<PAGE> 1
ANNUAL REPORT / JULY 31 2000
AIM LIMITED MATURITY TREASURY FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
ALEXANDER HAMILTON BY JOHN TRUMBULL
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 WHICH 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 in U.S. Treasury notes with maturities of three years or less.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Limited Maturity Treasury Fund's performance figures are historical,
and they reflect the reinvestment of distributions and changes in net asset
value. When sales charges are included in performance figures, those
figures reflect the maximum 1.00% sales charge.
o During the fiscal year ended 7/31/00, the fund paid distributions of $0.51
per share.
o The 30-day yield is calculated using 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 annualized.
o The fund's average annual total returns as of the close of the reporting
period are shown in a table on the performance history page that follows.
In addition, industry regulations require us to provide average annual
total returns (including sales charges) as of 6/30/00, the most recent
calendar quarter-end, which were: one year, 3.28%; five years, 4.93%; 10
years, 5.68%; inception (12/15/87), 6.10%.
o Government securities (such as U.S. Treasury bills, notes and bonds) offer
a high degree of safety, and they 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 fund's investment return and principal value will fluctuate, so 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 that the fund will continue to hold any particular security.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lehman 1-2 Year U.S. Government Bond Index, which represents
the performance of short-term (maturing in one to two years) U.S. Treasury
and U.S. government agency securities, is compiled by Lehman Brothers, a
well-known global investment bank.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is widely regarded as representative of the performance of the overall U.S.
stock market.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they 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 SOME 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
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
When we started AIM in 1976, we had only a table, two chairs
[PHOTO OF and a telephone. At the time, Bob Graham, Gary Crum and I
Charles T. had the idea of creating a mutual fund company that put
Bauer people first. Our slogan, "people are the product," means
Chairman of that people--our employees and our investors--are our
Board of company.
THE FUND Almost a quarter-century later, we've grown to more than
APPEARS HERE] eight million investors, with $176 billion in assets under
management. Over that time, the industry as a whole has
[PHOTO OF grown from $51 billion in assets to more than $7 trillion
Robert H. today. I never dreamed we would see such phenomenal growth.
Graham You are the main reason for our success, and I want you to
APPEARS HERE] know how much I appreciate your loyalty and trust over the
past 24 years.
Usually in this letter I review market activity during
the period covered by the report. This time, I'd just like
to say thank you. I am retiring as chairman of the AIM Funds effective September
30, and as chairman of AIM effective December 31, 2000. Bob Graham, whose
picture appears under mine, will succeed me as AIM's chairman and chairman of
the AIM Funds. Gary Crum will remain president of A I M Capital Management,
Inc., leading our investment division. I am enormously proud to leave AIM in
such capable hands.
I'm also very proud of our team of employees, now more than 2,500 strong.
Because of their collective commitment to excellence and ethical business
practices, AIM has earned the trust of investors and financial advisors alike.
And every employee, from portfolio managers to client services representatives,
is dedicated to serving our shareholders.
Rest assured that nothing at AIM will change because of my retirement. You
can still depend on this company to manage your money responsibly and provide
you with top-notch service. As chairman of AIM and chairman of the AIM Funds,
Bob is committed to preserving the things that have made AIM great in the past
and positioning it to succeed in the future. And Gary is dedicated to
maintaining the quality and long-term performance you've come to expect from
AIM.
In the pages that follow, the managers of your fund comment on recent market
activity, how they have managed your fund over the past year and their outlook
for the coming months. We trust you will find their comments helpful.
If you have any questions or comments, please contact us through our Web
site, www.aimfunds.com, or call our Client Services department at 800-959-4246
during normal business hours. Information about your account is available at our
Web site and on our automated AIM Investor Line, 800-246-5463.
Thank you again for the support and trust you've shown us. I feel privileged
to have helped you with your financial goals, and I wish you success in all your
endeavors.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
AIM LIMITED MATURITY TREASURY FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND RELISHES REVERSAL OF MARKET SENTIMENT
HOW DID AIM LIMITED MATURITY TREASURY FUND PERFORM DURING THE FISCAL YEAR?
In a year that saw many investors chase performance and then backpedal when the
market got bumpy, the fund remained a bastion of stability, with a fairly low
level of volatility compared to the broader market. The fund's net asset value
(NAV) per share remained between $9.89 and $10.04 during the reporting period.
The fund continued to provide steady, attractive income during the fiscal
year. As of July 31, 2000, the 30-day distribution rate at NAV was 5.60%, and
the 30-day SEC yield at maximum offering price was 5.89%.
The fund finished the fiscal year with a total return of 4.50%. (This
return is at NAV, which does not include sales charges.) Comparatively, the
Lehman 1-2 Year U.S. Government Bond Index had a return of 5.21% for the
reporting period.
It's worth noting that while in 1999 many widely reported stock indexes,
such as the S&P 500, far outperformed fixed-income markets, the new year has
been a different story. For the first seven months of 2000, the fund had a
total return of 3.18% (at NAV), while the S&P 500 had a total return of -1.98%.
This performance divergence is a testament to the wisdom of diversification
across different asset types.
WHAT WERE MARKET CONDITIONS LIKE OVER THE PAST YEAR?
During much of 1999, technology dominated markets overall, even though the
sector's eye-popping returns did not translate into extraordinary performance
across the broader market. Indeed, for fixed-income markets, 1999 was one of the
worst years on record.
But the new year brought with it unprecedented stock-market volatility and
a major shift in market sentiment when some companies' sky-high valuations came
into question. Volatility drove many investors to flee the stock market and to
sit on the sidelines until things calmed down somewhat. This environment was a
boon for short-term fixed-income securities as investors shifted money into
what are traditionally seen as more stable, highly liquid investments.
Also shaking market confidence were interest-rate hikes implemented by the
Federal Reserve Board (the Fed) and investors' concerns regarding potential
inflation. Since June 1999, the Fed has raised interest rates six times--a
total of 175 basis points (1.75%)--in an effort to cool what it feared was a
too-hot growth rate for the U.S. economy. Mixed signals from leading economic
indicators made it difficult to determine when the Fed would finish its
tightening cycle.
Indeed, while employment data released just days after the end of the
reporting period were weaker than expected, recent data showed the economy
growing by more than 5% during the second quarter of the year. However, over
the past year market participants have increasingly accepted that the Fed would
successfully control inflation without bringing the economy to a screeching
halt. This positive outlook for Fed policy has resulted in a much healthier
bond market in 2000 than in 1999.
HOW DID YOU MANAGE THE FUND, GIVEN THE MARKET ENVIRONMENT?
We continued to abide by our proven strategy of buying two-year Treasury notes
and selling them when they have one year left to maturity. This gives the
fund's portfolio a constant average maturity of a year and a half. Our strategy
has advantages both when interest rates are rising and when they are falling.
-------------------------------------
VOLATILITY DROVE MANY INVESTORS
TO FLEE THE STOCK MARKET AND TO
SIT ON THE SIDELINES...
-------------------------------------
YIELD CURVE-U.S. TREASURY SECURITIES
As of 7/31/00, with time to maturity
===============================================================================
LINE CHART
3-6 months 6.25%
6.43%
1-2 years 6.05%
6.28%
(Area of Investment Focus)
5 years 6.15%
10 years 6.04%
30 years 5.79%
Sources: Bloomberg, Lehman Brothers
===============================================================================
See important fund and index disclosures inside front cover.
AIM LIMITED MATURITY TREASURY FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
When interest rates are rising, the prices of the two-year notes in our
portfolio tend to fall less than those of longer issues, which may also lessen
the impact of rising rates on the fund's NAV. When interest rates are falling,
the prices of the notes in which we invest rise, and because we reinvest
gradually over time, the fund's yield should not fall as quickly as the yield
of the broader market in such an environment.
HOW HAS THE TREASURY'S BUYBACK PROGRAM AFFECTED YIELDS?
During the first quarter of 2000, the U.S. Treasury announced that it will
issue fewer securities across all maturity spectrums, and it has also begun
buying back its own debt. The buyback program has been spurred by consecutive
U.S. government budget surpluses in 1998 and 1999, the first consecutive
surpluses since the 1950s. The auction cuts and the buyback program have driven
yields lower because of the supply impact--lower supply means higher prices,
and higher prices mean lower yields.
Two-year Treasury note yields reached a high of 6.93% earlier in 2000, but
the yield dropped to 6.28% by fiscal year-end on the heels of both the Fed's
perceived success at combating inflation and the Treasury supply story. Because
the buyback program has been concentrated in longer maturities (15+ years)
where auction cuts have been the most dramatic, those yields have dropped and
formed an inverted yield curve--with long-term yields below short-term yields.
(See chart at left.)
In years past, such a yield-curve inversion has been seen more as a
harbinger of recession than as a characteristic of a steadily growing economy.
However, all indications are that the current inversion is a reflection of the
changing dynamics of the Treasury market. The Fed also continues to watch
yields carefully, and it has announced that to maintain liquidity without
roiling bond markets, it will concentrate more of its own buying at the short
end of the yield curve, which may bring down those yields eventually.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We know from experience that it takes time for Fed policy to trickle down
through the economy. While we think its inflation-prevention measures have
succeeded thus far, we believe that the Fed remains willing to raise rates
again should the need arise. There have been signs of economic cooling, but
some inflation risks remain because the data are mixed.
Interest rates that really affect the economy--mortgage and corporate
borrowing rates--have risen, and this should begin to slow growth to a rate
that will keep inflation at bay. While no one can say for certain whether the
Fed is finished tightening, we think the Fed has made good inroads into
preventing inflation by slowing--not stopping--the economy, and that should be
beneficial for fixed-income markets and the fund throughout the rest of 2000.
OF FINANCE AND THE FED
The Federal Reserve Board, or "the Fed," consists of seven presidential
appointees including Chairman Alan 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 (the
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.
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.
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.
------------------------------------
THERE HAVE BEEN SIGNS OF ECONOMIC
COOLING, BUT SOME INFLATION RISKS
REMAIN BECAUSE THE DATA ARE MIXED.
------------------------------------
See important fund and index disclosures inside front cover.
AIM LIMITED MATURITY TREASURY FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM LIMITED MATURITY TREASURY FUND VS. BENCHMARK INDEX
7/31/90-7/31/00
(HYPO LINE CHART GRAPHIC)
===============================================================================
AIM Limited Maturity Lehman 1-2 Year
Treasury Fund U.S. Government Bond Index
-------------------------------------------------------------------------------
7/90 $ 9,899.00 $10,000.00
7/91 $10,786.00 $10,961.00
7/92 $11,809.00 $12,043.00
7/93 $12,357.00 $12,649.00
7/94 $12,632.00 $12,984.00
7/95 $13,435.00 $13,870.00
7/96 $13,923.00 $14,634.00
7/97 $15,027.00 $15,656.00
7/98 $15,842.00 $16,591.00
7/99 $16,526.00 $17,415.00
7/00 $17,269.00 $18,320.00
Source: Lehman Brothers
Past performance cannot guarantee comparable future results.
===============================================================================
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
This chart compares your fund to a benchmark index. It is intended to give you
a general idea of how your fund performed compared to this benchmark over the
period 7/31/90 to 7/31/00. It is important to understand the differences
between your fund and this index. An index measures the performance of a
hypothetical portfolio. A market index such as the Lehman 1-2 Year U.S.
Government Bond Index is not managed, incurring 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.
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/00, including sales charges
===============================================================================
Inception (12/15/87) 6.10%
10 Years 5.62
5 Years 4.94
1 Year 3.47*
*4.50% excluding sales charges
===============================================================================
Your fund's total return includes sales charges, expenses and management fees.
For fund performance calculations and a description of the index cited on this
page, please see the inside front cover.
AIM LIMITED MATURITY TREASURY FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT VALUE
(000s)
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-99.01%
U.S. TREASURY NOTES-99.01%
5.50% 08/31/01 $25,100 $ 24,862,554
-------------------------------------------------------------------------------------------------
5.63% 09/30/01 25,100 24,875,857
-------------------------------------------------------------------------------------------------
5.88% 10/31/01 25,100 24,938,356
-------------------------------------------------------------------------------------------------
5.88% 11/30/01 25,100 24,931,328
-------------------------------------------------------------------------------------------------
6.13% 12/31/01 25,100 25,007,632
-------------------------------------------------------------------------------------------------
6.38% 01/31/02 25,100 25,092,470
-------------------------------------------------------------------------------------------------
6.50% 02/28/02 25,100 25,144,427
-------------------------------------------------------------------------------------------------
6.50% 03/31/02 25,100 25,147,188
-------------------------------------------------------------------------------------------------
6.38% 04/30/02 25,100 25,099,247
-------------------------------------------------------------------------------------------------
6.63% 05/31/02 25,100 25,214,707
-------------------------------------------------------------------------------------------------
6.38% 06/30/02 25,100 25,115,562
-------------------------------------------------------------------------------------------------
6.25% 07/31/02 24,100 24,085,058
-------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $299,787,994) 299,514,386
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.01% 299,514,386
-------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.99% 2,999,031
-------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $302,513,417
=================================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost
$299,787,994) $299,514,386
-----------------------------------------------------------
Cash 1,120,488
-----------------------------------------------------------
Receivables for:
-----------------------------------------------------------
Fund shares sold 272,822
-----------------------------------------------------------
Interest 3,873,029
-----------------------------------------------------------
Investment for deferred compensation plan 40,106
-----------------------------------------------------------
Other assets 2,306
-----------------------------------------------------------
Total assets 304,823,137
-----------------------------------------------------------
LIABILITIES:
Payables for:
-----------------------------------------------------------
Fund shares reacquired 1,752,268
-----------------------------------------------------------
Dividends 358,703
-----------------------------------------------------------
Deferred compensation plan 40,106
-----------------------------------------------------------
Accrued advisory fees 48,904
-----------------------------------------------------------
Accrued administrative services fees 5,859
-----------------------------------------------------------
Accrued distribution fees 54,237
-----------------------------------------------------------
Accrued transfer agent fees 39,501
-----------------------------------------------------------
Accrued operating expenses 10,142
-----------------------------------------------------------
Total liabilities 2,309,720
-----------------------------------------------------------
Net assets applicable to shares outstanding $302,513,417
===========================================================
NET ASSETS:
Class A $300,058,098
===========================================================
Institutional Class $ 2,455,319
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 30,115,896
===========================================================
Institutional Class 246,425
===========================================================
Class A :
Net asset value and redemption price per
share $ 9.96
-----------------------------------------------------------
Offering price per share:
(Net asset value of $9.96 divided by
99.00%) $ 10.06
===========================================================
Institutional Class:
Net asset value, redemption price and
offering price per share $ 9.96
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $19,783,947
------------------------------------------------------------
EXPENSES:
Advisory fees 705,741
------------------------------------------------------------
Administrative services fee 80,566
------------------------------------------------------------
Custodian fees 11,079
------------------------------------------------------------
Distribution fees -- Class A 517,076
------------------------------------------------------------
Transfer agent fees -- Class A 444,091
------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,749
------------------------------------------------------------
Trustees' fees 9,224
------------------------------------------------------------
Other 104,612
------------------------------------------------------------
Total expenses 1,875,138
------------------------------------------------------------
Less: Expenses paid indirectly (3,920)
------------------------------------------------------------
Net expenses 1,871,218
------------------------------------------------------------
Net investment income 17,912,729
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (4,797,259)
------------------------------------------------------------
Change in net unrealized appreciation of
investment securities 2,049,768
------------------------------------------------------------
Net gain (loss) on investment securities (2,747,491)
------------------------------------------------------------
Net increase in net assets resulting from
operations $15,165,238
===========================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
For the years ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,912,729 $ 19,679,426
-------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (4,797,259) 1,359,439
-------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 2,049,768 (3,023,894)
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,165,238 18,014,971
-------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (17,525,848) (18,245,067)
-------------------------------------------------------------------------------------------
Institutional Class (416,635) (1,523,201)
-------------------------------------------------------------------------------------------
Share transactions-net:
Class A (87,282,579) 46,655,684
-------------------------------------------------------------------------------------------
Institutional Class (14,575,249) (33,718,444)
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (104,635,073) 11,183,943
-------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 407,148,490 395,964,547
-------------------------------------------------------------------------------------------
End of year $ 302,513,417 $407,148,490
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 311,671,908 $413,559,490
-------------------------------------------------------------------------------------------
Undistributed net investment income 29,754 29,754
-------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (8,914,637) (4,117,378)
-------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (273,608) (2,323,376)
-------------------------------------------------------------------------------------------
$ 302,513,417 $407,148,490
===========================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
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 company consisting of seven separate
series portfolios each having an unlimited number of shares of beneficial
interests. The Fund currently offers two different classes of shares: 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 Fund's investment objective is to seek liquidity with minimum
fluctuation in principal value and, consistent with this investment objective,
the highest total return achievable.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts 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 any of the above
methods are valued based upon quotes furnished by independent sources and are
valued the mean between the last bid and asked prices. 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. Short-term obligations having 60 days or less to maturity 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. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income, adjusted for amortization of discounts on investments, is
recorded on the accrual basis from settlement date. It is the policy of the
Fund not to amortize bond premiums for financial reporting purposes.
On July 31, 2000 undistributed net investment income was increased by
$29,754 and additional paid-in capital was decreased by $29,754 as a result
of reclassifications of nondeductible organizational expenses. Net assets of
the Fund were unaffected by the reclassifications discussed above.
C. Distributions -- It is the policy of the Fund to declare dividends from net
investment income daily and pay monthly. Distributions from net realized
capital gains, if any, are generally paid annually and recorded on
ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for Federal income tax purposes.
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 of $4,224,162 as of July 31, 2000 which may be carried forward
to offset future taxable gains, if any, which expires in varying increments,
if not previously utilized, in the year 2008.
E. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.20% on
the first $500 million of the Fund's average daily net assets, plus 0.175% on
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. For the year ended July 31, 2000, AIM was paid
$80,566 for such services.
The Fund, pursuant to a transfer agency 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. For the year ended July 31, 2000, AFS was paid
$151,859 for such services.
The Trust has entered into master distribution agreements 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 with respect to the
Fund's Class A shares. The Fund, pursuant to the Plans, pays AIM Distributors
compensation at the annual rate of 0.15% of the Fund's average daily net assets
of Class A shares. The Plan is
8
<PAGE> 11
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 the appropriate class of 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 sales charges,
including asset-based sales charges that may be paid by the Fund. For the year
ended July 31, 2000, the Fund paid AIM Distributors $517,076 as compensation
under the Plan.
AIM Distributors received commissions of $57,087 from sales of the Class A
shares of the Fund during the year ended July 31, 2000. Such commissions are not
an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS, FMC and AIM Distributors.
During the year ended July 31, 2000, the Fund paid legal fees of $3,294 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended July 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $3,920 under expense offset
arrangements which resulted in a reduction of the Fund's total expenses of
$3,920.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, in mutual fund shares in accordance with a deferred compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A.. 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. During the year ended July 31,
2000, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
9
<PAGE> 12
NOTE 6-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, 2000 was
$431,234,972 and $537,432,998, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of July 31, 2000 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 395,575
------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (874,560)
------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(478,985)
========================================================================
Cost of investments for tax purposes is $299,993,371.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2000 and 1999 were
as follows:
<TABLE>
<CAPTION>
2000 1999
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 20,491,334 $ 204,290,029 66,719,952 $675,218,081
----------------------------------------------------------------------------------------------------------------------
Institutional Class 191,454 1,910,678 489,034 4,947,727
----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,468,058 14,627,764 1,524,802 15,430,990
----------------------------------------------------------------------------------------------------------------------
Institutional Class 891 11,992 1,998 20,239
----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (30,726,141) (306,200,372) (63,662,111) (643,993,387)
----------------------------------------------------------------------------------------------------------------------
Institutional Class (1,653,776) (16,497,919) (3,809,602) (38,686,410)
----------------------------------------------------------------------------------------------------------------------
(10,228,180) $(101,857,828) 1,264,073 $ 12,937,240
======================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.03 $ 10.07 $ 10.07 $ 9.97 $ 10.03
------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.51 0.47 0.53 0.54 0.55
------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.07) (0.04) -- 0.10 (0.06)
------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.44 0.43 0.53 0.64 0.49
------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.51) (0.47) (0.53) (0.54) (0.55)
------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 9.96 $ 10.03 $ 10.07 $ 10.07 $ 9.97
============================================================ ======== ======== ======== ======== ========
Total return(a) 4.50% 4.32% 5.42% 6.55% 4.98%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $300,058 $390,018 $345,355 $389,812 $359,048
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.54%(b) 0.54% 0.54% 0.54% 0.54%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 5.07%(b) 4.61% 5.29% 5.35% 5.45%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 122% 184% 133% 130% 117%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $344,717,229.
10
<PAGE> 13
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, 2000, and the
related statement of operations for the year then ended,
the statements of changes in net assets for each of the
years in the two-year period then ended, and the
financial highlights for each of the years in the
five-year 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 auditing
standards generally accepted in the United States of
America. 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, 2000, by correspondence with the
custodian. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Limited
Maturity Treasury Fund as of July 31, 2000, the results
of its operations for the year then ended, the changes
in its net assets for each of the years in the two-year
period then ended and the financial highlights for each
of the years in the five-year period then ended, in
conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
September 1, 2000
Houston, Texas
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
Director and 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; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Melville B. Cox Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman, CUSTODIAN
President and Chief Operating Officer, Karen Dunn Kelley
Mercantile-Safe Deposit & Trust Co.; and Vice President The Bank of New York
President, Mercantile Bankshares 90 Washington Street, 11th Floor
Mary J. Benson New York, NY 10286
Jack Fields Assistant Vice President and
Chief Executive Officer Assistant Treasurer COUNSEL TO THE FUND
Texana Global, Inc. and
Twenty First Century Group, Inc.; Sheri Morris Ballard Spahr
Formerly Member Assistant Vice President and Andrews & Ingersoll, LLP
of the U.S. House of Representatives Assistant Treasurer 1735 Market Street
Philadelphia, PA 19103
Carl Frischling Renee A. Friedli
Partner Assistant Secretary COUNSEL TO THE TRUSTEES
Kramer, Levin, Naftalis & Frankel LLP
P. Michelle Grace Kramer, Levin, Naftalis & Frankel LLP
Robert H. Graham Assistant Secretary 919 Third Avenue
Director, President and Chief Executive Officer New York, NY 10022
A I M Management Group Inc. Nancy L. Martin
Assistant Secretary DISTRIBUTOR
Prema Mathai-Davis
Formerly, Chief Executive Officer, YWCA of the U.S.A. Ofelia M. Mayo A I M Distributors, Inc.
Assistant Secretary 11 Greenway Plaza
Lewis F. Pennock Suite 100
Attorney Lisa A. Moss Houston, TX 77046
Assistant Secretary
Louis S. Sklar AUDITORS
Executive Vice President, Kathleen J. Pflueger
Development and Operations, Assistant Secretary KPMG LLP
Hines Interests 700 Louisiana
Limited Partnership Houston, TX 77002
</TABLE>
REQUIRED STATE INCOME TAX INFORMATION (UNAUDITED)
Of the ordinary dividends paid, 100% was derived from U.S. Treasury Obligations.
12
<PAGE> 15
------------------------------------
OUR AUTOMATED
AIM INVESTOR LINE,
800-246-5463,
PROVIDES CURRENT ACCOUNT
INFORMATION AND THE PRICE,
YIELD AND TOTAL RETURN ON
ALL AIM FUNDS 24 HOURS A
DAY. YOU CAN ALSO ORDER A
YEAR-TO-DATE STATEMENT OF
YOUR ACCOUNT.
------------------------------------
AIM FUNDS--Registered Trademark-- MAKES INVESTING EASY
o AIM Bank Connection(SM). You can invest in your AIM account in amounts from
$50 to $100,000 without writing a check. Once you set up this convenient
feature, AIM will draw the funds from your pre-authorized checking account
at your request.
o AIM Internet Connect(SM). Sign up for this service and you can buy, redeem
or exchange shares of AIM funds in your AIM account simply by visiting our
Web site at www.aimfunds.com. For a retirement account, such as an IRA or a
403(b), only exchanges are allowed over the Internet because of the
tax-reporting and record-keeping requirements these accounts involve.
o Automatic reinvestment of dividends and/or capital gains. You can receive
distributions in cash, or you can reinvest them in your account without
paying a sales charge. Over time, the power of compounding can
significantly increase the value of your account.
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AIM fund to withdraw a specified amount, minimum $50, from your bank
account on a regular schedule.
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the New York Stock Exchange is open. The value of the shares may be more or
less than their original cost depending on market conditions.
o Exchange privilege. As your investment goals change, you may exchange part
or all of your shares of one fund for shares of a different AIM fund within
the same share class. You may make up to 10 such exchanges per calendar
year.
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education IRAs, among others.
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information. For account information, contact us at
[email protected].
o www.aimfunds.com. Our award-winning Web site provides account information,
shareholder education and fund-performance information.
13
<PAGE> 16
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
EQUITY FUNDS
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has provided
MORE AGGRESSIVE MORE AGGRESSIVE leadership in the mutual fund industry
AIM Small Cap Opportunities(1) AIM Latin American Growth since 1976 and managed approximately
AIM Mid Cap Opportunities(2) AIM Developing Markets $176 billion in assets for more than
AIM Large Cap Opportunities(6) AIM European Small Company 8 million shareholders, including
AIM Emerging Growth AIM Asian Growth individual investors, corporate clients and
AIM Small Cap Growth(3) AIM Japan Growth financial institutions, as of June 30, 2000.
AIM Aggressive Growth AIM International Emerging Growth The AIM Family of Funds--Registered Trademark--
AIM Mid Cap Growth AIM European Development is distributed nationwide, and AIM today is the eighth-
AIM Small Cap Equity AIM Euroland Growth largest mutual fund complex in the
AIM Capital Development AIM Global Aggressive Growth United States in assets under management,
AIM Constellation(4) AIM International Equity according to Strategic Insight, an
AIM Dent Demographic Trends AIM Advisor International Value independent mutual fund monitor.
AIM Select Growth AIM Global Trends AIM is a subsidiary of AMVESCAP PLC,
AIM Large Cap Growth AIM Global Growth one of the world's largest independent
AIM Weingarten MORE CONSERVATIVE financial services companies with $389
AIM Mid Cap Equity billion in assets under management as of
AIM Value II SECTOR EQUITY FUNDS June 30, 2000.
AIM Charter MORE AGGRESSIVE
AIM Value AIM New Technology
AIM Blue Chip AIM Global Telecommunications and Technology
AIM Basic Value AIM Global Resources
AIM Large Cap Basic Value AIM Global Financial Services
AIM Balanced AIM Global Health Care
AIM Advisor Flex AIM Global Consumer Products and Services
MORE CONSERVATIVE AIM Global Infrastructure
AIM Advisor Real Estate
AIM Global Utilities
MORE CONSERVATIVE
FIXED - INCOME FUNDS
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE
AIM Strategic Income AIM High Income Municipal
AIM High Yield II AIM Tax-Exempt Bond of Connecticut
AIM High Yield AIM Municipal Bond
AIM Income AIM Tax-Free Intermediate
AIM Global Income AIM Tax-Exempt Cash
AIM Floating Rate(5) MORE CONSERVATIVE
AIM Intermediate Government
AIM Limited Maturity Treasury
AIM Money Market
MORE CONSERVATIVE
</TABLE>
The AIM Risk Spectrum illustrates equity and fixed-income funds from more
aggressive to more conservative. When assessing the degree of risk, three
factors were considered: the funds' portfolio holdings, volatility patterns over
time and diversification permitted within the fund. Fund rankings are relative
to one another within The AIM Family of Funds--Registered Trademark--and should
not be compared with other investments. There is no guarantee that any one AIM
fund will be less volatile than any other. (1) AIM Small Cap Opportunities Fund
closed to new investors Nov. 4, 1999. (2) AIM Mid Cap Opportunities Fund closed
to new investors March 21, 2000. (3) AIM Small Cap Growth Fund closed to new
investors Nov. 8, 1999. (4) AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations Dec. 1, 1999.
(5) AIM Floating Rate Fund was restructured to offer multiple share classes
April 3, 2000. Existing shares were converted to Class B shares, and Class C
shares commenced offering. (6) AIM Large Cap Opportunities Fund will close to
new investors Sept. 29, 2000, or when the fund reaches a total net asset value
of $750 million, whichever occurs first.
FOR MORE COMPLETE INFORMATION ABOUT ANY AIM FUND, INCLUDING SALES CHARGES
AND EXPENSES, OBTAIN THE APPROPRIATE PROSPECTUS(ES) FROM YOUR FINANCIAL
ADVISOR. PLEASE READ THE PROSPECTUS(ES) CAREFULLY BEFORE YOU INVEST OR SEND
MONEY. This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a currently effective fund prospectus. If
used as sales material after Oct. 20, 2000, this report must be accompanied by
a fund Performance & Commentary or by an AIM Quarterly Review of Performance
for the most recent quarter end.
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INVEST WITH DISCIPLINE
--Registered Trademark--
A I M Distributors, Inc. LTD-AR-1
