fund's performance
over the fiscal year. Please contact Institutional Customer Services at
800-659-1005 during normal business hours if you have any questions.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-------------------------------------
PLEASE NOTE THAT
THE INFORMATION
ABOUT THE YEAR
2000 IN THIS
LETTER IS DEEMED
AIM'S YEAR 2000
READINESS
DISCLOSURE.
-------------------------------------
<PAGE> 2
THE MANAGERS' OVERVIEW
FUND REMAINS STABLE IN CHANGING
MARKET ENVIRONMENT
A round-table discussion with the fund management team for AIM Limited Maturity
Treasury Fund-Institutional Class about the 12-month period ended July 31, 1999.
- -------------------------------------------------------------------------------
HOW DID AIM LIMITED MATURITY TREASURY FUND-INSTITUTIONAL CLASS PERFORM DURING
THE FISCAL YEAR?
The recovery of markets since last year's global financial crisis was tempered
somewhat by inflation fears in the United States, especially in bond markets.
The fund stuck to its discipline, and net asset value (NAV) per share
remained between $10.01 and $10.27 during the 12-month reporting period,
showing low volatility.
The fund also continued to provide attractive income during the fiscal
year. As of July 31, 1999, the 30-day distribution rate at NAV was 4.78%. The
30-day SEC yield at NAV was 5.23%.
Total return for the fund as of the end of the fiscal year was 4.55%.
Comparatively, the Lehman 1- to 2-Year U.S. Government Bond Index had a return
of 4.96% for the reporting period.
WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE FISCAL YEAR?
During the late summer and early fall of 1998, financial crises overseas
pummeled markets with record volatility. This caused a "flight to quality" that
sharply increased the demand for U.S. Treasury securities, pushing up their
prices. As a result, the yield on the two-year Treasury note fell 121 basis
points (1.21%) to a low of 4.27% during the third quarter of 1998. Global
markets began to rebound late in the year, spurred by U.S. interest-rate cuts
made by the Federal Reserve Board (the Fed). At the same time, the U.S. economy
drove ahead despite predictions that it would slow.
As global markets continued to recover into 1999, Treasury yields began to
increase, reflecting strong domestic economic growth. Investors and economists
worried that the strong U.S. economy would spark inflation and force the Fed to
raise interest rates. These fears roiled bond markets during the second quarter
of 1999, eroding Treasury
===============================================================================
Yield Curve--U.S. Treasury Securities
As of 7/31/99, with time to maturity
0-3 Months 4.74%
6 Months 4.84%
1 Year 5.10%
2 Years 5.62%
5 Years 5.79%
10 Years 5.90%
30 Years 6.10%
===============================================================================
2
<PAGE> 3
prices in May and June and sending yields higher. The yield on the benchmark
30-year Treasury bond soared from 5.09% at the beginning of 1999 to 6.16% on
June 24, its highest level since 1997.
Speculation surrounding the Fed's possible action did not end until the
central bank raised the federal funds rate from 4.75% to 5% on June 30. The Fed
also said it had shifted from a tightening to a neutral bias, which seemed to
indicate that it planned no further rate hikes in the near future. That sparked
a relief rally in bond markets as investors were reassured that the Fed
remained vigilant toward preventing inflation. As of June 30, the two-year
Treasury note was yielding 5.52%.
However, Fed Chairman Alan Greenspan jolted financial markets in July when
he said that the Fed would need to be especially alert to inflation risks,
citing the tight job market as a reason. Indeed, the employment cost index--a
widely watched gauge of wage trends--registered an unexpected 1.1% increase in
July, its largest rise since 1991. Some market watchers worried that this
increase raised the odds of a future interest-rate hike.
HOW DID THE MARKET ENVIRONMENT AFFECT THE FUND?
The fund has looked particularly strong compared to the broader fixed-income
universe so far in 1999. Although bond yields were volatile during the past
fiscal year, the fact that the fund invests in securities between one and two
years to maturity helped dampen the impact of rising interest rates on its NAV.
The shorter a bond's maturity, the less its price reacts to interest-rate
changes like the ones we have seen.
While inflation fears drove yields higher during the first half of 1999,
the fund's short maturity helped produce a positive total return. At the same
time, government and high-grade bond funds that invest in longer-term
securities struggled with higher interest rates, and many posted negative
returns over the same period.
DID YOUR STRATEGY CHANGE OVER THE FISCAL YEAR?
The fund maintained its disciplined approach throughout the reporting period.
In researching U.S. Treasury securities for the fund, we have found that a
favorable risk/return scenario generally occurs in the one- to two-year range
of securities. This is the area of the steepest slope in the yield curve (see
the chart on the previous page). So the fund buys two-year Treasury notes every
month and sells them after a year, a strategy called "rolling down the yield
curve" that creates a laddered portfolio. Because two-year Treasury notes are
fixed-coupon securities, they tend to appreciate slightly in price as they roll
down the yield curve to a lower interest-rate environment. This strategy has
historically provided a consistent yield and a greater degree of price
stability for the fund.
THE U.S. TREASURY RECENTLY ANNOUNCED CHANGES TO ITS AUCTION SCHEDULE AND A
DEBT-REPURCHASE PLAN. HOW WILL THE FUND BE AFFECTED?
In early August, Treasury Secretary Lawrence Summers announced a cut from three
to two annual 30-year bond auctions, and he also hinted at changes to the
current monthly auction schedules for one-year Treasury bills and two-year
Treasury notes. We will not know how changes in the monthly auction might
affect the fund until they are actually announced. The short maturity of the
two-year note readily appeals to both retail and institutional investors and
offers the Treasury flexibility in managing its debt balances. As a result,
market participants do not anticipate drastic changes to the auction schedule
for two-year notes.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
The Greenspan Fed has been working to keep inflation out of the U.S. economy.
In the long run, a move to raise interest rates this fall could be seen as good
news for the bond market because inflation is the primary threat to
fixed-income investments.
If interest rates do continue to rise, it is important to note that the
fund's NAV will fall. However, the short-term nature of the fund's investments
limits the NAV impact of rising yields. The opportunity to buy higher-yielding
securities should both help the fund's total return and offset at least some of
the NAV drop. We believe the fund's low price and yield volatility over time
should continue to provide an excellent risk/return relationship.
3
<PAGE> 4
LONG-TERM PERFORMANCE
AIM LIMITED MATURITY TREASURY
FUND--INSTITUTIONAL CLASS VS. BENCHMARK
INDEX
The chart below compares your fund to a benchmark index, which measures
performance of a hypothetical portfolio. It is important to understand the
difference between your fund and an index. A market index such as the Lehman
1- to 2-Year U.S. Government Bond Index is not managed, and it incurs no sales
charges, expenses or fees. If you could buy all the securities that make up a
market index, you would incur expenses that would affect your investment's
return. Use of this index is intended to give you a general idea of how your
fund performed compared to the bond market.
Growth of a $10,000 Investment
- -------------------------------------------------------------------------------
AIM Limited
Maturity Treasury Lehman 1- to 2-Year U.S. Government
Fund--Institutional Class Bond Index
- -------------------------------------------------------------------------------
7/89 $10000 $10000
7/90 10782 10823
7/91 11771 11863
7/92 12909 13035
7/93 13544 13679
7/94 13869 14041
7/95 14785 15000
7/96 15564 15730
7/97 16621 16817
7/98 17562 17803
7/99 18365 18688
Sources: Towers Data Systems HYPO--Registered Trademark--, Bloomberg.
Performance figures are historical and reflect reinvested distributions and
changes in net asset value, net of fees and expenses. Investment return and
principal value will vary, so an investor may have a gain or loss when selling
shares. Had the advisor not waived fund expenses in the past, performance
figures would have been lower.
===============================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/99
10 years 6.27%
5 years 5.77
1 year 4.55
As of 6/30/99 (the most recent calendar quarter end)
10 years 6.37%
5 years 5.87
1 year 4.70
===============================================================================
4
<PAGE> 5
SCHEDULE OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
MATURITY (000) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
U.S. TREASURY NOTES-100.19%
5.125% 8/31/00 $ 34,330 $ 34,238,339
- -------------------------------------------------------------------------------------------
4.50% 9/30/00 34,000 33,648,440
- -------------------------------------------------------------------------------------------
4.00% 10/31/00 34,060 33,472,806
- -------------------------------------------------------------------------------------------
4.625% 11/30/00 34,100 33,734,789
- -------------------------------------------------------------------------------------------
4.625% 12/31/00 35,100 34,681,959
- -------------------------------------------------------------------------------------------
4.50% 1/31/01 34,100 33,607,255
- -------------------------------------------------------------------------------------------
5.00% 2/28/01 34,500 34,222,965
- -------------------------------------------------------------------------------------------
4.875% 3/31/01 34,000 33,625,660
- -------------------------------------------------------------------------------------------
5.00% 4/30/01 34,200 33,877,836
- -------------------------------------------------------------------------------------------
5.25% 5/31/01 34,240 34,031,136
- -------------------------------------------------------------------------------------------
5.75% 6/30/01 34,090 34,160,907
- -------------------------------------------------------------------------------------------
5.50% 7/31/01 34,700 34,623,660
- -------------------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $410,249,128) 407,925,752
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.19% 407,925,752
- -------------------------------------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.19%) (777,262)
- -------------------------------------------------------------------------------------------
NET ASSETS-100.00% $407,148,490
===========================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $410,249,128) $407,925,752
- --------------------------------------------------------------------------
Cash 2,864,297
- --------------------------------------------------------------------------
Receivables for:
Investments sold 34,703,269
- --------------------------------------------------------------------------
Fund shares sold 3,745,894
- --------------------------------------------------------------------------
Interest 4,198,519
- --------------------------------------------------------------------------
Investment in deferred compensation plan 30,068
- --------------------------------------------------------------------------
Other assets 54,032
- --------------------------------------------------------------------------
Total assets 453,521,831
- --------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,638,671
- --------------------------------------------------------------------------
Fund shares reacquired 10,858,373
- --------------------------------------------------------------------------
Dividends 495,043
- --------------------------------------------------------------------------
Deferred compensation 30,068
- --------------------------------------------------------------------------
Accrued advisory fees 71,337
- --------------------------------------------------------------------------
Accrued distribution fees 74,125
- --------------------------------------------------------------------------
Accrued transfer agent fees 52,749
- --------------------------------------------------------------------------
Accrued operating expenses 152,975
- --------------------------------------------------------------------------
Total liabilities 46,373,341
- --------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $407,148,490
==========================================================================
</TABLE>
<TABLE>
<S> <C>
NET ASSETS:
Class A $390,017,633
- --------------------------------------------------------------------------
Institutional Class $ 17,130,857
- --------------------------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 38,882,645
- --------------------------------------------------------------------------
Institutional Class 1,707,856
- --------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share $ 10.03
- --------------------------------------------------------------------------
Offering price per share:
(Net asset value of $10.03
divided by 99.00%) $ 10.13
- --------------------------------------------------------------------------
Institutional Class:
Net asset value, redemption price and offering price per
share $ 10.03
- --------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
STATEMENT OF OPERATIONS
For the year ended July 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $21,893,952
- -------------------------------------------------------------------------
EXPENSES:
Advisory fees 850,738
- -------------------------------------------------------------------------
Administrative services fees 70,069
- -------------------------------------------------------------------------
Transfer agent fees-Class A 474,047
- -------------------------------------------------------------------------
Transfer agent fees-Institutional Class 3,113
- -------------------------------------------------------------------------
Distribution fees-Class A (See Note 2) 591,643
- -------------------------------------------------------------------------
Other 229,521
- -------------------------------------------------------------------------
Total expenses 2,219,131
- -------------------------------------------------------------------------
Less: Expenses paid indirectly (4,605)
- -------------------------------------------------------------------------
Net expenses 2,214,526
- -------------------------------------------------------------------------
Net investment income 19,679,426
- -------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 1,359,439
- -------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (3,023,894)
- -------------------------------------------------------------------------
Net gain (loss) from investment securities (1,664,455)
- -------------------------------------------------------------------------
Net increase in net assets resulting from operations $18,014,971
=========================================================================
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 19,679,426 $ 22,758,619
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities 1,359,439 1,855,056
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (3,023,894) (1,793,413)
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 18,014,971 22,820,262
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (18,245,067) (20,003,878)
- ------------------------------------------------------------------------------------------
Institutional Class (1,523,201) (2,754,741)
- ------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 46,655,684 (44,498,315)
- ------------------------------------------------------------------------------------------
Institutional Class (33,718,444) 1,723,996
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 11,183,943 (42,712,676)
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 395,964,547 438,677,223
- ------------------------------------------------------------------------------------------
End of period $407,148,490 $395,964,547
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $413,559,490 $400,652,004
- ------------------------------------------------------------------------------------------
Undistributed net investment income 29,754 88,842
- ------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (4,117,378) (5,476,817)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (2,323,376) 700,518
- ------------------------------------------------------------------------------------------
$407,148,490 $395,964,547
==========================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
July 31, 1999l
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Limited Maturity Treasury Fund (the "Fund") is a series portfolio of AIM
Investment Securities Funds (the "Trust"). The Trust is a Delaware business
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of two
separate series portfolios. 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 portfolio or class are voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund.
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 the 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. Realized gains and
losses from securities transactions are recorded on the identified cost
basis. On July 31, 1999, undistributed net investment income was increased
by $29,754 and paid-in-capital decreased by $29,754 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Dividends and Distributions to Shareholders--It is the policy of the Fund
to declare daily dividends from net investment income. Such distributions
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 $2,924,409, 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.
8
<PAGE> 9
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 pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended July 31, 1999, the Fund
paid AIM $70,069 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. During the year ended July 31, 1999, the Fund
paid AFS $206,185 for such services.
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 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 year ended July 31, 1999, the Fund paid AIM Distributors
$591,643 as compensation under the Plan.
AIM Distributors received commissions of $75,023 during the year ended July
31, 1999 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 year ended July 31, 1999, the Fund paid legal fees of $4,376 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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 $4,605 under an expense offset arrangement which resulted in a reduction
of the Fund's total expenses of $4,605 during the year ended July 31, 1999.
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) $1 billion 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. During the year
ended July 31, 1999, 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 0.09% 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. Prior to May 28, 1999, the commitment fee rate was 0.05%.
9
<PAGE> 10
NOTE 5-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, 1999 was
$804,343,804 and $787,113,635, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of July 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 30,522
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,546,327)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $ (3,515,805)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $411,441,557.
NOTE 6-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are 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 years ended July 31, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 66,719,952 $ 675,218,081 22,832,451 $ 229,871,705
- -----------------------------------------------------------------------------------------
Institutional Class 489,034 4,947,727 1,450,340 14,604,304
- -----------------------------------------------------------------------------------------
Issued as a reinvestment of dividends:
Class A 1,524,802 15,430,990 1,671,295 16,825,885
- -----------------------------------------------------------------------------------------
Institutional Class 1,998 20,239 4,391 44,205
- -----------------------------------------------------------------------------------------
Reacquired:
Class A (63,662,111) (643,993,387) (28,922,414) (291,195,905)
- -----------------------------------------------------------------------------------------
Institutional Class (3,809,602) (38,686,410) (1,281,958) (12,924,513)
- -----------------------------------------------------------------------------------------
1,264,073 $ 12,937,240 (4,245,895) $ (42,774,319)
=========================================================================================
</TABLE>
10
<PAGE> 11
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
outstanding during each of the years in the five-year period ended July 31,
1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.07 $ 10.07 $ 9.97 $ 10.03 $ 9.96
- ------------------------------------------------------ ------- ------- ------- -------- --------
Income from investment operations:
Net investment income 0.49 0.56 0.56 0.58 0.57
- ------------------------------------------------------ ------- ------- ------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.04) -- 0.10 (0.06) 0.07
- ------------------------------------------------------ ------- ------- ------- -------- --------
Total from investment operations 0.45 0.56 0.66 0.52 0.64
- ------------------------------------------------------ ------- ------- ------- -------- --------
Less distributions:
Dividends from net investment income (0.49) (0.56) (0.56) (0.58) (0.57)
- ------------------------------------------------------ ------- ------- ------- -------- --------
Net asset value, end of period $ 10.03 $ 10.07 $ 10.07 $ 9.97 $ 10.03
====================================================== ======= ======= ======= ======== ========
Total return 4.55% 5.66% 6.79% 5.27% 6.61%
====================================================== ======= ======= ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,131 $50,609 $48,866 $143,468 $129,530
====================================================== ======= ======= ======= ======== ========
Ratio of expenses to average net assets 0.31%(a) 0.32% 0.31% 0.27% 0.28%
====================================================== ======= ======= ======= ======== ========
Ratio of net investment income to average net assets 4.84%(a) 5.51% 5.56% 5.72% 5.70%
====================================================== ======= ======= ======= ======== ========
Portfolio turnover rate 184% 133% 130% 117% 120%
====================================================== ======= ======= ======= ======== ========
</TABLE>
(a) Ratios are based on average net assets of $30,940,119.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM
Limited Maturity Treasury Fund (a series of AIM Investment Securities Funds)
including the schedule of investments, as of July 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
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, 1999, by correspondence with the custodian and brokers. 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 AIM
Limited Maturity Treasury Fund as of July 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
September 3, 1999
Houston, Texas
11
<PAGE> 12
ANNUAL REPORT
July 31, 1999
AIM Investment
Securities Funds
AIM Limited Maturity
Treasury Fund
--------------------------
INSTITUTIONAL CLASS
TRUSTEES
Charles T. Bauer Carl Frishling
Bruce L. Crockett Robert H. Graham
Owen Daly II Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack M. Fields Louis S. Sklar
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
Gary T. Crum Senior Vice President
Carol F. Relihan Senior Vice President & Secretary
Melville B. Cox Vice President
Karen Dunn Kelley Vice President
Dana R. Sutton Vice President & Treasurer
Renee A. Friedli Assistant Secretary
P. Michelle Grace Assistant Secretary
Jeffrey H. Kupor Assistant Secretary
Nancy L. Martin Assistant Secretary
Ofelia M. Mayo Assistant Secretary
Lisa A. Moss Assistant Secretary
Kathleen J. Pflueger Assistant Secretary
Samuel D. Sirko Assistant Secretary
Stephen I. Winer Assistant Secretary
Mary J. Benson Assistant Vice President & Assistant Treasurer
Sheri Morris Assistant Vice President & Assistant Treasurer
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
800-347-1919
DISTRIBUTOR
Fund Management Company
11 Greenway Plaza, Suite 100
Houston, TX 77046
800-659-1005
CUSTODIAN
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
LEGAL COUNSEL TO FUND
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
LEGAL COUNSEL TO TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-47392
AUDITORS
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
This report may be distributed only to current shareholders or
to persons who have received a current prospectus.
[AIM LOGO APPEARS HERE]
Fund Management Company
