<PAGE> 1
SEMIANNUAL REPORT / JANUARY 31 1999
AIM LIMITED MATURITY TREASURY FUND
[Cover Art]
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
[THUMBNAIL OF COVER ART]
--------------------------------------
ALEXANDER HAMILTON BY JOHN TRUMBELL (AMERICAN, 1756-1843)
AS THE UNITED STATES' FIRST SECRETARY OF THE TREASURY,
ALEXANDER HAMILTON PROVIDED THE BASIC MODEL
FOR OUR PRESENT ECONOMIC SYSTEM. AFTER THE
REVOLUTIONARY WAR, WHEN THE NEWLY FORMED UNITED
STATES FOUND ITSELF DEEP IN DEBT, HAMILTON
PROPOSED ISSUING A NEW SERIES OF GOVERNMENT BONDS
THAT WOULD PRESUMABLY SELL (AND DID) BECAUSE OF HIGH
PUBLIC CONFIDENCE IN THE NEW COUNTRY. U.S. TREASURY
SECURITIES CONTINUE TO BE A POPULAR INVESTMENT
CHOICE TODAY FOR THE VERY SAME REASON.
--------------------------------------
AIM Limited Maturity Treasury Fund is 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 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
Securities and Exchange Commission (SEC). The formula is based on the
Fund's potential earnings from dividends, interest, yield-to-maturity or
yield-to-call of its holdings, 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.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
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 Dow Jones Industrial Average (the Dow) is a price-weighted average of
30 actively traded primarily industrial stocks.
o The Lehman 1-2 Year U.S. Government Bond Index is an unmanaged index
composed of short-term U.S. agency and Treasury issues (maturities of one
to two years).
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. Fund shares are not insured and their value
will vary with market conditions.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THERE IS A RISK THAT YOU COULD LOSE A PORTION
OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to
persons who have received a current prospectus of the Fund.
AIM LIMITED MATURITY TREASURY FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the period covered by this report opened, markets were in
[PHOTO OF the midst of a serious loss of confidence stemming from
Charles T. global financial crises and widespread decline in U.S.
Bauer, corporate earnings growth. From July until October, a major
Chairman of market correction for equities bolstered U.S.Treasury issues,
the Board of whose safety attracts investors in doubtful times.
THE FUND The reporting period would bring two particularly serious
APPEARS HERE] financial shocks, first the debt default by Russia, and
later the currency devaluation by Brazil. The result was
another six months of market volatility here and abroad.
Investors flocked to securities perceived as safe and
liquid, especially U.S. Treasuries. Even high-quality
corporate bonds went out of favor, and high-yield bonds
plummeted. Beginning in late September, the U.S. Federal
Reserve Board intervened to pump liquidity and confidence
into markets. Numerous interest rate cuts in other countries
followed. Investors responded favorably, and by the close of the reporting
period, bond market volatility had generally subsided.
HOW SHOULD INVESTORS RESPOND?
We understand how unnerving this level of volatility could have been. Of course,
our repeated message to you is to keep a long-term outlook on investments rather
than responding to short-term fluctuations. And we are pleased to note that most
mutual fund shareholders remained cool headed and did not pull out of the
markets. In the end, most were rewarded for their long-term perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant
to review your current asset allocation and the diversification of your
portfolio. Broad portfolio diversification remains one of the most fundamental
principles of investing, along with long-term thinking and realistic
expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously. AIM has
devoted considerable effort to creating a comprehensive plan for assessing,
correcting and testing our in-house systems. We will also participate in an
industry-wide testing effort scheduled to begin in March. But no matter how well
we prepare and test, no one can know for sure what the year 2000 will bring. Our
industry's systems are connected in complex ways to many third parties, and
there may be unforeseen problems when the year 2000 actually arrives. Though we
cannot predict what all those problems might be, we are working with our
business recovery team to develop contingency plans appropriate for a variety of
year 2000 scenarios. We are pleased to send you this report on your Fund's
recent performance. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
AIM Investor Line at 800-246-5463 or at our Web site, www.aimfunds.com. We often
post market updates on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
----------------------------------------
. . . WE ARE PLEASED TO
NOTE THAT MOST MUTUAL
FUND SHAREHOLDERS
REMAINED COOL HEADED
AND DID NOT PULL OUT OF
THE MARKETS.
----------------------------------------
AIM LIMITED MATURITY TREASURY FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
FUND PROVIDES SAFE HAVEN IN
VOLATILE MARKETS
HOW DID AIM LIMITED MATURITY TREASURY FUND PERFORM DURING THE REPORTING PERIOD,
GIVEN THE TURBULENCE IN THE MARKETS?
The Fund held true to its investment discipline and provided attractive
current income. Despite the ups and downs in both fixed-income and equity
markets, the Fund's net asset value remained relatively stable.
As of January 31, 1999, the Fund's 30-day SEC yield at maximum offering
price was 3.69%. Cumulative total return for the six-month period ended January
31, 1999, at net asset value (NAV) and excluding sales charges, was 3.23%. The
Fund's NAV per share remained within a range of $10.07 and $10.27 during the
reporting period. The Fund's distribution rate at maximum offering price was
4.54%.
WHAT WAS THE MARKET ENVIRONMENT LIKE DURING THE REPORTING PERIOD?
After experiencing the effects of the Asian financial crisis early in 1998,
U.S. markets succumbed to another wave of the "Asian contagion" during the
summer. Major stock indexes that reached all-time highs in July fell by nearly
20% in August, with the Dow enduring its worst week ever August 24-28,
plummeting nearly 482 points.
A number of events converged to create the sharp downturn. Currency
devaluations occurred in Thailand, Malaysia, Indonesia and Korea. A lingering
recession gripped Japan, exacerbated by a proliferation of bad loans in the
banking system. Crippled by overwhelming debt, Russia effectively defaulted on
much of its government debt, and the ruble suffered deep devaluation. Fears of
a global credit crunch then spread to Latin America, as investors worried that
Brazil could not sustain its exchange rate in light of the country's increasing
debt.
Investor sentiment in the face of this global instability caused a capital
flight to safe havens as preservation of capital quickly became the leading
investment objective. In an attempt to calm the nerves of investors who were
shifting their money from equity markets to any security considered liquid--a
worldwide flight to quality and liquidity--the Federal Reserve Board (the Fed)
cut the federal funds rate by 0.25% on September 29. Few people were assuaged
by the action. Two weeks later, in an unusual inter-meeting move, the Fed
lowered the federal funds rate and the discount rate by 0.25%, igniting a
fierce market rally. Both rates were lowered by 0.25% again in November.
Widespread speculation that the U.S. economy would slow down at the end of
1998 was never borne out. Instead, during the fourth quarter, inflation
increased at its slowest pace in almost 40 years and the economy grew at an
annual rate of 6.1%, beating most forecasts. The Fed elected to leave interest
rates unchanged at its final policy meetings during the reporting period,
adopting a "wait and see" attitude.
The Dow hit two record highs during the first week of 1999, but Brazil's
earlier currency problems came to a head when the leader of that country's
Central Bank resigned and the Brazilian real was allowed to float on the open
market. The resulting ripple in global markets indicated that there is still
uneasiness among investors that 1998's record volatility might reappear.
HOW DID THE MARKET ENVIRONMENT AFFECT U.S. TREASURY SECURITIES?
The "flight to quality" meant that investors pulled their money out of nearly
any market
================================================================================
YIELD CURVE - U.S. TREASURY SECURITIES
As of 1/29/99
(Line Chart)
1/29/99
3 mo 4.457
6 mo 4.454
1 yr 4.497
2 yrs 4.566
5 yrs 4.542
10 yrs 4.651
30 yrs 5.091
===============================================================================
Source: Bloomberg
----------------------------------------
WIDESPREAD SPECULATION THAT THE
U.S. ECONOMY WOULD SLOW DOWN
AT THE END OF 1998 WAS NEVER
BORNE OUT.
----------------------------------------
See important Fund and index disclosures inside front cover.
AIM LIMITED MATURITY TREASURY FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
that was perceived to be a risky investment. As a result, demand for U.S.
investment-grade bonds, particularly Treasuries, rose sharply (see chart
below). The price of U.S. Treasury securities climbed, sending their yields to
historic lows. For example, the yield of the benchmark 30-year Treasury bond
fell to 4.72% on October 5, 1998, its lowest level since the issue was first
offered in 1977.
Since that time, U.S. markets have remained rather unsettled, due partially
to domestic political uncertainty and mixed corporate earnings reports. Thus,
the demand for short-term Treasuries remains robust. Brazil's problems also
drew investors to Treasuries at the beginning of 1999, although not in the
droves in which they came a few months before.
WHAT WAS YOUR STRATEGY DURING THIS PERIOD?
A "flight to quality" often greatly affects shorter-term Treasury securities
because they are the most liquid securities. However, increased demand
for the Treasury securities in which the Fund invests did not affect our
strategy. We use a laddered portfolio approach, buying two-year Treasury notes
every month and selling them after one year, a strategy called "rolling down
the yield curve." This generally results in NAV and yield stability, so our
strategy does not change based on market conditions. However, greater demand
for short-term Treasuries did affect the yield and the price appreciation of
the Fund. Because yield and price move in opposite directions, in the face of
greater demand, the price of the securities we already owned went up, which
brought down the yield of the Fund.
WHAT DOES THE U.S. BUDGET SURPLUS MEAN FOR TREASURIES?
The U.S. budget surplus will probably decrease the amount of outstanding
Treasury debt because the government may not replace maturing old issues with
the same number of new issues. This decrease should not materially affect the
Fund. Two-year Treasury notes are generally easy for the government to sell
because there are many regular buyers. The relatively short two-year maturity
also allows the U.S. Treasury to be flexible in managing the amount of
outstanding debt. Some of the inflows into Treasuries may leave as equity
markets improve. Over the long term, though, many investors realize they may
need a lower-volatility asset in their portfolios, such as this Fund, to temper
the volatility of the stock market.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
In 1998, the Consumer Price Index rose just 1.6%, its lowest annual increase
since 1986, and unemployment is now at a 28-year low. Clearly, the U.S. economy
is still showing steady growth, and there is little evidence to suggest that
this growth will either accelerate or decelerate rapidly. Therefore, we believe
interest rates should remain fairly steady. But because many foreign economies
are slowing, we think overseas interest rates will probably continue to fall.
Based on these factors, U.S. Treasuries should keep seeing demand from both
domestic and foreign investors in 1999 because U.S. Treasuries offer investors
what we believe is the highest quality, most liquid vehicle available in the
financial markets.
================================================================================
TOTAL NET ASSETS PARALLEL CAPITAL FLIGHT
7/31/98-1/31/99
- --------------------------------------------------------------------------------
(Line Chart)
7/31/98 $ 343,907,751.00
8/31/98 $ 359,467,579.00
9/30/98 $ 437,541,244.00
10/31/98 $ 398,302,306.00
11/30/98 $ 392,656,647.00
12/31/98 $ 428,425,730.00
1/31/99 $ 419,440,064.00
This chart illustrates how 1998's "flight to quality and liquidity" paralleled
total net asset levels in the Fund. Notice that during the height of the
markets' volatility (August-September), total net assets in the Fund jumped as
the demand for Treasuries increased. When the markets calmed, demand for
Treasuries lessened as investors shifted back into equities. This pattern was
reflected in the overall Treasury market as well.
================================================================================
--------------------------------
OVER THE LONG TERM . . .
MANY INVESTORS REALIZE THEY MAY
NEED A LOWER-VOLATILITY ASSET IN THEIR
PORTFOLIOS . . . TO TEMPER THE VOLATILITY
OF THE STOCK MARKET.
--------------------------------
See important Fund and index disclosures inside front cover.
AIM LIMITED MATURITY TREASURY FUND
3
<PAGE> 6
SEMIANNUAL REPORT / PERFORMANCE
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM LIMITED MATURITY TREASURY FUND VS. BENCHMARKS
1/31/89-1/31/99
- -------------------------------------------------------------------------------
(Line Chart)
AIM Treasury CD Lehman
Limited Maturity
Fund
- -------------------------------------------------------------------------------
1/89 $10,000.00 $10,000.00 $10,000.00
1/90 10,793.00 10,935.00 10,994.00
1/91 11,844.00 11,854.00 12,128.00
1/92 12,970.00 12,540.00 13,334.00
1/93 13,833.00 13,011.00 14,271.00
1/94 14,410.00 13,444.00 14,901.00
1/95 14,632.00 14,164.00 15,205.00
1/96 15,922.00 15,018.00 16,620.00
1/97 16,625.00 15,864.00 17,342.00
1/98 17,690.00 16,796.00 18,507.00
1/99 18,651.00 16,913.00 19,614.00
===============================================================================
PAST PERFORMANCE IS NO GUARANTEE OF COMPARABLE FUTURE RESULTS.
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 1/31/99, including sales charges
10 years 6.43%
5 years 5.10
1 year 4.47*
*5.51%, excluding sales charges
===============================================================================
Sources: Towers Data Systems HYPO--Registered Trademark--, Bloomberg.
Your Fund's total return includes sales charges, expenses and management
fees. For Fund data performance calculations and descriptions of benchmarks
cited in this page, please refer to the inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
===============================================================================
ABOUT THIS CHART
The chart compares your Fund to two benchmark measures: an index and returns on
six-month CDs. An index measures performance of a hypothetical portfolio. It is
important to understand differences between your Fund and these benchmarks.
Your Fund's total return is shown with a sales charge and includes Fund
expenses and management fees. A market index such as the Lehman 1-2 Year U.S.
Government Bond Index is not managed and 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 these
benchmarks is intended to give you a general idea of how your Fund performed
compared to the market.
AIM LIMITED MATURITY TREASURY FUND
4
<PAGE> 7
ANNUAL REPORT / FOR CONSIDERATION
OF FINANCE AND THE FED
A few words from Federal Reserve Board Chairman Alan Greenspan can send the
markets into a frenzy or calm them down.
Why? In 1998, a year of record volatility in stock and bond markets, when
investors and analysts alike seemed genuinely puzzled as to what to do next,
the Federal Reserve Board became a constant in the midst of the unsettling
environment.
WHAT IS THE FED?
The Federal Reserve Board, or "The Fed," consists of seven presidential
appointees including Chairman Greenspan. In addition to overseeing the
country's Federal Reserve System--the central bank of the United
States--members of the Fed serve on the Federal Open Market Committee (FOMC),
which decides monetary policy. Other FOMC members include the chairman of the
New York Federal Reserve Bank and four other FOMC seats that are rotated among
the remaining 11 Federal Reserve Banks.
The FOMC meets eight times a year, and these meetings are always followed
with a great deal of interest because it is here that decisions on monetary
policy are made. Often these decisions involve changes in interest rates.
WHY ARE ADJUSTMENTS TO INTEREST RATES SO CLOSELY FOLLOWED?
Interest rate changes by the Fed are important for several reasons: (1) they
frequently reflect economic trends; (2) they immediately affect bond markets;
(3) they usually affect the stock market because when rates are high, people
tend to be less apt to take on the greater risks of stocks; and (4) they often
have a trickle-down effect.
For example, an interest rate hike was considered during the first half of
1998 when the U.S. economy seemed in danger of overheating and sparking
inflation. A rate hike would have helped slow things down by making borrowing
more expensive. Instead, myriad financial difficulties abroad affected markets
and slowed the U.S. economy enough to persuade the Fed to lower short-term
interest rates. Three rate cuts between late September and mid-November
spurred rallies in the stock market as a whole.
Consumers feel the effect of interest rate adjustments as they trickle down
through the banking system. Rate cuts by the Fed often prompt rate reductions
on home mortgages, car loans, and variable-rate credit cards. Conversely, rate
hikes make all forms of loans more expensive.
Although the Fed does not directly control the financial markets, its
influence over short-term interest rates makes it a potent force.
WHAT ELSE DOES THE FED DO?
The Fed is an integral part of the Federal Reserve System (FRS), created by
Congress in 1913. The FRS includes 12 regional Federal Reserve Banks in New
York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco. A Federal Reserve Bank
o clears checks,
o lends money to banks needing emergency reserves,
o issues currency, and
o holds reserve deposits of member banks.
A bank must hold a percentage of its loans as liquid reserves, meaning
readily available. The Fed decides what this percentage will be and can lower
it to inject more money into the economy or raise it to tighten credit.
While these other functions of the Federal Reserve System do not generate
as many headlines as its interest rate moves, they are crucial to the Fed's
purpose of keeping the nation's banking system safe, flexible and stable.
FED RATE CUTS AND THE DOW
Weekly closes, Dow Jones Industrial Average*
7/3/98-12/31/98
- -------------------------------------------------------------------------------
(Line Chart)
- -------------------------------------------------------------------------------
7/17/98 Dow Reaches New High 9,337.97
8/28/98 Dow's Worst Decline (481.97)
9/29/98 First Rate Cut
10/15/98 Second Rate Cut
11/17/98 Third Rate Cut
12/31/98 Dow Closes at 9,181.43
===============================================================================
This graph shows the weekly closing levels for the Dow from July 3 through
December 31, 1998. While the Fed does not control the Dow, which is affected by
innumerable factors, its influence is clearly reflected in the index's
behavior.
* The Dow Jones Industrial Average (the Dow) is a price-weighted
average of 30 actively traded primarily industrial stocks.
AIM LIMITED MATURITY TREASURY FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
JANUARY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
MATURITY (000s) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
U.S. TREASURY NOTES-98.60%
5.50% 02/29/00 $ 33,200 $ 33,499,132
- -------------------------------------------------------------------------------------------------
5.50% 03/31/00 34,743 35,078,617
- -------------------------------------------------------------------------------------------------
5.625% 04/30/00 34,700 35,105,990
- -------------------------------------------------------------------------------------------------
5.50% 05/31/00 34,700 35,082,394
- -------------------------------------------------------------------------------------------------
5.375% 06/30/00 34,540 34,883,673
- -------------------------------------------------------------------------------------------------
5.375% 07/31/00 34,700 35,067,126
- -------------------------------------------------------------------------------------------------
5.125% 08/31/00 34,830 35,085,652
- -------------------------------------------------------------------------------------------------
4.50% 09/30/00 34,900 34,825,314
- -------------------------------------------------------------------------------------------------
4.00% 10/31/00 34,960 34,597,465
- -------------------------------------------------------------------------------------------------
4.625% 11/30/00 34,000 34,005,440
- -------------------------------------------------------------------------------------------------
4.625% 12/31/00 34,500 34,518,630
- -------------------------------------------------------------------------------------------------
4.50% 01/31/01 35,000 34,956,250
- -------------------------------------------------------------------------------------------------
Total U. S. Treasury Securities (Cost $414,559,460) 416,705,683
=================================================================================================
TOTAL INVESTMENTS-98.60% 416,705,683
- -------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.40% 5,926,765
- -------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $422,632,448
=================================================================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999
(Unaudited)
ASSETS:
Investments, at market value (cost
$414,559,460) $416,705,683
- -------------------------------------------------------
Cash 413,218
- -------------------------------------------------------
Receivables for:
Investments sold 31,585,010
- -------------------------------------------------------
Fund shares sold 4,680,983
- -------------------------------------------------------
Interest 6,275,765
- -------------------------------------------------------
Investment in deferred compensation plan 29,778
- -------------------------------------------------------
Other assets 73,562
- -------------------------------------------------------
Total assets 459,763,999
- -------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,963,751
- -------------------------------------------------------
Fund shares reacquired 1,220,816
- -------------------------------------------------------
Dividends 492,295
- -------------------------------------------------------
Deferred compensation 29,778
- -------------------------------------------------------
Accrued advisory fees 71,140
- -------------------------------------------------------
Accrued distribution fees 74,861
- -------------------------------------------------------
Accrued transfer agent fees 68,911
- -------------------------------------------------------
Accrued operating expenses 209,999
- -------------------------------------------------------
Total liabilities 37,131,551
- -------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $422,632,448
=======================================================
NET ASSETS:
Class A $402,107,015
=======================================================
Institutional Class $ 20,525,433
=======================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 39,610,083
=======================================================
Institutional Class 2,021,882
=======================================================
Class A:
Net asset value and redemption price
per share $ 10.15
- -------------------------------------------------------
Offering price per share:
(Net asset value of $10.15
divided by 99.00%) $ 10.25
=======================================================
Institutional Class:
Net asset value and offering price per
share $ 10.15
=======================================================
STATEMENT OF OPERATIONS
For the six months ended January 31, 1999
(Unaudited)
INVESTMENT INCOME:
Interest $11,380,508
- -------------------------------------------------------
EXPENSES:
Advisory fees 431,775
- -------------------------------------------------------
Administrative services fees 33,132
- -------------------------------------------------------
Transfer agent fees-Class A 259,598
- -------------------------------------------------------
Transfer agent fees-Institutional Class 3,905
- -------------------------------------------------------
Distribution fees-Class A (See Note 2) 292,229
- -------------------------------------------------------
Other 95,104
- -------------------------------------------------------
Total expenses 1,115,743
- -------------------------------------------------------
Less: Expenses paid indirectly (2,094)
- -------------------------------------------------------
Net expenses 1,113,649
- -------------------------------------------------------
Net investment income 10,266,859
- -------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment
securities 1,870,966
- -------------------------------------------------------
Net unrealized appreciation of investment
securities 1,445,705
- -------------------------------------------------------
Net gain from investment securities 3,316,671
- -------------------------------------------------------
Net increase in net assets resulting from
operations $13,583,530
=======================================================
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended January 31, 1999
and the year ended July 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,266,859 $ 22,758,619
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 1,870,966 1,855,056
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 1,445,705 (1,793,413)
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 13,583,530 22,820,262
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (9,240,724) (20,003,878)
- ------------------------------------------------------------------------------------------
Institutional Class (1,055,543) (2,754,741)
- ------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 53,938,118 (44,498,315)
- ------------------------------------------------------------------------------------------
Institutional Class (30,557,480) 1,723,996
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 26,667,901 (42,712,676)
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 395,964,547 438,677,223
- ------------------------------------------------------------------------------------------
End of period $422,632,448 $395,964,547
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $424,032,642 $400,652,004
- ------------------------------------------------------------------------------------------
Undistributed net investment income 59,434 88,842
- ------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (3,605,851) (5,476,817)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 2,146,223 700,518
- ------------------------------------------------------------------------------------------
$422,632,448 $395,964,547
==========================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
January 31, 1999
(Unaudited)
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 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 $5,440,638, 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, 1999,
the Fund reimbursed AIM $33,132 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 six months ended January 31, 1999,
the Fund paid AFS $101,377 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,
9
<PAGE> 12
including asset-based sales charges, that may be paid by the Fund. During the
six months ended January 31, 1999, the Fund paid AIM Distributors $292,229 as
compensation under the Plan.
AIM Distributors received commissions of $33,439 during the six months ended
January 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 six months ended January 31, 1999, the Fund paid legal fees of
$2,107 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 $2,094 under an expense offset arrangement which resulted in a reduction
of the Fund's total expenses of $2,094 during the six months ended January 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) $1,000,000,000 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, 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 0.05% 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, 1999 was
$376,570,142 and $355,291,326, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of January 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 2,458,917
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (319,641)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 2,139,276
=========================================================
Cost of investments for tax purposes is $414,566,407.
</TABLE>
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, 1999 and
the year ended July 31, 1998 were as follows:
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 31,262,155 $ 317,899,291 22,832,451 $ 229,871,705
- --------------------------------------------------------------------------------
Institutional Class 194,716 1,977,974 1,450,340 14,604,304
- --------------------------------------------------------------------------------
Issued as a
reinvestment of
dividends:
Class A 761,506 7,746,222 1,671,295 16,825,885
- --------------------------------------------------------------------------------
Institutional Class 1,350 13,707 4,391 44,205
- --------------------------------------------------------------------------------
Reacquired:
Class A (26,713,580) (271,707,395) (28,922,414) (291,195,905)
- --------------------------------------------------------------------------------
Institutional Class (3,200,610) (32,549,161) (1,281,958) (12,924,513)
- --------------------------------------------------------------------------------
2,305,537 $ 23,380,638 (4,245,895) $ (42,774,319)
================================================================================
</TABLE>
10
<PAGE> 13
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the six months ended January 31, 1999, each of the years in the four-year
period ended July 31, 1998, and the eleven months ended July 31, 1994.
<TABLE>
<CAPTION>
JULY 31,
JANUARY 31, -----------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.07 $ 10.07 $ 9.97 $ 10.03 $ 9.96 $ 10.24
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.24 0.53 0.54 0.55 0.54 0.35
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.08 -- 0.10 (0.06) 0.07 (0.20)
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Total from investment operations 0.32 0.53 0.64 0.49 0.61 0.15
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.24) (0.53) (0.54) (0.55) (0.54) (0.35)
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- -- (0.08)
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Total distributions (0.24) (0.53) (0.54) (0.55) (0.54) (0.43)
- ------------------------------------------------------------ -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.15 $ 10.07 $ 10.07 $ 9.97 $ 10.03 $ 9.96
============================================================ ======== ======== ======== ======== ======== ========
Total return(a) 3.23% 5.42% 6.55% 4.98% 6.36% 1.52%
============================================================ ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $402,107 $345,355 $389,812 $359,048 $274,480 $329,942
============================================================ ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.54%(b) 0.54% 0.54% 0.54% 0.51% 0.47%(c)
============================================================ ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 4.73%(b) 5.29% 5.35% 5.45% 5.44% 3.75%(c)
============================================================ ======== ======== ======== ======== ======== ========
Portfolio turnover rate 82% 133% 130% 117% 120% 120%
============================================================ ======== ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $386,461,670.
(c) Annualized.
11
<PAGE> 14
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox
President, Mercantile Bankshares Vice President Bank of New York
90 Washington Street, 11th Floor
Jack Fields Karen Dunn Kelley New York, NY 10286
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Mary J. Benson
of the U.S. House of Representatives Assistant Vice President and Ballard Spahr
Assistant Treasurer Andrews & Ingersoll, LLP
Carl Frischling 1735 Market Street
Partner Sheri Morris Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP Assistant Vice President and
Assistant Treasurer COUNSEL TO THE TRUSTEES
Robert H. Graham
President and Chief Executive Officer Renee A. Friedli Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
Prema Mathai-Davis P. Michelle Grace
Chief Executive Officer, YWCA of the U.S.A., Assistant Secretary DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors, Jeffrey H. Kupor A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
Nancy L. Martin Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney
Ofelia M. Mayo
Ian W. Robinson Assistant Secretary
Consultant; Formerly Executive
Vice President and Lisa A. Moss
Chief Financial Officer Assistant Secretary
Bell Atlantic Management
Services, Inc. Kathleen J. Pflueger
Assistant Secretary
Louis S. Sklar
Executive Vice President Samuel D. Sirko
Hines Interests Assistant Secretary
Limited Partnership
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</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. Certain restrictions
apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your
Individual Retirement Account (IRA), Roth 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-hour-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
The AIM Family of Funds--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund(1) AIM Money Market Fund provided leadership in the mutual fund
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund industry since 1976 and managed
AIM Capital Development Fund approximately $109 billion in assets
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS for more than 6.2 million shareholders,
AIM Mid Cap Equity Fund(2), (A) AIM Advisor International Value Fund including individual investors,
AIM Mid Cap Opportunities Fund AIM Asian Growth Fund corporate clients, and financial
AIM Select Growth Fund (3) AIM Developing Markets Fund(2) institutions, as of December 31, 1998.
AIM Small Cap Growth Fund(2), (B) AIM Europe Growth Fund(2) The AIM Family of Funds -- registered
AIM Small Cap Opportunities Fund AIM European Development Fund trademark is distributed nationwide,
AIM Value Fund AIM International Equity Fund and AIM today is the 10th-largest
AIM Weingarten Fund AIM Japan Growth Fund(2) mutual fund complex in the U.S. in
AIM Latin American Growth Fund(2) assets under management,
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(2) according to Strategic Insight, an
AIM Advisor Flex Fund independent mutual fund monitor.
AIM Advisor Large Cap Value Fund GLOBAL GROWTH FUNDS
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GROWTH & INCOME FUNDS
AIM Charter Fund
AIM Global Growth & Income Fund(2)
INCOME FUNDS AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM High Yield Fund II AIM Emerging Markets Debt Fund(2), (D)
AIM Income Fund AIM Global Government Income Fund(2)
AIM Intermediate Government Fund AIM Global Income Fund
AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(2)
TAX-FREE INCOME FUNDS THEME FUNDS
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund(2)
AIM Municipal Bond Fund AIM Global Financial Services Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
</TABLE>
(1)AIM Aggressive Growth Fund reopened to new investors November 16, 1998.
(2)Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3)On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A)On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B)On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C)On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D)On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E)On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es).
Please read the prospectus(es) carefully before you invest or send money.
