As filed with the Securities and Exchange Commission on July 7, 2003
1933 Act Reg. No. 33-39519
1940 Act Reg. No. 811-5686
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 22 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 26 X
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(Check appropriate box or boxes.)
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Copy to:
Stephen Rimes, Esquire Martha J. Hays, Esquire A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP 11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599 |
It is proposed that this filing will become effective (check appropriate box)
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
AIM HIGH YIELD FUND
July 21, 2003
Prospectus
AIM High Yield Fund seeks to achieve a high level of
current income.
This prospectus contains important information about the Class A, B, C and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares -- Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
Investments in the fund:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
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INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-4 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-10 Taxes A-11 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
The fund's investment objective is to achieve a high level of current income. The fund will attempt to achieve its objective by investing primarily in publicly traded non-investment grade securities. The fund's investment objective may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in non-investment grade debt securities, i.e., "junk bonds." In complying with this 80% investment requirement, the fund's investments may include investments in synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include futures and options. The fund considers a bond to be a junk bond if it is rated Ba or lower by Moody's Investors Service, Inc. or BB or lower by Standard & Poor's Rating Services. The fund will principally invest in junk bonds rated B or above by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services or deemed by the portfolio managers to be of comparable quality. The fund may also invest in preferred stock. The fund may invest up to 25% of its total assets in foreign securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
Although the portfolio managers focus on debt securities that they believe have favorable prospects for high current income, they also consider the possibility of growth of capital of the security. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease; junk bonds are less sensitive to this risk than are higher-quality bonds. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
Compared to higher-quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer and because they are generally unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times, the bonds could be difficult to value or to sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about issuers, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993................................................................... 18.40%
1994................................................................... -1.68%
1995................................................................... 16.86%
1996................................................................... 15.44%
1997................................................................... 12.52%
1998................................................................... -5.10%
1999................................................................... 2.08%
2000................................................................... -23.81%
2001................................................................... -3.59%
2002................................................................... -10.38%
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The Class A shares' year-to-date total return as of June 30, 2003 was 17.71%.
During the periods shown in the bar chart, the highest quarterly return was 6.62% (quarter ended March 31, 1993) and the lowest quarterly return was -13.88% (quarter ended December 31, 2000).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
-----------------------------------------------------------------------------------
Class A 07/11/78
Return Before Taxes (14.64)% (9.49)% 0.71% --
Return After Taxes on
Distributions (18.27) (13.33) (3.35) --
Return After Taxes on
Distributions and Sale of
Fund Shares (8.94) (8.54) (0.96) --
Class B 09/01/93
Return Before Taxes (15.06) (9.51) -- (0.74)%
Class C 08/04/97
Return Before Taxes (11.68) (9.29) -- (7.88)
Investor Class(2) 07/11/78(2)
Return Before Taxes (10.38) (8.60) 1.20 --
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Lehman Brothers U.S. Aggregate
Bond Index(3) 10.25 7.55 7.51 --
Lehman Brothers High Yield
Index(4) (1.41) 0.38 5.86 --
Lipper High Yield Bond Fund
Index(5) (2.41) (1.80) 4.69 --
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, C and Investor Class will vary.
(1) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. As of July 21, 2003, Investor Class shares have not commenced operations.
(3) The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index generally considered representative of treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The fund has elected to use the Lehman Brothers U.S. Aggregate Bond Index as its broad-based index rather than the Lehman Brothers High Yield Index because the Lehman Brothers U.S. Aggregate Bond Index is such a widely recognized gauge of U.S. stock market performance. The fund has also included the Lehman Brothers High Yield Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper High Yield Bond Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(4) The Lehman Brothers High Yield Index is an index that includes all fixed-income securities having a maximum quality rating of Ba1 (including defaulted issues), a minimum amount outstanding of $100 million, and at least one year to maturity.
(5) The Lipper High Yield Bond Fund Index is an equally weighted representation of the 30 largest funds within the Lipper High Yield category. The funds have no credit rating restriction, but tend to invest in fixed-income securities with lower credit ratings.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES -------------------------------------------------------------------------------------------------------------------------------- (fees paid directly from INVESTOR your investment) CLASS A CLASS B CLASS C CLASS -------------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.75% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None -------------------------------------------------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(3) ----------------------------------------------------------------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS ----------------------------------------------------------------------------------------------------------------------------- Management Fees 0.52% 0.52% 0.52% 0.52% Distribution and/or Service (12b-1) Fees 0.25 1.00 1.00 0.25 Other Expenses(4) 0.30 0.30 0.30 0.30 Total Annual Fund Operating Expenses 1.07 1.82 1.82 1.07 ----------------------------------------------------------------------------------------------------------------------------- |
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares within 18 months from the date of purchase, you may pay a 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) There is no guarantee that actual expenses will be the same as those shown in the table.
(4) Other expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A $579 $799 $1,037 $1,719
Class B 685 873 1,185 1,940
Class C 285 573 985 2,137
Investor Class 109 340 590 1,306
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A $579 $799 $1,037 $1,719
Class B 185 573 985 1,940
Class C 185 573 985 2,137
Investor Class 109 340 590 1,306
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 2002, the advisor received compensation of 0.52% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual members of the team (co-managers) who are primarily responsible for the management of the fund's portfolio are
- Peter Ehret, Senior Portfolio Manager, who has been responsible for the fund since 2001 and has been associated with the advisor and/or its affiliates since 2001. From 1999 to 2001, he was director of high yield research and portfolio manager for Van Kampen Investment Advisory Corp. where he was associated since 1992.
- Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1992.
They are assisted by the High Yield Taxable Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM High Yield Fund are subject to the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of ordinary income.
DIVIDENDS
The fund generally declares any dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2002 and 2001 has been audited by Ernst & Young, LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
CLASS A
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SIX MONTHS YEAR ENDED JULY 31, JANUARY 1,
ENDED THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, --------------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ------------ ---------- ---------- ----------
Net asset value, beginning
of period $ 3.70 $ 4.92 $ 7.00 $ 8.07 $ 8.77 $ 10.16 $ 9.88
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.20 0.49(a) 0.68 0.47 0.85 0.92 0.90
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and unrealized) 0.06 (1.19) (2.03) (1.03) (0.66) (1.40) 0.28
=================================================================================================================================
Total from investment
operations 0.26 (0.70) (1.35) (0.56) 0.19 (0.48) 1.18
=================================================================================================================================
Less distributions:
Dividends from net
investment income (0.20) (0.52) (0.69) (0.49) (0.87) (0.91) (0.90)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of
net investment income -- -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.20) (0.52) (0.73) (0.51) (0.89) (0.91) (0.90)
=================================================================================================================================
Net asset value, end of
period $ 3.76 $ 3.70 $ 4.92 $ 7.00 $ 8.07 $ 8.77 $ 10.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.44% (15.36)% (19.98)% (7.12)% 2.21% (5.10)% 12.52%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $449,581 $417,974 $683,845 $1,056,453 $1,364,502 $1,670,863 $1,786,352
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 1.18%(c) 1.07% 0.99% 0.93%(d) 0.92% 0.85% 0.90%
=================================================================================================================================
Ratio of net investment
income to average net
assets 10.73%(c) 11.15%(a) 11.98% 10.79%(d) 10.06% 9.45% 9.08%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 40% 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share would have remained the same and the ratio of net investment income to average net assets would have been 11.22%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $435,992,654.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS B
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SIX MONTHS JANUARY 1,
ENDED YEAR ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ------------------------- JULY 31, --------------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- ---------- ---------- ----------
Net asset value, beginning
of period $ 3.71 $ 4.93 $ 7.01 $ 8.07 $ 8.76 $ 10.16 $ 9.88
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.18 0.45(a) 0.64 0.44 0.79 0.84 0.83
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.07 (1.18) (2.03) (1.03) (0.66) (1.40) 0.28
=================================================================================================================================
Total from investment
operations 0.25 (0.73) (1.39) (0.59) 0.13 (0.56) 1.11
=================================================================================================================================
Less distributions:
Dividends from net
investment income (0.19) (0.49) (0.65) (0.45) (0.80) (0.84) (0.83)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess
of net investment
income -- -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.19) (0.49) (0.69) (0.47) (0.82) (0.84) (0.83)
=================================================================================================================================
Net asset value, end of
period $ 3.77 $ 3.71 $ 4.93 $ 7.01 $ 8.07 $ 8.76 $ 10.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.02% (15.99)% (20.60)% (7.49)% 1.46% (5.90)% 11.71%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $444,140 $469,408 $756,704 $1,206,737 $1,559,864 $1,820,899 $1,647,801
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to
average net assets 1.93%(c) 1.82% 1.75% 1.69%(d) 1.68% 1.61% 1.65%
=================================================================================================================================
Ratio of net investment
income to average net
assets 9.98%(c) 10.40%(a) 11.22% 10.03%(d) 9.30% 8.69% 8.33%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 40% 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share would have been $0.46 and the ratio of net investment income to average net assets would have been 10.47%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $445,745,533.
(d) Annualized.
(e) Not annualized for periods less than one year.
CLASS C
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AUGUST 4, 1997
(DATE SALES
SIX MONTHS YEAR ENDED JANUARY 1, YEAR ENDED COMMENCED)
ENDED JULY 31, THROUGH DECEMBER 31, THROUGH
JANUARY 31, --------------------- JULY 31, -------------------- DECEMBER 31,
2003 2002 2001 2000 1999 1998 1997
----------- ------- ------- ---------- -------- -------- --------------
Net asset value, beginning of
period $ 3.70 $ 4.92 $ 6.99 $ 8.05 $ 8.74 $ 10.14 $ 10.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.18 0.45(a) 0.65 0.44 0.78 0.82(b) 0.35
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.07 (1.18) (2.03) (1.03) (0.65) (1.38) 0.10
=================================================================================================================================
Total from investment
operations 0.25 (0.73) (1.38) (0.59) 0.13 (0.56) 0.45
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.19) (0.49) (0.65) (0.45) (0.80) (0.84) (0.35)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net
investment income -- -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.19) (0.49) (0.69) (0.47) (0.82) (0.84) (0.35)
=================================================================================================================================
Net asset value, end of period $ 3.76 $ 3.70 $ 4.92 $ 6.99 $ 8.05 $ 8.74 $ 10.14
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.04% (16.02)% (20.52)% (7.51)% 1.46% (5.92)% 4.49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $51,372 $50,060 $81,871 $110,297 $129,675 $113,246 $26,177
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.93%(d) 1.82% 1.75% 1.69%(e) 1.68% 1.61% 1.68%(e)
=================================================================================================================================
Ratio of net investment income
to average net assets 9.98%(d) 10.40%(a) 11.22% 10.03%(e) 9.30% 8.69% 8.30%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 40% 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. Had the Fund not amortized premiums on debt securities, the net investment income per share would have been $0.46 and the ratio of net investment income to average net assets would have been 10.47%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of American, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $48,488,832.
(e) Annualized.
(f) Not annualized for periods less than one year.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM Funds). The following information is about all the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R INVESTOR CLASS(6)
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(5)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $250,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
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Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM Fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(5) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund.
(6) As of July 21, 2003 Investor Class shares of AIM Blue Chip Fund, AIM European Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Real Estate Fund and AIM Tax-Exempt Cash Fund have not commenced operations.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) has adopted 12b-1 plans that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
MCF--07/03
SALES CHARGES
Sales charges on the AIM Funds and classes of those Funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
MCF--07/03
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must provide sufficient information at the time of purchase to verify that your purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) for the purpose of qualifying for the lower initial sales
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the
current value of all other shares you own.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
MCF--07/03
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25(1)
IRA, Education IRA or Roth IRA 250 50
All other accounts 500(2) 50
-------------------------------------------------------------------------------------------------------------------------
|
(1) $50 for Investor Class shares.
(2) $1,000 for Investor Class shares.
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--07/03
GRANDFATHERED INVESTORS
As of July 21, 2003, Investor Class shares of certain funds that intend to offer such shares have not commenced operations (for a listing of funds that intend to offer Investor Class shares see the "Choosing a Share Class" section of your prospectus). Once operations commence, Investor Class shares of such funds may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by A I M Distributors, Inc. (the "Grandfathered Funds") and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with A I M Distributors, Inc. and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) INVESCO Funds directors, employees of AMVESCAP PLC and its subsidiaries.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase Plan at
any time by giving the transfer agent notice ten days prior to your next
scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at least $5,000; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans, SIMPLE IRA
plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or another
sponsor's retirement plan. The plan custodian of the AIM sponsored retirement
plan assesses an annual maintenance fee of $10. Contact your financial
consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase
MCF--07/03
$1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--07/03
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM Fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line. You will be allowed
to redeem by telephone if (1) the proceeds
are to be mailed to the address on record
(if there has been no change communicated to
us within the last 30 days) or transferred
electronically to a pre-authorized checking
account; (2) you do not hold physical share
certificates; (3) you can provide proper
identification information; (4) the proceeds
of the redemption do not exceed $250,000;
and (5) you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
|
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--07/03
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
If you paid a contingent deferred sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC if you later redeem that amount.
You must notify the transfer agent in writing at the time you reinstate that you are exercising your reinstatement privilege.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM Funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security or other tax ID number on your account application, the AIM Fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those of another AIM Fund. Before requesting an exchange, review the prospectus of the AIM Fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund);
(7) Investor Class shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or Class A3 shares of an AIM Fund; or
(8) Class A or A3 shares of an AIM Fund for Investor Class shares of any AIM Fund as long as you own Investor Class shares of any AIM Fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a Fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
MCF--07/03
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; MCF--07/03
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. There is no fee for exchanges. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM Funds or the distributor may modify or terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM Funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The AIM Funds value portfolio securities for which market quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM Funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors or Trustees of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's net asset value will be subject to the judgment of the Board of Directors or Trustees or its designee instead of being determined by the market. Because some of the AIM Funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM Funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary trading session of the NYSE. The AIM Funds price
MCF--07/03
purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. An AIM Fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of dividends and distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM Fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM Fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--07/03
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P. O. Box 4739
Houston, TX 77046-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
--------------------------------------------------------
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You also can review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com HYI-PRO-1
AIM INCOME FUND
July 21, 2003
Prospectus
AIM Income Fund seeks to achieve a high level of current income consistent with reasonable concern for safety of principal.
This prospectus contains important information about the Class A, B, C, R and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares -- Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
Investments in the fund:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
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---------------
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INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 2 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-4 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-10 Taxes A-11 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc.
No dealer, sales person or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
The fund's investment objective is to achieve a high level of current income consistent with reasonable concern for safety of principal. The fund will attempt to achieve its objective by investing primarily in fixed-rate corporate debt and U.S. and non-U.S. Government obligations. The fund's investment objective may be changed by the Board of Trustees without shareholder approval.
The fund may invest up to 40% of its total assets in foreign securities. The
fund may invest up to 35% of its net assets in lower-quality debt securities,
i.e., "junk bonds," and unrated debt securities deemed by the portfolio managers
to be of comparable quality. The fund may also invest in preferred stock issues
and convertible corporate debt. For cash management purposes, the fund may also
hold a portion of its assets in cash or cash equivalents, including shares of
affiliated money market funds. Any percentage limitations with respect to assets
of the fund are applied at the time of purchase.
The portfolio managers focus on securities that they believe have favorable prospects for current income, consistent with their concerns for safety of principal. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. Junk bonds are less sensitive to this risk than are higher-quality bonds. The issuer of a security may default or otherwise be unable to honor a financial obligation.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are valued.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
Compared to higher-quality debt securities, junk bonds involve a greater risk of default or price changes due to changes in the credit quality of the issuer and because they are generally unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times the bonds could be difficult to value or sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993................................................................... 15.38%
1994................................................................... -7.65%
1995................................................................... 22.77%
1996................................................................... 8.58%
1997................................................................... 11.92%
1998................................................................... 4.94%
1999................................................................... -2.92%
2000................................................................... -1.14%
2001................................................................... 3.58%
2002................................................................... 2.26%
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The Class A share's year-to-date total return as of June 30, 2003 was 8.90%.
During the periods shown in the bar chart, the highest quarterly return was 6.92% (quarter ended March 31, 1993) and the lowest quarterly return was -5.88% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
---------------------------------------------------------------------------------
Class A 05/03/68
Return Before Taxes (2.54)% 0.31% 4.91% --
Return After Taxes
on Distributions (4.83) (2.29) 2.02 --
Return After Taxes
on Distributions
and Sale of Fund
Shares (1.60) (1.02) 2.50 --
Class B 09/07/93
Return Before Taxes (3.29) 0.25 -- 3.28%
Class C 08/04/97
Return Before Taxes 0.55 0.55 -- 1.41
Class R(2) 05/03/68(2)
Return Before Taxes 1.99 1.05 5.16 --
Investor Class(3) 05/03/68(3)
Return Before Taxes 2.26 1.30 5.43 --
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Lehman Brothers U.S.
Aggregate Bond
Index(4) 10.25 7.55 7.51 --
Lipper BBB Rated Fund
Index(5) 7.20 5.42 6.83 --
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, C, R and Investor Class will vary.
(1) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the Fund's Class R shares is June 3, 2002.
(3) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. As of July 21, 2003, Investor Class shares have not commenced operations.
(4) The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index generally considered representative of treasury issues, agency issues, corporate bond issues and mortgage-backed securities. In addition, the Lipper BBB Rated Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(5) The Lipper BBB Rated Fund Index is an equally weighted representation of the 30 largest funds in the Lipper BBB Rated Funds category. The funds invest at least 65% of assets in corporate and government debt issues rated in the top four grades.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES ------------------------------------------------------------------------------------- (fees paid directly from your INVESTOR investment) CLASS A CLASS B CLASS C CLASS R CLASS ------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.75% None None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) None ------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) --------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS R CLASS -------------------------------------------------------------------------------- Management Fees 0.43% 0.43% 0.43% 0.43% 0.43% Distribution and/or Service (12b-1) Fees 0.25 1.00 1.00 0.50 0.25 Other Expenses(5) 0.28 0.28 0.28 0.28 0.28 Total Annual Fund Operating Expenses 0.96 1.71 1.71 1.21 0.96 -------------------------------------------------------------------------------- |
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares within 18 months from the date of purchase, you may pay a 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown
in the table.
(5) Other expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $568 $766 $ 981 $1,597
Class B 674 839 1,128 1,821
Class C 274 539 928 2,019
Class R 123 384 665 1,466
Investor Class 98 306 531 1,178
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $568 $766 $981 $1,597
Class B 174 539 928 1,821
Class C 174 539 928 2,019
Class R 123 384 665 1,466
Investor Class 98 306 531 1,178
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 2002, the advisor received compensation of 0.43% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual members of the team (co-managers) who are primarily responsible for the management of the fund's portfolio are
- Robert G. Alley, Senior Portfolio Manager, who has been responsible for the fund since 1992 and has been associated with the advisor and/or its affiliates since 1992.
- Jan H. Friedli, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was global fixed-income portfolio manager for Nicholas-Applegate Capital Management.
- Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the fund since 1995 and has been associated with the advisor and/or its affiliates since 1992.
- Scot W. Johnson, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1994.
They are assisted by the Investment Grade and High Yield Taxable Teams. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Income Fund are subject to the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of ordinary income.
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2002 and 2001 has been audited by Ernst & Young LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
CLASS A
----------------------------------------------------------------
SIX MONTHS JANUARY 1,
ENDED YEAR ENDED JULY 31, THROUGH
JANUARY 31, -------------------------- JULY 31,
2003 2002 2001 2000
----------- -------- -------- ----------
Net asset value, beginning of period $ 6.20 $ 6.91 $ 7.14 $ 7.59
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.44(a)(b) 0.53 0.34
---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.26 (0.70) (0.23) (0.47)
===============================================================================================================
Total from investment operations 0.44 (0.26) 0.30 (0.13)
===============================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.43) (0.51) (0.25)
---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- --
---------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07)
===============================================================================================================
Total distributions (0.20) (0.45) (0.53) (0.32)
===============================================================================================================
Net asset value, end of period $ 6.44 $ 6.20 $ 6.91 $ 7.14
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(c) 7.17% (4.05)% 4.42% (1.70)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $283,759 $281,966 $346,967 $346,482
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets 1.04%(d) 0.96% 0.95% 0.97%(e)
===============================================================================================================
Ratio of net investment income to average net
assets 5.69%(d) 6.57%(b) 7.57% 8.03%(e)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43%
_______________________________________________________________________________________________________________
===============================================================================================================
CLASS A
--------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
Net asset value, beginning of period $ 8.38 $ 8.57 $ 8.24
----------------------------------------------
Income from investment operations:
Net investment income 0.57 0.57 0.55
----------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.81) (0.16) 0.39
==============================================
Total from investment operations (0.24) 0.41 0.94
==============================================
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.52)
----------------------------------------------
Distributions from net realized gains -- (0.05) (0.09)
----------------------------------------------
Return of capital -- -- --
==============================================
Total distributions (0.55) (0.60) (0.61)
==============================================
Net asset value, end of period $ 7.59 $ 8.38 $ 8.57
______________________________________________
==============================================
Total return(c) (2.92)% 4.94% 11.92%
______________________________________________
==============================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $393,414 $399,701 $340,608
______________________________________________
==============================================
Ratio of expenses to average net assets 0.91% 0.91% 0.94%
==============================================
Ratio of net investment income to average net
assets 7.11% 6.69% 6.55%
______________________________________________
==============================================
Portfolio turnover rate(f) 78% 41% 54%
______________________________________________
==============================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydown gains and losses as adjustments to interest income. Had the Fund not amortized premiums on debt securities or recorded paydown gains and losses as adjustments to interest income, the net investment income per share would have been $0.45 and the ratio of net investment income to average net assets would have been 6.76%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not deduct sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $279,826,101.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS B
----------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JANUARY 1,
ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, -------------------------- JULY 31, --------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- -------- -------- --------
Net asset value, beginning of
period $ 6.21 $ 6.92 $ 7.14 $ 7.58 $ 8.37 $ 8.55 $ 8.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.16(a) 0.39(a)(b) 0.48 0.31 0.50 0.50 0.48
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.25 (0.70) (0.23) (0.47) (0.80) (0.15) 0.38
=================================================================================================================================
Total from investment
operations 0.41 (0.31) 0.25 (0.16) (0.30) 0.35 0.86
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.17) (0.38) (0.45) (0.21) (0.49) (0.48) (0.45)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- -- -- -- -- (0.05) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07) -- -- --
=================================================================================================================================
Total distributions (0.17) (0.40) (0.47) (0.28) (0.49) (0.53) (0.54)
=================================================================================================================================
Net asset value, end of period $ 6.45 $ 6.21 $ 6.92 $ 7.14 $ 7.58 $ 8.37 $ 8.55
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 6.76% (4.76)% 3.67% (2.09)% (3.72)% 4.20% 10.89%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $212,723 $216,710 $237,118 $213,926 $244,713 $219,033 $125,871
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 1.79%(d) 1.71% 1.71% 1.73%(e) 1.66% 1.66% 1.69%
=================================================================================================================================
Ratio of net investment income
to average net assets 4.94%(d) 5.82%(b) 6.81% 7.28%(e) 6.36% 5.94% 5.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43% 78% 41% 54%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydown gains and losses as adjustments to interest income. Had the Fund not amortized premiums on debt securities or recorded paydown gains and losses as adjustments to interest income, the net investment income per share would have been $0.40 and the ratio of net investment income to average net assets would have been 6.01%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $214,246,245.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
---------------------------------------------------------------------------------------------------
AUGUST 4, 1997
(DATE SALES
SIX MONTHS YEAR ENDED JANUARY 1, YEAR ENDED COMMENCED)
ENDED JULY 31, THROUGH DECEMBER 31, THROUGH
JANUARY 31, ------------------------ JULY 31, ------------------ DECEMBER 31,
2003 2002 2001 2000 1999 1998 1997
----------- ------- ------- ---------- ------- ------- --------------
Net asset value, beginning
of period $ 6.19 $ 6.91 $ 7.13 $ 7.57 $ 8.36 $ 8.54 $ 8.38
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.16(a) 0.39(a)(b) 0.48 0.31 0.50 0.50 0.19
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.26 (0.71) (0.23) (0.47) (0.80) (0.15) 0.22
=================================================================================================================================
Total from investment
operations 0.42 (0.32) 0.25 (0.16) (0.30) 0.35 0.41
=================================================================================================================================
Less distributions:
Dividends from net
investment income (0.17) (0.38) (0.45) (0.21) (0.49) (0.48) (0.16)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- -- -- -- -- (0.05) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07) -- -- --
=================================================================================================================================
Total distributions (0.17) (0.40) (0.47) (0.28) (0.49) (0.53) (0.25)
=================================================================================================================================
Net asset value, end of
period $ 6.44 $ 6.19 $ 6.91 $ 7.13 $ 7.57 $ 8.36 $ 8.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 6.95% (4.92)% 3.68% (2.09)% (3.71)% 4.21% 4.96%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $36,566 $37,769 $44,216 $26,821 $28,202 $19,332 $2,552
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to
average net assets 1.79%(d) 1.71% 1.71% 1.73%(e) 1.66% 1.66% 1.69%(d)
=================================================================================================================================
Ratio of net investment
income to average net
assets 4.94%(d) 5.82%(b) 6.81% 7.28%(e) 6.36% 5.94% 5.80%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43% 78% 41% 54%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydown gains and losses as adjustments to interest income. Had the Fund not amortized premiums on debt securities or recorded paydown gains and losses as adjustments to interest income, the net investment income per share would have been $0.40 and the ratio of net investment income to average net assets would have been 6.01%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $36,580,634.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS R
------------------------------------
SIX MONTHS JUNE 3, 2002
ENDED (DATE SALES
JANUARY 31, COMMENCED) THROUGH
2003 JULY 31, 2002
----------- ------------------
Net asset value, beginning of period $ 6.20 $ 6.53
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.06(a)(b)
----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.25 (0.32)
====================================================================================================
Total from investment operations 0.43 (0.26)
====================================================================================================
Less distributions:
Dividends from net investment income (0.19) (0.05)
----------------------------------------------------------------------------------------------------
Return of capital -- (0.02)
====================================================================================================
Total distributions (0.19) (0.07)
====================================================================================================
Net asset value, end of period $ 6.44 $ 6.20
____________________________________________________________________________________________________
====================================================================================================
Total return(c) 7.02% (4.01)%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,088 $ 10
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets 1.29%(d) 1.21%(e)
====================================================================================================
Ratio of net investment income to average net assets 5.44%(d) 6.32%(b)(e)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(f) 55% 70%
____________________________________________________________________________________________________
====================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydown gains and losses as adjustments to interest income. Had the Fund not amortized premiums on debt securities or recorded paydown gains and losses as adjustments to interest income, the net investment income per share would have been $0.07 and the ratio of net investment income to average net assets would have been 6.51%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $146,037.
(e) Annualized.
(f) Not annualized for periods less than one year.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM Funds). The following information is about all the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R INVESTOR CLASS(6)
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(5)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $250,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
----------------------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM Fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(5) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund.
(6) As of July 21, 2003 Investor Class shares of AIM Blue Chip Fund, AIM European Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Real Estate Fund and AIM Tax-Exempt Cash Fund have not commenced operations.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) has adopted 12b-1 plans that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
MCF--07/03
SALES CHARGES
Sales charges on the AIM Funds and classes of those Funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
MCF--07/03
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must provide sufficient information at the time of purchase to verify that your purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) for the purpose of qualifying for the lower initial sales
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the
current value of all other shares you own.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
MCF--07/03
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25(1)
IRA, Education IRA or Roth IRA 250 50
All other accounts 500(2) 50
-------------------------------------------------------------------------------------------------------------------------
|
(1) $50 for Investor Class shares.
(2) $1,000 for Investor Class shares.
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
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MCF--07/03
GRANDFATHERED INVESTORS
As of July 21, 2003, Investor Class shares of certain funds that intend to offer such shares have not commenced operations (for a listing of funds that intend to offer Investor Class shares see the "Choosing a Share Class" section of your prospectus). Once operations commence, Investor Class shares of such funds may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by A I M Distributors, Inc. (the "Grandfathered Funds") and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with A I M Distributors, Inc. and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) INVESCO Funds directors, employees of AMVESCAP PLC and its subsidiaries.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase Plan at
any time by giving the transfer agent notice ten days prior to your next
scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at least $5,000; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans, SIMPLE IRA
plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or another
sponsor's retirement plan. The plan custodian of the AIM sponsored retirement
plan assesses an annual maintenance fee of $10. Contact your financial
consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase
MCF--07/03
$1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
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(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
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(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
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(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--07/03
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM Fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line. You will be allowed
to redeem by telephone if (1) the proceeds
are to be mailed to the address on record
(if there has been no change communicated to
us within the last 30 days) or transferred
electronically to a pre-authorized checking
account; (2) you do not hold physical share
certificates; (3) you can provide proper
identification information; (4) the proceeds
of the redemption do not exceed $250,000;
and (5) you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
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TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--07/03
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
If you paid a contingent deferred sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC if you later redeem that amount.
You must notify the transfer agent in writing at the time you reinstate that you are exercising your reinstatement privilege.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM Funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security or other tax ID number on your account application, the AIM Fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those of another AIM Fund. Before requesting an exchange, review the prospectus of the AIM Fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund);
(7) Investor Class shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or Class A3 shares of an AIM Fund; or
(8) Class A or A3 shares of an AIM Fund for Investor Class shares of any AIM Fund as long as you own Investor Class shares of any AIM Fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a Fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
MCF--07/03
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; MCF--07/03
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. There is no fee for exchanges. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM Funds or the distributor may modify or terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM Funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The AIM Funds value portfolio securities for which market quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM Funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors or Trustees of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's net asset value will be subject to the judgment of the Board of Directors or Trustees or its designee instead of being determined by the market. Because some of the AIM Funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM Funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary trading session of the NYSE. The AIM Funds price
MCF--07/03
purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. An AIM Fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of dividends and distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM Fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM Fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--07/03
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
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BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
|
You also can review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com INC-PRO-1
AIM INTERMEDIATE GOVERNMENT FUND
July 21, 2003
Prospectus
AIM Intermediate Government Fund seeks to achieve a high level of current income consistent with reasonable concern for safety of principal.
This prospectus contains important information about Class A, B, C, R and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares -- Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
Investments in the fund:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
|
--------------------------------
|
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-4 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-10 Taxes A-11 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representation other than those contained in this prospectus, and you should not rely on such other information or representations.
The fund's investment objective is to achieve a high level of current income consistent with reasonable concern for safety of principal. The fund's investment objective may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of
its assets in debt securities issued, guaranteed or otherwise backed by the U.S.
Government. In complying with this 80% investment requirement, the fund's
investments may include synthetic instruments. Synthetic instruments are
investments that have economic characteristics similar to the fund's direct
investments, and may include futures and options. The fund may invest in
securities of all maturities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, including: (1) U.S. Treasury obligations, and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities and supported by (a) the full faith and credit of the U.S.
Treasury, (b) the right of the issuer to borrow from the U.S. Treasury, or (c)
the credit of the agency or instrumentality. The fund will maintain a weighted
average effective maturity, as estimated by the fund's portfolio managers, of
between three and ten years. The fund invests primarily in fixed-rate securities
such as high-coupon U.S. Government agency mortgage-backed securities, which
consist of interests in underlying mortgages with maturities of up to thirty
years. For cash management purposes, the fund may also hold a portion of its
assets in cash or cash equivalents, including shares of affiliated money market
funds. Any percentage limitations with respect to assets of the fund are applied
at the time of purchase.
The portfolio managers focus on securities that they believe have favorable prospects for current income, consistent with their reasonable concern for safety of principal. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If the fund does trade in this way, it may incur increased transaction costs, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. The prices of high-coupon U.S. Government agency mortgage-backed securities fall more slowly when interest rates rise than do prices of traditional fixed-rate securities. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The agency or instrumentality issuing a security may default or otherwise be unable to honor a financial obligation.
If the seller of a repurchase agreement in which the fund invests defaults on its obligation or declares bankruptcy, the fund may experience delays in selling the securities underlying the repurchase agreement. As a result, the fund may incur losses arising from decline in the value of those securities, reduced levels of income and expenses of enforcing its rights.
High-coupon U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium. If these securities experience a faster principal prepayment rate than expected, both the market value of and income from such securities will decrease.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993................................................................... 7.07%
1994................................................................... -3.44%
1995................................................................... 16.28%
1996................................................................... 2.35%
1997................................................................... 9.07%
1998................................................................... 8.17%
1999................................................................... -1.87%
2000................................................................... 9.37%
2001................................................................... 6.11%
2002................................................................... 10.00%
|
The Class A share's year-to-date total return as of June 30, 2003 was 1.78%.
During the periods shown in the bar chart, the highest quarterly return was 5.49% (quarter ended June 30, 1995) and the lowest quarterly return was -2.92% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------------
(for the periods
ended December 31, SINCE INCEPTION
2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
------------------------------------------------------------------------------
Class A 04/28/87
Return Before
Taxes 4.79% 5.24% 5.65% --
Return After
Taxes on
Distributions 2.96 2.81 3.01 --
Return After
Taxes on
Distributions
and Sale of
Fund Shares 2.89 2.93 3.13 --
Class B 09/07/93
Return Before
Taxes 4.19 5.17 -- 5.12%
Class C 08/04/97
Return Before
Taxes 8.10 5.47 -- 5.74
Class R(2) 04/28/87(3)
Return Before
Taxes 9.72 6.00 5.90 --
Investor Class(3) 04/28/87(3)
Return Before
Taxes 10.00 6.27 6.16 --
------------------------------------------------------------------------------
Lehman Brothers
U.S. Aggregate
Bond Index(4) 10.25 7.55 7.51 --
Lehman Brothers
Intermediate U.S.
Government Bond
Index(5) 9.64 7.44 6.91 --
Lehman Brothers
Intermediate U.S.
Government and
Mortgage Index(6) 9.11 7.39 N/A --
Lipper Intermediate
U.S. Government
Fund Index(7) 10.00 7.01 6.62 --
------------------------------------------------------------------------------
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, C, R and Investor Class will vary.
(1) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the Fund's Class R shares is June 3, 2002.
(3) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. As of July 21, 2003, Investor Class shares have not commenced operations.
(4) The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index generally considered representative of treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The fund has elected to use the Lehman Brothers U.S. Aggregate Bond Index as its broad-based index rather than the Lehman Brothers Intermediate U.S. Government Bond Index because the Lehman Brothers U.S. Aggregate Bond Index is a more widely recognized gauge of the U.S. bond market. The fund also included the Lehman Brothers Intermediate U.S. Government and Mortgage Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Intermediate U.S. Government Index (which may or may not include the fund) is included for comparison to a peer group.
(5) The Lehman Brothers Intermediate U.S. Government Bond Index is an unmanaged composite generally considered representative of intermediate publicly issued debt of U.S. Government agencies and quasi-federal corporations, and corporate debt guaranteed by the U.S. Government.
(6) The Lehman Brothers Intermediate U.S. Government and Mortgage Index includes securities in the intermediate maturity range of the U.S. Government Index that must have between 1 year and 10 years to final maturity regardless of call features, and fixed-rate mortgage securities with a weighted average of at least 1 year and issued by GNMA, FHLMC, or FNMA.
(7) The Lipper Intermediate U.S. Government Fund Index measures the performance of the largest government securities funds. It is compiled by Lipper Analytical Services, Inc., an independent mutual funds performance monitor. Results shown reflect reinvestment of dividends.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES ---------------------------------------------------------------------------------------------------- (fees paid directly INVESTOR from your investment) CLASS A CLASS B CLASS C CLASS R CLASS ---------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.75% None None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) None ---------------------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) -------------------------------------------------------------------------------------------- (expenses that are deducted from fund INVESTOR assets) CLASS A CLASS B CLASS C CLASS R CLASS -------------------------------------------------------------------------------------------- Management Fees 0.40% 0.40% 0.40% 0.40% 0.40% Distribution and/or Service (12b-1) Fees 0.25 1.00 1.00 0.50 0.25 Other Expenses(5) 0.25 0.25 0.25 0.25 0.25 Interest 0.04 0.04 0.04 0.04 0.04 Total Other Expenses 0.29 0.29 0.29 0.29 0.29 Total Annual Fund Operating Expenses 0.94 1.69 1.69 1.19 0.94 -------------------------------------------------------------------------------------------- |
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares within 18 months from the date of purchase, you may pay a 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown
in the table.
(5) Other Expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------
Class A $566 $760 $ 970 $1,575
Class B 672 833 1,118 1,799
Class C 272 533 918 1,998
Class R 121 378 654 1,443
Investor Class 96 300 520 1,155
-------------------------------------------------------------------------------------
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------
Class A $566 $760 $970 $1,575
Class B 172 533 918 1,799
Class C 172 533 918 1,998
Class R 121 378 654 1,443
Investor Class 96 300 520 1,155
-------------------------------------------------------------------------------------
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 2002, the advisor received compensation of 0.40% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual members of the team who are primarily responsible for the management of the fund's portfolio are
- Scot W. Johnson (lead manager), Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994.
- Clint W. Dudley, Portfolio Manager, who has been responsible for the fund since 2001 and has been associated with the advisor and/or its affiliates since 1998. Prior to 1998, he was a full time student.
More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Intermediate Government Fund are subject to the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of ordinary income.
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2002 and 2001 has been audited by Ernst & Young LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
CLASS A
-----------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JANUARY 1,
ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ------------------------ JULY 31, --------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- -------- -------- --------
Net asset value, beginning of period $ 9.28 $ 9.08 $ 8.77 $ 8.80 $ 9.58 $ 9.46 $ 9.28
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.43(b) 0.50(a) 0.34 0.60 0.62 0.63
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.23 0.35 (0.03) (0.78) 0.13 0.18
=================================================================================================================================
Total from investment operations 0.38 0.66 0.85 0.31 (0.18) 0.75 0.81
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.46) (0.54) (0.34) (0.60) (0.63) (0.61)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (0.02)
=================================================================================================================================
Total distributions (0.46) (0.54) (0.34) (0.60) (0.63) (0.63)
=================================================================================================================================
Net asset value, end of period $ 9.46 $ 9.28 $ 9.08 $ 8.77 $ 8.80 $ 9.58 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 4.11% 7.39% 9.91% 3.55% (1.87)% 8.17% 9.07%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $635,390 $473,104 $302,391 $221,636 $238,957 $245,613 $167,427
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets (including interest expense) 0.90%(d) 0.94% 1.32% 1.25%(e) 1.08% 1.20% 1.11%
=================================================================================================================================
Ratio of expenses to average net
assets (excluding interest expense) 0.89%(d) 0.90% 0.93% 0.98%(e) 0.89% 0.96% 1.00%
=================================================================================================================================
Ratio of net investment income to
average net assets 3.82%(d) 4.58%(b) 5.61% 6.61%(e) 6.60% 6.43% 6.77%
=================================================================================================================================
Ratio of interest expense to average
net assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24% 0.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147% 99%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydowns gains and losses on asset-backed securities as adjustments to net investment income. Had the Fund not amortized on debt securities or recorded paydowns gains and losses adjustments to investment income, the investment income per share would have been $0.47 and the ratio of net investment income to average net assets would have been 5.09%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $557,521,567.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS B
---------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JANUARY 1,
ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ---------------------------- JULY 31, --------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- ---------------- -------- ---------- -------- -------- --------
Net asset value, beginning of
period $ 9.31 $ 9.11 $ 8.79 $ 8.82 $ 9.59 $ 9.46 $ 9.28
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15(a) 0.37(b) 0.44(a) 0.30 0.53 0.55 0.56
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.20 0.22 0.35 (0.04) (0.77) 0.13 0.17
=================================================================================================================================
Total from investment
operations 0.35 0.59 0.79 0.26 (0.24) 0.68 0.73
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.17) (0.39) (0.47) (0.29) (0.53) (0.55) (0.53)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (0.02)
=================================================================================================================================
Total distributions (0.39) (0.47) (0.29) (0.53) (0.55) (0.55)
=================================================================================================================================
Net asset value, end of period $ 9.49 $ 9.31 $ 9.11 $ 8.79 $ 8.82 $ 9.59 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 3.74% 6.58% 9.17% 3.05% (2.56)% 7.40% 8.16%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $721,806 $613,306 $269,677 $177,032 $228,832 $237,919 $89,265
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets (including interest
expense) 1.65%(d) 1.69% 2.08% 2.01%(e) 1.85% 1.96% 1.87%
=================================================================================================================================
Ratio of expenses to average net
assets (excluding interest
expense) 1.64%(d) 1.65% 1.69% 1.74%(e) 1.66% 1.72% 1.76%
=================================================================================================================================
Ratio of net investment income to
average net assets 3.07%(d) 3.83%(b) 4.85% 5.85%(e) 5.83% 5.68% 6.01%
=================================================================================================================================
Ratio of interest expense to
average net assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24% 0.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147% 99%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydowns gains and losses on asset-backed securities as adjustments to net investment income. Had the Fund not amortized on debt securities or recorded paydowns gains and losses adjustments to investment income, the investment income per share would have been $0.40 and the ratio of net investment income to average net assets would have been 4.35%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $693,738,301.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS C
--------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JANUARY 1, YEAR ENDED
ENDED JULY 31, THROUGH DECEMBER 31,
JANUARY 31, ------------------------- JULY 31, ---------------------
2003 2002 2001 2000 1999 1998
----------- -------- ------- ---------- -------- -------
Net asset value, beginning of period $ 9.27 $ 9.08 $ 8.77 $ 8.79 $ 9.56 $ 9.44
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15(a) 0.37(b) 0.44(a) 0.30 0.53 0.56
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 0.21 0.34 (0.03) (0.77) 0.11
===========================================================================================================================
Total from investment operations 0.35 0.58 0.78 0.27 (0.24) 0.67
===========================================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.39) (0.47) (0.29) (0.53) (0.55)
---------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- --
===========================================================================================================================
Total distributions (0.39) (0.47) (0.29) (0.53) (0.55)
===========================================================================================================================
Net asset value, end of period $ 9.45 $ 9.27 $ 9.08 $ 8.77 $ 8.79 $ 9.56
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(c) 3.75% 6.48% 9.08% 3.18% (2.57)% 7.31%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $155,195 $127,114 $59,915 $34,206 $39,011 $38,026
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 165%(d) 1.69% 2.08% 2.01%(e) 1.85% 1.96%
===========================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 1.64%(d) 1.65% 1.69% 1.74%(e) 1.66% 1.72%
===========================================================================================================================
Ratio of net investment income to average
net assets 3.07%(d) 3.83%(b) 4.85% 5.85%(e) 5.83% 5.68%
===========================================================================================================================
Ratio of interest expense to average net
assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147%
___________________________________________________________________________________________________________________________
===========================================================================================================================
CLASS C
------------------
AUGUST 4, 1997
(DATE SALES
COMMENCED) THROUGH
DECEMBER 31,
1997
------------------
Net asset value, beginning of period $ 9.33
-----------------------------------------
Income from investment operations:
Net investment income 0.24
-----------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.10
=========================================
Total from investment operations 0.34
=========================================
Less distributions:
Dividends from net investment income (0.22)
-----------------------------------------
Return of capital (0.01)
=========================================
Total distributions (0.23)
=========================================
Net asset value, end of period $ 9.44
_________________________________________
=========================================
Total return(c) 3.64%
_________________________________________
=========================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,851
_________________________________________
=========================================
Ratio of expenses to average net assets
(including interest expense) 1.87%(e)
=========================================
Ratio of expenses to average net assets
(excluding interest expense) 1.76%(e)
=========================================
Ratio of net investment income to average
net assets 6.01%(e)
=========================================
Ratio of interest expense to average net
assets 0.11%(e)
_________________________________________
=========================================
Portfolio turnover rate(f) 99%
_________________________________________
=========================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydowns gains and losses on asset-backed securities as adjustments to net investment income. Had the Fund not amortized on debt securities or recorded paydowns gains and losses adjustments to investment income, the investment income per share would have been $0.40 and the ratio of net investment income to average net assets would have been 4.35%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $145,247,773.
(e) Annualized.
(f) Not annualized for periods less than one year.
CLASS R
---------------------------
SIX MONTHS JUNE 3, 2002
ENDED (DATE SALES
JANUARY 31, COMMENCED) TO
2003 JULY 31, 2002
----------- -------------
Net asset value, beginning of period $ 9.27 $ 9.13
-----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17(a) 0.07(b)
-----------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.14
=========================================================================================
Total from investment operations 0.38 0.21
=========================================================================================
Less distributions from net investment income (0.19) (0.07)
=========================================================================================
Net asset value, end of period $ 9.46 $ 9.27
_________________________________________________________________________________________
=========================================================================================
Total return(c) 4.09% 2.34%
_________________________________________________________________________________________
=========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,106 $ 34
_________________________________________________________________________________________
=========================================================================================
Ratio of expenses to average net assets (including interest
expense) 1.15%(d) 1.19%(e)
=========================================================================================
Ratio of expenses to average net assets (excluding interest
expense) 1.14%(d) 1.15%(e)
=========================================================================================
Ratio of net investment income to average net assets 3.57%(d) 4.33%(b)(e)
=========================================================================================
Ratio of interest expense to average net assets 0.01%(d) 0.04%(e)
_________________________________________________________________________________________
=========================================================================================
Portfolio turnover rate(f) 103% 146%
_________________________________________________________________________________________
=========================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydowns gains and losses on asset-backed securities as adjustments to net investment income. Had the Fund not amortized on debt securities or recorded paydowns gains and losses adjustments to investment income, the investment income per share would have remained the same and the ratio of net investment income to average net assets would have been 4.85%. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $312,930.
(e) Annualized.
(f) Not annualized for periods less than one year.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM Funds). The following information is about all the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R INVESTOR CLASS(6)
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(5)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $250,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
----------------------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM Fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(5) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund.
(6) As of July 21, 2003 Investor Class shares of AIM Blue Chip Fund, AIM European Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Real Estate Fund and AIM Tax-Exempt Cash Fund have not commenced operations.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) has adopted 12b-1 plans that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
MCF--07/03
SALES CHARGES
Sales charges on the AIM Funds and classes of those Funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
MCF--07/03
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must provide sufficient information at the time of purchase to verify that your purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) for the purpose of qualifying for the lower initial sales
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the
current value of all other shares you own.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
MCF--07/03
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25(1)
IRA, Education IRA or Roth IRA 250 50
All other accounts 500(2) 50
-------------------------------------------------------------------------------------------------------------------------
|
(1) $50 for Investor Class shares.
(2) $1,000 for Investor Class shares.
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--07/03
GRANDFATHERED INVESTORS
As of July 21, 2003, Investor Class shares of certain funds that intend to offer such shares have not commenced operations (for a listing of funds that intend to offer Investor Class shares see the "Choosing a Share Class" section of your prospectus). Once operations commence, Investor Class shares of such funds may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by A I M Distributors, Inc. (the "Grandfathered Funds") and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with A I M Distributors, Inc. and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) INVESCO Funds directors, employees of AMVESCAP PLC and its subsidiaries.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase Plan at
any time by giving the transfer agent notice ten days prior to your next
scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at least $5,000; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans, SIMPLE IRA
plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or another
sponsor's retirement plan. The plan custodian of the AIM sponsored retirement
plan assesses an annual maintenance fee of $10. Contact your financial
consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase
MCF--07/03
$1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--07/03
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM Fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line. You will be allowed
to redeem by telephone if (1) the proceeds
are to be mailed to the address on record
(if there has been no change communicated to
us within the last 30 days) or transferred
electronically to a pre-authorized checking
account; (2) you do not hold physical share
certificates; (3) you can provide proper
identification information; (4) the proceeds
of the redemption do not exceed $250,000;
and (5) you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
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TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--07/03
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
If you paid a contingent deferred sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC if you later redeem that amount.
You must notify the transfer agent in writing at the time you reinstate that you are exercising your reinstatement privilege.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM Funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security or other tax ID number on your account application, the AIM Fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those of another AIM Fund. Before requesting an exchange, review the prospectus of the AIM Fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund);
(7) Investor Class shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or Class A3 shares of an AIM Fund; or
(8) Class A or A3 shares of an AIM Fund for Investor Class shares of any AIM Fund as long as you own Investor Class shares of any AIM Fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a Fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
MCF--07/03
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; MCF--07/03
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. There is no fee for exchanges. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM Funds or the distributor may modify or terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM Funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The AIM Funds value portfolio securities for which market quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM Funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors or Trustees of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's net asset value will be subject to the judgment of the Board of Directors or Trustees or its designee instead of being determined by the market. Because some of the AIM Funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM Funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary trading session of the NYSE. The AIM Funds price
MCF--07/03
purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. An AIM Fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of dividends and distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM Fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM Fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--07/03
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77046-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
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You also can review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com GOV-PRO-1
AIM MONEY MARKET FUND
July 21, 2003
Prospectus
AIM Money Market Fund seeks to provide as high a level of current income as is consistent with the preservation of capital and liquidity.
This prospectus contains important information about the Class B, C, R and Investor Class shares and AIM Cash Reserve Shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares -- Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
There can be no assurance that the fund will be able to maintain a stable net asset value of $1.00 per share.
Investments in the fund:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
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---------------------
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INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 2 FEE TABLE AND EXPENSE EXAMPLE 3 ------------------------------------------------------ Fee Table 3 Expense Example 3 FUND MANAGEMENT 4 ------------------------------------------------------ The Advisor 4 Advisor Compensation 4 OTHER INFORMATION 4 ------------------------------------------------------ Sales Charges 4 Dividends and Distributions 4 FINANCIAL HIGHLIGHTS 5 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-4 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-10 Taxes A-11 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
The fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity. The fund's investment objective may be changed by the Board of Trustees without shareholder approval.
The fund attempts to meet its objective by investing only in high-quality U.S. dollar-denominated short-term obligations, including:
- securities issued by the U.S. Government or its agencies;
- bankers' acceptances, certificates of deposit, and time deposits from U.S. or foreign banks;
- repurchase agreements;
- commercial paper;
- taxable municipal securities;
- master notes; and
- cash equivalents.
The fund may invest up to 50% of its assets in U.S. dollar-denominated foreign securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers focus on securities that they believe have favorable prospects for current income, consistent with their concerns for preservation of capital and liquidity. The portfolio managers usually hold portfolio securities to maturity, but may sell a particular security when they deem it advisable, such as when any of the factors above materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objectives.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature and the proceeds are reinvested in securities with different interest rates.
The following factors could reduce the fund's income and/or share price:
- sharply rising interest rates;
- downgrades of credit ratings or default of any of the fund's holdings;
- the risks generally associated with concentrating investments in the banking industry, such as interest rate risk, credit risk and regulatory developments relating to the banking and financial services industries; or
- the risks generally associated with U.S. dollar-denominated foreign investments, including political and economic upheaval, seizure or nationalization of deposits, imposition of taxes or other restrictions on the payment of principal and interest.
If the seller of a repurchase agreement in which the fund invests defaults on its obligation or declares bankruptcy, the fund may experience delays in selling the securities underlying the repurchase agreement. As a result, the fund may incur losses arising from decline in the value of those securities, reduced levels of income and expenses of enforcing its rights.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's AIM Cash Reserve Shares from year to year. AIM Cash Reserve Shares do not have sales loads.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1994................................................................... 3.44%
1995................................................................... 5.04%
1996................................................................... 4.41%
1997................................................................... 4.66%
1998................................................................... 4.62%
1999................................................................... 4.22%
2000................................................................... 5.45%
2001................................................................... 3.21%
2002................................................................... 0.91%
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The AIM Cash Reserve Shares' year-to-date total return as of June 30, 2003 was 0.27%.
During the periods shown in the bar chart, the highest quarterly return was 1.41% (quarters ended September 30, 2000 and December 31, 2000) and the lowest quarterly return was 0.17% (quarter ended December 31, 2002).
PERFORMANCE TABLE
The following performance table reflects the fund's performance over the period indicated. The fund's performance reflects payment of sales loads, if applicable.
AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2002) 1 YEAR 5 YEARS INCEPTION DATE --------------------------------------------------------------------------------- AIM Cash Reserve Shares 0.91% 3.67% 3.95% 10/16/93 Class B (4.82) 2.53 3.26 10/16/93 Class C (0.81) 2.89 2.97 08/04/97 Class R(1) 0.65 3.41 3.69 10/16/93(1) Investor Class(2) 0.91 3.67 3.95 10/16/93(2) --------------------------------------------------------------------------------- |
(1) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the Fund's Class R shares is June 3, 2002.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. As of July 21, 2003, Investor Class shares have not commenced operations.
AIM Cash Reserve Shares', Class B shares' and Class C shares' seven day yields on December 31, 2002, were 1.19%, 0.44% and 0.44%, respectively. For the current seven day yield, call (800) 347-4246.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
AIM CASH
RESERVE INVESTOR
(fees paid directly from your investment) SHARES CLASS B CLASS C CLASS R CLASS
---------------------------------------------------------------------------------------------
Maximum Sales Charge
(Load) Imposed on
Purchases
(as a percentage of
offering price) None None None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase price or redemption
proceeds,
whichever is less) None 5.00% 1.00% None(1) None
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ANNUAL FUND OPERATING EXPENSES(2) ------------------------------------------------------------------------------------------- (expenses that are AIM CASH deducted from RESERVE INVESTOR fund assets) SHARES CLASS B CLASS C CLASS R CLASS ------------------------------------------------------------------------------------------- Management Fees 0.53% 0.53% 0.53% 0.53% 0.53% Distribution and/or Service (12b-1) Fees 0.25 1.00 1.00 0.50 0.00 Other Expenses(3) 0.23 0.23 0.23 0.23 0.23 Total Annual Fund Operating Expenses 1.01 1.76 1.76 1.26 0.76 ------------------------------------------------------------------------------------------- |
(1) If you are a retirement plan participant, you may pay a 0.75% CDSC if a
total redemption of the retirement plan assets occurs within 12 months from
the date of the retirement plan's initial purchase.
(2) There is no guarantee that actual expenses will be the same as those shown
in the table.
(3) Other expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
AIM Cash Reserve Shares $103 $322 $ 558 $1,236
Class B 679 854 1,154 1,875
Class C 279 554 954 2,073
Class R 128 400 692 1,523
Investor Class 78 243 422 942
--------------------------------------------------------------------------------
|
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
AIM Cash Reserve Shares $103 $322 $558 $1,236
Class B 179 554 954 1,875
Class C 179 554 954 2,073
Class R 128 400 692 1,523
Investor Class 78 243 422 942
--------------------------------------------------------------------------------
|
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 2002, the advisor received compensation of 0.53% of average daily net assets.
SALES CHARGES
Purchase of Class B and Class C Shares of AIM Money Market Fund are subject to the contingent deferred sales charges listed in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class R shares may be subject to the contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of ordinary income.
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
In order to earn dividends on a purchase of fund shares on the day of the purchase, the transfer agent must receive payment in federal funds before 12:00 noon Eastern Time on that day. Purchases made by payments in other forms, or payments in federal funds received after 12:00 noon Eastern Time but before the close of the customary trading session of the New York Stock Exchange, will begin to earn dividends on the next business day.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2002 and 2001 has been audited by Ernst & Young, LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
CASH RESERVE
-----------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 1,
ENDED YEAR ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, ------------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- ---------- -------- ---------- -------- ---------- --------
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.0036 0.0141 0.0467 0.0300(a) 0.0414 0.0453 0.0456
=================================================================================================================================
Less distributions from net
investment income (0.0036) (0.0141) (0.0467) (0.0300) (0.0414) (0.0453) (0.0456)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.37% 1.42% 4.77% 3.03% 4.22% 4.62% 4.66%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,188,727 $1,121,879 $937,532 $912,042 $989,478 $1,179,072 $344,117
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets(c) 1.00%(d) 1.01% 1.06% 1.07%(e) 1.04% 0.99% 1.05%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income
to average net assets 0.72%(d) 1.40% 4.61% 5.15%(e) 4.16% 4.53% 4.55%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.03% for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $1,139,401,811.
(e) Annualized.
CLASS B
-------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 1,
ENDED YEAR ENDED JULY 31, THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, --------------------- JULY 31, ----------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- -------- -------- --------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0004 0.0065 0.0392 0.0256(a) 0.0339 0.0371 0.0378
=================================================================================================================================
Less distributions from net
investment income (0.0004) (0.0065) (0.0392) (0.0256) (0.0339) (0.0371) (0.0378)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.04% 0.66% 3.99% 2.59% 3.45% 3.78% 3.84%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $673,939 $717,967 $439,445 $289,327 $404,911 $310,534 $116,058
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets(c) 1.65%(d) 1.76% 1.81% 1.82%(e) 1.79% 1.81% 1.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to
average net assets 0.08%(d) 0.65% 3.86% 4.40%(e) 3.41% 3.71% 3.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.78% for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $691,775,145.
(e) Annualized.
CLASS C
-----------------------------------------------------------------------------------------------------
AUGUST 4, 1997
SIX MONTHS JANUARY 1, YEAR ENDED (DATES SALES
ENDED YEAR ENDED JULY 31, THROUGH DECEMBER 31, COMMENCED) THROUGH
JANUARY 31, --------------------- JULY 31, --------------------- DECEMBER 31,
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- -------- -------- ------------------
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.0004 0.0065 0.0393 0.0256(a) 0.0339 0.0371 0.0158
=================================================================================================================================
Less distributions from
net investment income (0.0004) (0.0065) (0.0393) (0.0256) (0.0339) (0.0371) (0.0158)
=================================================================================================================================
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.04% 0.66% 4.00% 2.59% 3.44% 3.78% 3.92%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $117,100 $118,947 $ 86,884 $ 45,457 $ 56,636 $ 27,391 $ 8,287
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to
average net assets(c) 1.65%(d) 1.76% 1.81% 1.82%(d) 1.79% 1.81% 1.80%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment
income to average net
assets 0.08%(d) 0.65% 3.86% 4.40%(d) 3.41% 3.71% 3.80%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.78% for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $120,598,012.
(e) Annualized.
CLASS R
-----------------------------
JUNE 3, 2002
SIX MONTHS (DATES SALES
ENDED COMMENCED)
JANUARY 31, THROUGH
2003 JULY 31, 2002
----------- -------------
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0023 0.0010
===============================================================================================================
Less distributions from net investment income (0.0023) (0.0010)
===============================================================================================================
Net asset value, end of period $ 1.00 $ 1.00
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(a) 0.23% 0.10%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 7,569 $ 10
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets(b) 1.25%(c) 1.26%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of net investment income to average net assets 0.47%(c) 1.15%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.28% for the six months ended January 31, 2003.
(c) Ratios are annualized and based on average net assets of $1,454,153.
(d) Annualized.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM Funds). The following information is about all the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R INVESTOR CLASS(6)
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(5)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $250,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
----------------------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM Fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(5) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund.
(6) As of July 21, 2003 Investor Class shares of AIM Blue Chip Fund, AIM European Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Real Estate Fund and AIM Tax-Exempt Cash Fund have not commenced operations.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) has adopted 12b-1 plans that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
MCF--07/03
SALES CHARGES
Sales charges on the AIM Funds and classes of those Funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
MCF--07/03
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must provide sufficient information at the time of purchase to verify that your purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) for the purpose of qualifying for the lower initial sales
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the
current value of all other shares you own.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
MCF--07/03
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25(1)
IRA, Education IRA or Roth IRA 250 50
All other accounts 500(2) 50
-------------------------------------------------------------------------------------------------------------------------
|
(1) $50 for Investor Class shares.
(2) $1,000 for Investor Class shares.
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--07/03
GRANDFATHERED INVESTORS
As of July 21, 2003, Investor Class shares of certain funds that intend to offer such shares have not commenced operations (for a listing of funds that intend to offer Investor Class shares see the "Choosing a Share Class" section of your prospectus). Once operations commence, Investor Class shares of such funds may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by A I M Distributors, Inc. (the "Grandfathered Funds") and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with A I M Distributors, Inc. and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) INVESCO Funds directors, employees of AMVESCAP PLC and its subsidiaries.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase Plan at
any time by giving the transfer agent notice ten days prior to your next
scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at least $5,000; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans, SIMPLE IRA
plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or another
sponsor's retirement plan. The plan custodian of the AIM sponsored retirement
plan assesses an annual maintenance fee of $10. Contact your financial
consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase
MCF--07/03
$1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
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(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
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(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
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(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--07/03
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM Fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line. You will be allowed
to redeem by telephone if (1) the proceeds
are to be mailed to the address on record
(if there has been no change communicated to
us within the last 30 days) or transferred
electronically to a pre-authorized checking
account; (2) you do not hold physical share
certificates; (3) you can provide proper
identification information; (4) the proceeds
of the redemption do not exceed $250,000;
and (5) you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
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TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--07/03
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
If you paid a contingent deferred sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC if you later redeem that amount.
You must notify the transfer agent in writing at the time you reinstate that you are exercising your reinstatement privilege.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM Funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security or other tax ID number on your account application, the AIM Fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those of another AIM Fund. Before requesting an exchange, review the prospectus of the AIM Fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund);
(7) Investor Class shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or Class A3 shares of an AIM Fund; or
(8) Class A or A3 shares of an AIM Fund for Investor Class shares of any AIM Fund as long as you own Investor Class shares of any AIM Fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a Fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
MCF--07/03
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; MCF--07/03
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. There is no fee for exchanges. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM Funds or the distributor may modify or terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM Funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The AIM Funds value portfolio securities for which market quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM Funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors or Trustees of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's net asset value will be subject to the judgment of the Board of Directors or Trustees or its designee instead of being determined by the market. Because some of the AIM Funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM Funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary trading session of the NYSE. The AIM Funds price
MCF--07/03
purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. An AIM Fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of dividends and distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM Fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM Fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--07/03
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
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You also can review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com MKT-PRO-1
AIM MUNICIPAL BOND FUND
July 21, 2003
Prospectus
AIM Municipal Bond Fund seeks to achieve a high level of current income exempt from federal income taxes, consistent with the preservation of principal.
This prospectus contains important information about the Class A, B, C and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
Investor Class shares offered by this prospectus are offered only to grandfathered investors. Please see the section of the prospectus entitled "Purchasing Shares -- Grandfathered Investors."
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
Investments in the fund:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
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INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 Special Tax Information Regarding the Fund 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-4 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-10 Taxes A-11 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are registered service marks and AIM Bank Connection, AIM Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations.
The fund's investment objective is to achieve a high level of current income exempt from federal income taxes, consistent with the preservation of principal. The fund will attempt to achieve its objective by investing primarily in a diversified portfolio of municipal bonds. The fund's investment objective may be changed by the Board of Trustees without shareholder approval.
The fund attempts to meet its objective by investing, normally, at least 80% of its assets in municipal bond securities that (1) pay interest which is excluded from gross income for federal income tax purposes, and (2) do not produce income that will be considered to be an item of preference for purposes of the alternative minimum tax. In complying with this 80% investment requirement, the fund's investments may include investments in synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include futures and options. Municipal bonds include debt obligations of varying maturities issued to obtain funds for various public purposes by or on behalf of states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies, authorities and instrumentalities. Certain types of industrial development bonds, such as private activity bonds, that meet certain standards, are treated as municipal bonds.
The fund will also invest at least 80% of its total assets in investment-grade municipal securities rated by Moody's Investors Service, Inc., Standard & Poor's Ratings Services or any other nationally recognized statistical rating organization. Other securities meeting certain standards set by the fund are included in this category. The fund may invest up to 20% of its total assets in lower-quality municipal securities, i.e. "junk bonds," or unrated municipal securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers focus on municipal securities they believe have favorable prospects for current income consistent with the fund's objective of preservation of principal. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. Junk bonds are less sensitive to this risk than are higher-quality bonds. A municipality may default or otherwise be unable to honor a financial obligation. Revenue bonds are generally not backed by the taxing power of the issuing municipality.
The value of, payment of interest and repayment of principal by, and the ability of the fund to sell, a municipal security may also be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations and voter initiatives as well as the economies of the regions in which the fund invests.
Compared to higher quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer and because they may be unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times the bonds could be difficult to value or sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993................................................................... 11.66%
1994................................................................... -3.79%
1995................................................................... 13.04%
1996................................................................... 3.90%
1997................................................................... 7.27%
1998................................................................... 5.28%
1999................................................................... -2.45%
2000................................................................... 8.63%
2001................................................................... 3.82%
2002................................................................... 8.26%
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The Class A shares' year-to-date total return as of June 30, 2003 was 3.96%.
During the periods shown in the bar chart, the highest quarterly return was 4.90% (quarter ended March 31, 1995) and the lowest quarterly return was -4.22% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
-----------------------------------------------------------------------------------------
Class A 03/28/77
Return Before Taxes 3.16% 3.61% 4.92% --
Return After Taxes on
Distributions 3.16 3.60 4.86 --
Return After Taxes on
Distributions and Sale of
Fund Shares 3.74 3.83 4.93 --
Class B 09/01/93
Return Before Taxes 2.31 3.48 -- 4.14%
Class C 08/04/97
Return Before Taxes 6.33 3.80 -- 3.95
Investor Class(2) 03/28/77(2)
Return Before Taxes 8.26 4.63 5.43 --
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Lehman Brothers Municipal Bond
Index(3) 9.60 6.06 6.71 --
Lipper General Municipal Debt
Fund Index(4) 8.63 4.96 5.99 --
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depends on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A only and after-tax returns for Class B, C and Investor Class will vary.
(1) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2) The returns shown for these periods are the restated historical performance of the fund's Class A shares at the net asset value and reflect the Rule 12b-1 fees applicable to Class A shares. Investor Class shares would have different returns because, although the shares are invested in the same portfolio of securities, the Investor Class has a different expense structure. The inception date shown in the table is that of the fund's Class A shares. As of July 21, 2003, Investor Class shares have not commenced operations.
(3) The Lehman Brothers Municipal Bond Index is a broad-based, total return index comprised of 8000 actual bonds, all of which are investment grade, fixed rate, long term maturities (greater than two years) and are selected from issues larger than $50 million dated since January 1984.
(4) The Lipper General Municipal Debt Fund Index is an equally weighted representation of the 30 largest funds in the Lipper General Municipal Debt category. These funds invest primarily in Municipal debt issues rated in the top four credit ratings.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES -------------------------------------------------------------------------------------------- (fees paid directly from INVESTOR your investment) CLASS A CLASS B CLASS C CLASS -------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.75% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None -------------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(3) ------------------------------------------------------------------------------------------- (expenses that are deducted INVESTOR from fund assets) CLASS A CLASS B CLASS C CLASS ------------------------------------------------------------------------------------------- Management Fees 0.44% 0.44% 0.44% 0.44% Distribution and/or Service (12b-1) Fees 0.25 1.00 1.00 0.25 Other Expenses(4) 0.12 0.12 0.12 0.12 Total Annual Fund Operating Expenses 0.81 1.56 1.56 0.81 ------------------------------------------------------------------------------------------- |
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares within 18 months from the date of purchase, you may pay a 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) There is no guarantee that actual expenses will be the same as those shown in the table.
(4) Other expenses for Investor Class shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------
Class A $554 $721 $ 903 $1,429
Class B 659 793 1,050 1,655
Class C 259 493 850 1,856
Investor Class 83 259 450 1,002
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------
Class A $554 $721 $903 $1,429
Class B 159 493 850 1,655
Class C 159 493 850 1,856
Investor Class 83 259 450 1,002
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THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 2002, the advisor received compensation of 0.44% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual members of the team (co-managers) who are primarily responsible for the management of the fund's portfolio are
- Richard A. Berry, Senior Portfolio Manager, who has been responsible for the fund since 1992 and has been associated with the advisor and/or its affiliates since 1987.
- Stephen D. Turman, Senior Portfolio Manager, who has been responsible for the fund since 1992 and has been associated with the advisor and/or its affiliates since 1985.
They are assisted by the Municipal Bond Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Municipal Bond Fund are subject to the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of tax-exempt income.
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
SPECIAL TAX INFORMATION REGARDING THE FUND
In addition to the general tax information set forth under the heading "Shareholder Information--Taxes" in this prospectus, the following information describes the tax impact of certain dividends you may receive from the fund.
You will not be required to include the "exempt-interest" portion of dividends paid by the fund in your gross income for federal income tax purposes. You will be required to report the receipt of exempt-interest dividends and other tax-exempt interest on your federal income tax returns. Exempt-interest dividends from the fund may be subject to state and local income taxes, may give rise to a federal alternative minimum tax liability, may affect the amount of social security benefits subject to federal income tax, may affect the deductibility of interest on certain indebtedness, and may have other collateral federal income tax consequences for you. The fund may invest in municipal securities the interest on which constitutes an item of tax preference and could give rise to a federal alternative minimum tax liability for you, and may invest up to 20% of its net assets in such securities and other taxable securities. The fund will try to avoid investments that result in taxable dividends.
To the extent that dividends paid by the fund are derived from taxable investments or realized capital gains, they will be taxable as ordinary income or long-term capital gains. The percentage of dividends that constitutes exempt-interest dividends will be determined annually. This percentage may differ from the actual percentage of exempt interest received by the fund for the particular days in which you hold shares.
From time to time, proposals have been introduced before Congress that would have the effect of reducing or eliminating the federal tax exemption on municipal securities. If such a proposal were enacted, the ability of the fund to pay exempt-interest dividends might be adversely affected.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information for the fiscal years 2002 and 2001 has been audited by Ernst & Young LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2001 was audited by other public accountants.
CLASS A
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SIX MONTHS YEAR ENDED JULY 31, JANUARY 1,
ENDED THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, ----------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- -------- ---------- -------- -------- --------
Net asset value, beginning of
period $ 8.06 $ 8.06 $ 7.83 $ 7.74 $ 8.35 $ 8.34 $ 8.19
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.19 0.38(a) 0.40 0.24(b) 0.41 0.42 0.42
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.04 0.00 0.23 0.09 (0.61) 0.01 0.16
=================================================================================================================================
Total from investment
operations 0.23 0.38 0.63 0.33 (0.20) 0.43 0.58
=================================================================================================================================
Less dividends from net
investment income (0.19) (0.38) (0.40) (0.24) (0.41) (0.42) (0.43)
=================================================================================================================================
Net asset value, end of period $ 8.10 $ 8.06 $ 8.06 $ 7.83 $ 7.74 $ 8.35 $ 8.34
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.86% 4.84% 8.28% 4.32% (2.45)% 5.28% 7.27%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $342,010 $339,545 $322,437 $283,416 $294,720 $327,705 $318,469
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 0.81%(d) 0.81% 0.85% 0.85%(e) 0.84% 0.82% 0.90%
=================================================================================================================================
Ratio of net investment income
to average net assets 4.58%(d) 4.79%(a) 5.06% 5.32%(e) 5.01% 5.00% 5.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19% 24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing market discounts on debt securities. Had the Fund not amortized market discounts on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $340,651,090.
(e) Annualized.
(f)Not annualized for periods less than one year.
CLASS B
--------------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, JANUARY 1,
ENDED THROUGH YEAR ENDED DECEMBER 31,
JANUARY 31, ---------------------- JULY 31, --------------------------------
2003 2002 2001 2000 1999 1998 1997
----------- -------- ------- ---------- -------- ------- -------
Net asset value, beginning of
period $ 8.07 $ 8.07 $ 7.84 $ 7.75 $ 8.37 $ 8.36 $ 8.19
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.32(a) 0.34 0.21(b) 0.35 0.36 0.36
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.04 0.00 0.23 0.08 (0.62) 0.01 0.17
=================================================================================================================================
Total from investment
operations 0.20 0.32 0.57 0.29 (0.27) 0.37 0.53
=================================================================================================================================
Less dividends from net investment
income (0.16) (0.32) (0.34) (0.20) (0.35) (0.36) (0.36)
=================================================================================================================================
Net asset value, end of period $ 8.11 $ 8.07 $ 8.07 $ 7.84 $ 7.75 $ 8.37 $ 8.36
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.48% 4.05% 7.46% 3.84% (3.28)% 4.48% 6.59%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $106,973 $104,150 $86,565 $67,363 $72,256 $72,723 $47,185
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.56%(d) 1.56% 1.60% 1.61%(e) 1.59% 1.57% 1.66%
=================================================================================================================================
Ratio of net investment income to
average net assets 3.83%(d) 4.04%(a) 4.31% 4.56%(e) 4.26% 4.25% 4.38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19% 24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing market discounts on debt securities. Had the Fund not amortized market discounts on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $106,588,104.
(e) Annualized.
(f)Not annualized for periods less than one year.
CLASS C
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AUGUST 4,
1997
(DATE SALES
SIX MONTHS YEAR ENDED JULY 31, JANUARY 1, YEAR ENDED DECEMBER COMMENCED)
ENDED THROUGH 31, THROUGH
JANUARY 31, --------------------- JULY 31, -------------------- DECEMBER 31,
2003 2002 2001 2000 1999 1998 1997
----------- ------- ------- ---------- -------- ------ ------------
Net asset value, beginning of
period $ 8.06 $ 8.05 $ 7.83 $ 7.74 $ 8.35 $ 8.35 $ 8.30
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.16 0.32(a) 0.34 0.21(b) 0.35 0.36 0.15
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) 0.04 0.01 0.22 0.08 (0.61) 0.00 0.04
=================================================================================================================================
Total from investment
operations 0.20 0.33 0.56 0.29 (0.26) 0.36 0.19
=================================================================================================================================
Less dividends from net
investment income (0.16) (0.32) (0.34) (0.20) (0.35) (0.36) (0.14)
=================================================================================================================================
Net asset value, end of period $ 8.10 $ 8.06 $ 8.05 $ 7.83 $ 7.74 $ 8.35 $ 8.35
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.49% 4.19% 7.34% 3.85% (3.16)% 4.36% 2.36%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $26,640 $29,175 $17,889 $8,252 $9,652 $9,565 $ 825
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.56%(d) 1.56% 1.60% 1.61%(e) 1.59% 1.57% 1.67%(e)
=================================================================================================================================
Ratio of net investment income
to average net assets 3.83%(d) 4.04%(a) 4.31% 4.56%(e) 4.26% 4.25% 4.37%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19% 24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing market discounts on debt securities. Had the Fund not amortized market discounts on debt securities, the net investment income per share and the ratio of net investment income to average net assets would have remained the same. In accordance with the AICPA Audit and Accounting Guide for Investment Companies, per share and ratios for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $27,554,534.
(e) Annualized.
(f)Not annualized for periods less than one year.
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to many other mutual funds (the AIM Funds). The following information is about all the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. When choosing a share class, you should consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R INVESTOR CLASS(6)
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(5)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
service (12b-1)
fee than Class B,
Class C or Class
R shares (See
"Fee Table and
Expense Example")
- Does not convert - Converts to Class - Does not convert - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $250,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
sponsored by
section 501(c)(3)
organizations,
and (iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
----------------------------------------------------------------------------------------------------------------------------
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Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and continue to hold them, those shares will convert to Class A shares of that fund at the end of the month which is seven years after the date on which shares were purchased. If you exchange those shares for Class B shares of another AIM Fund, the shares into which you exchanged will not convert to Class A shares until the end of the month which is eight years after the date on which you purchased your original shares.
(5) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund.
(6) As of July 21, 2003 Investor Class shares of AIM Blue Chip Fund, AIM European Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Real Estate Fund and AIM Tax-Exempt Cash Fund have not commenced operations.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) has adopted 12b-1 plans that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc. (the distributor) for the sale and distribution of its shares and fees for services provided to shareholders, all or a substantial portion of which are paid to the dealer of record. Because the AIM Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
MCF--07/03
SALES CHARGES
Sales charges on the AIM Funds and classes of those Funds are detailed below. As used below, the term "offering price" with respect to all categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
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(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
------------------------------------------------------------------------------
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CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
------------------------------------------------------------------------------
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SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
MCF--07/03
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify for these reductions or exceptions, you or your financial consultant must provide sufficient information at the time of purchase to verify that your purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares of any AIM fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) for the purpose of qualifying for the lower initial sales
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the
current value of all other shares you own.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
MCF--07/03
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25(1)
IRA, Education IRA or Roth IRA 250 50
All other accounts 500(2) 50
-------------------------------------------------------------------------------------------------------------------------
|
(1) $50 for Investor Class shares.
(2) $1,000 for Investor Class shares.
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
reference number. Then, use the
following wire instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- option on
your completed account application or
complete an AIM Bank Connection form.
Mail the application or form to the
transfer agent. Once the transfer agent
has received the form, call the
transfer agent to place your purchase
order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--07/03
GRANDFATHERED INVESTORS
As of July 21, 2003, Investor Class shares of certain funds that intend to offer such shares have not commenced operations (for a listing of funds that intend to offer Investor Class shares see the "Choosing a Share Class" section of your prospectus). Once operations commence, Investor Class shares of such funds may be purchased only by: (1) persons or entities who had established an account, prior to April 1, 2002, in Investor Class shares of any of the funds currently distributed by A I M Distributors, Inc. (the "Grandfathered Funds") and have continuously maintained such account in Investor Class shares since April 1, 2002; (2) any person or entity listed in the account registration for any Grandfathered Funds, which account was established prior to April 1, 2002 and continuously maintained since April 1, 2002, such as joint owners, trustees, custodians and designated beneficiaries; (3) customers of certain financial institutions, wrap accounts or other fee-based advisory programs, or insurance company separate accounts, which have had relationships with A I M Distributors, Inc. and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously maintained such relationships since April 1, 2002; (4) defined benefit, defined contribution and deferred compensation plans; and (5) INVESCO Funds directors, employees of AMVESCAP PLC and its subsidiaries.
SPECIAL PLANS
SYSTEMATIC PURCHASE PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase Plan at
any time by giving the transfer agent notice ten days prior to your next
scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at least $5,000; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM sponsored retirement plans, which
include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans, SIMPLE IRA
plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or another
sponsor's retirement plan. The plan custodian of the AIM sponsored retirement
plan assesses an annual maintenance fee of $10. Contact your financial
consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase
MCF--07/03
$1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM Floating Rate Fund, the early withdrawal charge applicable to shares of AIM Floating Rate Fund will be applied instead of the CDSC normally applicable to Class B shares.
MCF--07/03
Through a Financial Consultant Contact your financial consultant.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered owners; (2) the
name of the AIM Fund and your account
number; (3) if the transfer agent does not
hold your shares, endorsed share
certificates or share certificates
accompanied by an executed stock power; and
(4) signature guarantees, if necessary (see
below). The transfer agent may require that
you provide additional information, such as
corporate resolutions or powers of attorney,
if applicable. If you are redeeming from an
IRA account, you must include a statement of
whether or not you are at least 59 1/2 years
old and whether you wish to have federal
income tax withheld from your proceeds. The
transfer agent may require certain other
information before you can redeem from an
employer-sponsored retirement plan. Contact
your employer for details.
By Telephone Call the transfer agent or our AIM 24-hour
Automated Investor Line. You will be allowed
to redeem by telephone if (1) the proceeds
are to be mailed to the address on record
(if there has been no change communicated to
us within the last 30 days) or transferred
electronically to a pre-authorized checking
account; (2) you do not hold physical share
certificates; (3) you can provide proper
identification information; (4) the proceeds
of the redemption do not exceed $250,000;
and (5) you have not previously declined the
telephone redemption privilege. Certain
accounts, including retirement accounts and
403(b) plans, may not be redeemed by
telephone. The transfer agent must receive
your call during the hours of the customary
trading session of the New York Stock
Exchange (NYSE) in order to effect the
redemption at that day's closing price. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.com. You will be allowed
to redeem by internet if (1) you do not hold
physical share certificates; (2) you can
provide proper identification information;
(3) the proceeds of the redemption do not
exceed $250,000; and (4) you have already
provided proper bank information. AIM
prototype retirement accounts may not be
redeemed on the internet. The transfer agent
must confirm your transaction during the
hours of the customary trading session of
the NYSE in order to effect the redemption
at that day's closing price.
|
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no more than seven days, after we accept your request to redeem. If you redeem shares recently purchased by check, you will be required to wait up to ten business days before we will send your redemption proceeds. This delay is necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
MCF--07/03
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND AND AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND ONLY)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $250,000;
(2) you request that payment be made to someone other than the name registered on the account;
(3) you request that payment be sent somewhere other than the bank of record on the account; or
(4) you request that payment be sent to a new address or an address that changed in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of financial institutions. Call the transfer agent for additional information. Some institutions have transaction amount maximums for these guarantees. Please check with the guarantor institution.
REINSTATEMENT PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
If you paid a contingent deferred sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC if you later redeem that amount.
You must notify the transfer agent in writing at the time you reinstate that you are exercising your reinstatement privilege.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class shares only) has been open at least one year, you have not made an additional purchase in the account during the past six calendar months, and the value of your account falls below $500 ($250 for Investor Class shares) for three consecutive months due to redemptions or exchanges (excluding retirement accounts), the AIM Funds have the right to redeem the account after giving you 60 days' prior written notice. You may avoid having your account redeemed during the notice period by bringing the account value up to $500 ($250 for Investor Class shares) or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security or other tax ID number on your account application, the AIM Fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those of another AIM Fund. Before requesting an exchange, review the prospectus of the AIM Fund you wish to acquire. Exchange privileges also apply to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund;
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund);
(7) Investor Class shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or Class A3 shares of an AIM Fund; or
(8) Class A or A3 shares of an AIM Fund for Investor Class shares of any AIM Fund as long as you own Investor Class shares of any AIM Fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a Fund with a lower initial sales charge than the one into which you are exchanging. If you exchange into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
MCF--07/03
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares;
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your state of residence;
- Exchanges must be made between accounts with identical registration information;
- The account you wish to exchange from must have a certified tax identification number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange; MCF--07/03
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares being acquired in an exchange for up to five business days if it determines that it would be materially disadvantaged by the immediate transfer of exchange proceeds. There is no fee for exchanges. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM Funds or the distributor may modify or terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of each registered owner exactly as the shares are registered, the account registration and account number, the dollar amount or number of shares to be exchanged and the names of the AIM Funds from which and into which the exchange is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by telephone, including that the transfer agent must receive exchange requests during the hours of the customary trading session of the NYSE; however, you still will be allowed to exchange by telephone even if you have changed your address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The AIM Funds value portfolio securities for which market quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and AIM Tax-Free Intermediate Fund value variable rate securities that have an unconditional demand or put feature exercisable within seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the customary trading session of the NYSE, events occur that may materially affect the value of the security, the AIM Funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors or Trustees of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's net asset value will be subject to the judgment of the Board of Directors or Trustees or its designee instead of being determined by the market. Because some of the AIM Funds may invest in securities that are primarily listed on foreign exchanges that trade on days when the AIM Funds do not price their shares, the value of those funds' assets may change on days when you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or any earlier NYSE closing time that day. AIM Money Market Fund also determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary trading session of the NYSE. The AIM Funds price
MCF--07/03
purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. An AIM Fund may postpone the right of redemption only under unusual circumstances, as allowed by the Securities and Exchange Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary income or long-term capital gains for federal income tax purposes, whether you reinvest them in additional shares or take them in cash. Distributions are generally taxable to you at different rates depending on the length of time the fund holds its assets and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions, regardless of how long you have held your shares. Every year, you will be sent information showing the amount of dividends and distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM Fund shares will be subject to federal income tax. Exchanges of shares for shares of another AIM Fund are treated as a sale, and any gain realized on the transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING "OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares may differ materially from the federal income tax consequences described above. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--07/03
More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about the fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about the fund's investments. The fund's annual report also discusses the market conditions and investment strategies that significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77046-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
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You also can review and obtain copies of the fund's SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com MBD-PRO-1
STATEMENT OF
ADDITIONAL INFORMATION
AIM INVESTMENT SECURITIES FUNDS
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE CLASS A, CLASS A3, CLASS B, CLASS C, CLASS R, AIM CASH RESERVE AND INVESTOR CLASS SHARES, AS APPLICABLE, OF EACH PORTFOLIO (EACH A "FUND", COLLECTIVELY THE "FUNDS") OF AIM INVESTMENT SECURITIES FUNDS LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES FOR THE CLASS A, CLASS A3, CLASS B, CLASS C, CLASS R, AIM CASH RESERVE AND INVESTOR CLASS SHARES, AS APPLICABLE, OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF ANY PROSPECTUS FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
A I M FUND SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING
(800) 347-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED JULY 21, 2003, RELATES TO THE CLASS A, CLASS A3, CLASS B, CLASS C, AIM CASH RESERVE, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, OF THE FOLLOWING PROSPECTUSES:
FUND DATED
---- -----
AIM HIGH YIELD FUND JULY 21, 2003
AIM INCOME FUND JULY 21, 2003
AIM INTERMEDIATE GOVERNMENT FUND JULY 21, 2003
AIM LIMITED MATURITY TREASURY FUND DECEMBER 2, 2002
AIM MONEY MARKET FUND JULY 21, 2003
AIM MUNICIPAL BOND FUND JULY 21, 2003
AIM SHORT TERM BOND FUND DECEMBER 2, 2002
AIM TOTAL RETURN BOND FUND DECEMBER 2, 2002
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AIM INVESTMENT SECURITIES FUNDS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION ABOUT THE TRUST...............................................................................1
Fund History.............................................................................................1
Shares of Beneficial Interest............................................................................1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS..........................................................3
Classification...........................................................................................3
Investment Strategies and Risks..........................................................................4
Equity Investments............................................................................7
Foreign Investments...........................................................................7
Debt Investments..............................................................................9
Other Investments............................................................................16
Investment Techniques........................................................................17
Derivatives..................................................................................22
Fund Policies...........................................................................................28
Temporary Defensive Positions...........................................................................32
MANAGEMENT OF THE TRUST..........................................................................................32
Board of Trustees.......................................................................................32
Management Information..................................................................................32
Trustee Ownership of Fund Shares.............................................................33
Factors Considered in Approving the Investment Advisory Agreement............................33
Compensation............................................................................................34
Retirement Plan For Trustees.................................................................34
Deferred Compensation Agreements.............................................................34
Purchase of Class A Shares of the Funds at Net Asset Value...................................35
Codes of Ethics.........................................................................................35
Proxy Voting Policies...................................................................................35
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..............................................................36
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................36
Investment Advisor......................................................................................36
Service Agreements......................................................................................38
Other Service Providers.................................................................................38
BROKERAGE ALLOCATION AND OTHER PRACTICES.........................................................................39
Brokerage Transactions..................................................................................39
Commissions.............................................................................................40
Brokerage Selection.....................................................................................40
Directed Brokerage (Research Services)..................................................................41
Regular Brokers or Dealers..............................................................................41
Allocation of Portfolio Transactions....................................................................41
Allocation of Initial Public Offering ("IPO") Transactions..............................................42
PURCHASE, REDEMPTION AND PRICING OF SHARES.......................................................................43
Purchase and Redemption of Shares.......................................................................43
Offering Price..........................................................................................59
Redemption In Kind......................................................................................61
Backup Withholding......................................................................................61
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................62
Dividends and Distributions.............................................................................62
Tax Matters.............................................................................................63
DISTRIBUTION OF SECURITIES.......................................................................................71
Distribution Plans......................................................................................71
Distributor.............................................................................................73
CALCULATION OF PERFORMANCE DATA..................................................................................75
APPENDICIES:
RATINGS OF DEBT SECURITIES......................................................................................A-1
TRUSTEES AND OFFICERS...........................................................................................B-1
TRUSTEE COMPENSATION TABLE......................................................................................C-1
PROXY VOTING POLICIES...........................................................................................D-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................E-1
MANAGEMENT FEES.................................................................................................F-1
ADMINISTRATIVE SERVICES FEES....................................................................................G-1
BROKERAGE COMMISSIONS...........................................................................................H-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASE OF SECURITIES OF REGULAR BROKERS OR DEALERS.................I-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS.........................................J-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS...................................................K-1
TOTAL SALES CHARGES.............................................................................................L-1
PERFORMANCE DATA................................................................................................M-1
FINANCIAL STATEMENTS.............................................................................................FS
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GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Investment Securities Fund (the "Trust") is a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of eight separate portfolios: AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Limited Maturity Treasury Fund, AIM Money Market Fund, AIM Municipal Bond Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund (each a "Fund" and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002, as amended (the "Trust Agreement"), the Board of Trustees is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust.
The Trust was originally organized as a Maryland corporation on November 4, 1988. Pursuant to an Agreement and Plan of Reorganization, AIM Limited Maturity Treasury Fund was reorganized on October 15, 1993 as a series portfolio of the Trust. Pursuant to another Agreement and Plan of Reorganization, AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund and AIM Municipal Bond Fund were reorganized on June 1, 2000 as series portfolios of the Trust. In connection with their reorganization as series portfolios of the Trust, the fiscal year end of each of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund and AIM Municipal Bond Fund changed from December 31 to July 31.
AIM Limited Maturity Treasury Fund succeeded to the assets and assumed the liabilities of a series portfolio with a corresponding name (the "Predecessor Fund") of Short-Term Investments Co., a Massachusetts business trust, on October 15, 1993. All historical financial information and other information contained in this Statement of Additional Information for periods prior to October 15, 1993, relating to AIM Limited Maturity Treasury Fund (or a class thereof) is that of the Predecessor Fund (or a corresponding class thereof). AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund and AIM Municipal Bond Fund succeeded to the assets and assumed the liabilities of series portfolios with corresponding names (the "Predecessor Funds") of AIM Funds Group, a Delaware business trust, on June 1, 2000. All historical financial information and other information contained in this Statement of Additional Information for periods prior to June 1, 2000, relating to AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund or AIM Municipal Bond Fund (or any classes thereof) is that of the Predecessor Funds (or the corresponding classes thereof).
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net asset value (subject, in certain circumstances, to a contingent deferred sales charge) at the option of the shareholder or at the option of the Trust in certain circumstances.
The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund by or under the direction of the Board of Trustees, primarily on the basis of relative net assets, or other relevant factors.
EACH SHARE OF EACH FUND REPRESENTS AN EQUAL PROPORTIONATE INTEREST IN THAT FUND WITH EACH OTHER SHARE AND IS ENTITLED TO SUCH DIVIDENDS AND DISTRIBUTIONS OUT OF THE INCOME BELONGING TO SUCH FUND AS ARE DECLARED BY THE BOARD. EACH FUND OFFERS SEPARATE CLASSES OF SHARES AS FOLLOWS:
AIM CASH
RESERVE INSTITUTIONAL INVESTOR
FUND CLASS A CLASS A3 SHARES CLASS B CLASS C CLASS R CLASS CLASS
---- --------- -------- ----------- --------- --------- --------- -------------- -----------
AIM High Yield Fund X X X X
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Income Fund X X X X X
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Intermediate X X X X X
Government Fund
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Limited Maturity X X X
Treasury Fund
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Money Market Fund X X X X X
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Municipal Bond Fund X X X X
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Short Term Bond Fund X
--------- -------- ----------- --------- --------- --------- -------------- -----------
AIM Total Return Bond
Fund X X X
--------- -------- ----------- --------- --------- --------- -------------- -----------
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This Statement of Additional Information relates solely to the Class A, Class A3, AIM Cash Reserve Shares, Class B, Class C, Class R and Investor Class shares, if applicable, of the Funds. The Institutional Class shares, which are discussed in a separate Statement of Additional Information, are intended for use by certain eligible institutional investors and are available to the following:
o banks and trust companies acting in a fiduciary or similar capacity;
o bank and trust company common and collective trust funds;
o banks and trust companies investing for their own account;
o entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies);
o retirement plans;and
o platform sponsors with which A I M Distributors, Inc. ("AIM Distributors") has entered into an agreement.
Each class of shares represents an interest in the same portfolio of investments. Differing sales charges and expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class.
Each share of a Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Because Class B shares automatically convert to Class A shares, or AIM Cash Reserve shares with respect to AIM Money Market Fund, at month-end eight years after the date of purchase, the Fund's
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B shareholders must also approve any material increase in distribution fees submitted to Class A shareholders, or AIM Cash Reserve shareholders with respect to AIM Money Market Fund, of that Fund. A pro rata portion of shares from reinvested dividends and distributions convert along with the Class B shares.
Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected against any liability to the Trust or to the shareholders to which a trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office with the Trust ("Disabling Conduct"). The Trust Agreement provides for indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. The Trust Agreement also authorizes the purchase of liability insurance on behalf of trustees and officers.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds is "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and investment techniques used by AIM in managing The AIM Family of Funds--Registered Trademark--. The table has been marked to indicate those securities and investment techniques that AIM may use to manage a Fund. A Fund may not use all of these techniques at any one time. A Fund's transactions in a particular security or use of a particular technique is subject to limitations imposed by a Fund's investment objective, policies and restrictions described in that Fund's Prospectus and/or this Statement of Additional Information, as well as federal securities laws. The Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy.
AIM INVESTMENT SECURITIES FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM
SECURITY/ AIM LIMITED AIM AIM AIM SHORT TOTAL
INVESTMENT INTERMEDIATE MATURITY MONEY MUNICIPAL TERM RETURN
TECHNIQUE AIM INCOME GOVERNMENT TREASURY MARKET BOND BOND BOND
AIM HIGH YIELD FUND FUND FUND FUND FUND FUND FUND FUND
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
EQUITY INVESTMENTS
Common Stock
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Preferred Stock X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Convertible Securities X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Alternative Entity
Securities
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
FOREIGN INVESTMENTS
Foreign Securities X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Foreign Government
Obligations X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Foreign Exchange
Transactions X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
DEBT INVESTMENTS
U.S. Government
Obligations X X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Rule 2a-7 Requirements X X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Mortgage-Backed and
Asset-Backed Securities X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Collateralized Mortgage
Obligations X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Bank Instruments X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Commercial Instruments X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Participation Interests X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Municipal Securities X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Municipal Lease
Obligations X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Investment Grade
Corporate Debt
Obligations X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Junk Bonds X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
OTHER INVESTMENTS
REITs X X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Other Investment
Companies X X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Defaulted Securities X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Municipal Forward
Contracts
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Variable or Floating
Rate Instruments X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Indexed Securities
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Zero-Coupon and
Pay-in-Kind Securities X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
Synthetic Municipal
Instruments
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
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AIM INVESTMENT SECURITIES FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM AIM
SECURITY/ AIM LIMITED AIM AIM AIM SHORT TOTAL
INVESTMENT INTERMEDIATE MATURITY MONEY MUNICIPAL TERM RETURN
TECHNIQUE AIM INCOME GOVERNMENT TREASURY MARKET BOND BOND BOND
AIM HIGH YIELD FUND FUND FUND FUND FUND FUND FUND FUND
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
INVESTMENT TECHNIQUES
Delayed Delivery
Transactions X X X X X X X X
----------------------- ------------------- ----------- ------------ --------- -------- ---------- --------- ------
When-Issued Securities X X X X X X X X
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Short Sales X X X X X X
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Margin Transactions
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Swap Agreements X X X
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Interfund Loans X X X X X X X X
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Borrowing X X X X X X X X
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Lending Portfolio X X X X X X X X
Securities
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Repurchase Agreements X X X X X X X X
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Reverse Repurchase X X X X X X X X
Agreements
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Dollar Rolls X X X X
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Illiquid Securities X X X X X X X X
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Rule 144A Securities X X X X X X X
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Unseasoned Issuers X X
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Sale of Money Market
Securities X
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Standby Commitments
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DERIVATIVES
Equity-Linked
Derivatives
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Put Options X X X X X
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Call Options X X X X X X
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Straddles X X X X X
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Warrants X X X X
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Futures Contracts and
Options on Futures
Contracts X X X X X X
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Forward Currency
Contracts X X X
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Cover X X X X X X
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Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
AIM High Yield Fund will not acquire equity securities, other than preferred stocks, except when (a) attached to or included in a unit with income-generating securities that otherwise would be attractive to the Fund; (b) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange privileges or warrants for the acquisition of stock or equity interests of the same or a different issuer; or (c) in the case of an exchange offer whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a "when-issued" basis.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund.
The Funds will invest in a convertible debt security based primarily on the characteristics of the equity security into which it converts, and without regard to the credit rating of the convertible security (even if the credit rating is below investment grade). To the extent that a Fund invests in convertible debt securities with credit ratings below investment grade, such securities may have a higher likelihood of default, although this may be somewhat offset by the convertibility feature. See also "Junk Bonds" below.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
AIM High Yield Fund and AIM Total Return Bond Fund may invest up to 25% of their total assets, AIM Income Fund may invest up to 40% of its total assets, AIM Money Market Fund may invest up to 50% of its total assets and AIM Short Term Bond Fund may invest up to 15% of its total assets in foreign securities; however, AIM Money Market Fund and AIM Short Term Bond Fund may only invest in foreign securities denominated in U.S. dollars. In addition, AIM Total Return Bond Fund may only invest up to 5% of its total assets in foreign securities that are non-U.S. dollar denominated.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
On January 1, 1999, certain members of the European Economic and Monetary Union ("EMU") established a common European currency known as the "euro" and each member's local currency became a denomination of the euro. Each participating country (currently, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) has replaced its local currency with the euro effective January 1, 2002.
Risk of Developing Countries. AIM High Yield Fund, AIM Income Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund may each invest up to 5% of their total assets in securities of companies located in developing countries. Investments in developing countries present risks greater than, and in addition to, those presented by investments in foreign issuers in general. A number of developing countries restrict, to varying degrees, foreign investment in stocks. Repatriation of investment income, capital, and the proceeds of sales by foreign investors may require governmental registration and/or approval in some developing countries. A number of the currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investments in these currencies by the Funds. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of
certain emerging market countries. Many of the developing securities markets are relatively small or less diverse, have low trading volumes, suffer periods of relative liquidity, and are characterized by significant price volatility. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on a Fund's investments.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing countries. Foreign government obligations of developing countries and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds."
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so.
RULE 2a-7 REQUIREMENTS. Money market instruments in which the Fund will invest will be "Eligible Securities" as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. An Eligible Security is generally a rated security with a remaining maturity of 397 calendar days or less that has been rated by the Requisite NRSROs (as defined below) in one of the two highest short-term rating categories, or a security issued by an issuer that has received a rating by the Requisite NRSROs in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Eligible Securities may also include unrated securities determined by AIM (under the supervision of and pursuant to guidelines established by the Board of Trustees) to be of comparable quality to such rated securities. If an unrated security is subject to a guarantee, to be an Eligible Security, the guarantee generally must have received a rating from a NRSRO in one of the two highest short-term rating categories or be issued by a guarantor that has received a rating from a NRSRO in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Since the Fund may invest in securities backed by banks and other financial institutions, changes in the credit quality of these institutions could cause losses to the Fund and affect their share price. The term "Requisite NRSRO" means (a) any two nationally recognized statistical rating organizations (NRSROs) that have issued a rating with respect to a security or class of debt obligations of an issuer, or (b) if only one NRSRO has issued a rating with respect to such security or issuer at the time a Fund acquires the security, that NRSRO.
AIM Money Market Fund will limit investments in money market obligations to those which are denominated in U.S. dollars and which at the date of purchase are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. Briefly, "First Tier" securities are securities that are rated in the highest rating category for short-term debt obligations by two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating category by the NRSRO, or if unrated, are determined by the Fund's investment advisor (under the supervision of and pursuant to guidelines established by the Board of Trustees) to be of comparable quality to a rated security that meets the foregoing quality standards, as well as securities issued by a registered investment company that is a money market fund and U.S. Government securities.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities are mortgage-related securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, or issued by nongovernment entities. Mortgage-related securities represent pools of mortgage loans assembled for sale to investors by various government agencies such as GNMA and government-related organizations such as FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured.
There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities they issue. Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest. That guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a corporation wholly owned by the U.S. Government within the Department of Housing and Urban Development. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and are guaranteed as to payment of principal and interest by FNMA itself and backed by a line of credit with the U.S. Treasury. FNMA is a government-sponsored entity wholly owned by public stockholders. Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs") guaranteed as to payment of principal and interest by FHLMC itself and backed by a line of credit with the U.S. Treasury. FHLMC is a government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor
vehicle installment sales or installment loan contracts, leases of various types of real and personal property, and receivables from credit card agreements. Regular payments received in respect of such securities include both interest and principal. Asset-backed securities typically have no U.S. Government backing. Additionally, the ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-backed or other asset-backed security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages and loans underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received. When interest rates are rising, though, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-backed or other asset-backed security's average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security's return.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). AIM Total Return Bond Fund may invest in CMOs. The Fund can also invest in mortgage-backed bonds and asset-backed securities. A CMO is a hybrid between a mortgage-backed bond and a mortgage pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.
CMOs that are issued or guaranteed by the U.S. government or by any of its agencies or instrumentalities will be considered U.S. government securities by the Funds, while other CMOs, even if collateralized by U.S. government securities, will have the same status as other privately issued securities for purposes of applying the Fund's diversification tests.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates which are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC Participation Certificates ("PCs"), payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to approximately 100% of FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the "pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.
Risks of Mortgage-Related Securities. Investment in mortgage-backed securities poses several risks, including prepayment, market, and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions.
Market risk reflects the risk that the price of the security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and the Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold.
Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-related entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.
BANK INSTRUMENTS. AIM Money Market Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund may invest in certificates of deposits, time deposits, and bankers' acceptances from U.S. or foreign banks. A bankers' acceptance is a bill of exchange or time draft drawn on and accepted by a commercial bank. A certificate of deposit is a negotiable interest-bearing instrument with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds, and normally can be traded in the secondary market prior to maturity. A time deposit is a non-negotiable receipt issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market.
AIM Money Market Fund may invest in certificates of deposit ("Eurodollar CDs") and time deposits ("Eurodollar time deposits") of foreign branches of domestic banks. Accordingly, an investment in the Fund may involve risks that are different in some respects from those incurred by an investment company which invests only in debt obligations of U.S. domestic issuers. Such risks include future political and economic developments, the possible seizure or nationalization of foreign deposits and the possible imposition of foreign country withholding taxes on interest income.
COMMERCIAL INSTRUMENTS. AIM Money Market Fund intends to invest in commercial instruments, including commercial paper, master notes and other short-term corporate instruments, that are
denominated in U.S. dollars. Commercial paper consists of short-term promissory notes issued by corporations. Commercial paper may be traded in the secondary market after its issuance. Master notes are demand notes that permit the investment of fluctuating amounts of money at varying rates of interest pursuant to arrangements with issuers who meet the quality criteria of the Fund. The interest rate on a master note may fluctuate based upon changes in specified interest rates or be reset periodically according to a prescribed formula or may be a set rate. Although there is no secondary market in master demand notes, if such notes have a demand feature, the payee may demand payment of the principal amount of the note upon relatively short notice.
PARTICIPATION INTERESTS. AIM Money Market Fund may purchase participations in corporate loans. Participation interests generally will be acquired from a commercial bank or other financial institution (a "Lender") or from other holders of a participation interest (a "Participant"). The purchase of a participation interest either from a Lender or a Participant will not result in any direct contractual relationship with the borrowing company ("the Borrower"). Instead, the Fund will be required to rely on the Lender or the Participant that sold the participation interest both for the enforcement of the Fund's rights against the Borrower and for the receipt and processing of payments due to the Fund under the loans. The Fund is thus subject to the credit risk of both the Borrower and a Participant. Participation interests are generally subject to restrictions on resale. The Fund considers participation interests to be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities.
MUNICIPAL SECURITIES. "Municipal Securities" include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Securities may be issued include the refunding of outstanding obligations, obtaining funds for general operating expenses and lending such funds to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds to provide for the construction, equipment, repair or improvement of privately operated housing facilities, airport, mass transit, industrial, port or parking facilities, air or water pollution control facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal. The principal and interest payments for industrial development bonds or pollution control bonds are often the sole responsibility of the industrial user and therefore may not be backed by the taxing power of the issuing municipality. The interest paid on such bonds may be exempt from federal income tax, although current federal tax laws place substantial limitations on the purposes and size of such issues. Such obligations are considered to be Municipal Securities provided that the interest paid thereon, in the opinion of bond counsel, qualifies as exempt from federal income tax. However, interest on Municipal Securities may give rise to a federal alternative minimum tax liability and may have other collateral federal income tax consequences. See "Dividends, Distributions and Tax Matters - Tax Matters."
The two major classifications of Municipal Securities are bonds and notes. Bonds may be further classified as "general obligation" or "revenue" issues. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities, and in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Tax-exempt industrial development bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. Notes are short-term instruments which usually mature in less than two years. Most notes are general obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. There are, of course, variations in the risks associated with Municipal Securities, both within a particular classification and between classifications. The Funds' assets may consist of any combination of general obligation bonds, revenue bonds, industrial revenue bonds and notes. The percentage of such Municipal Securities held by a Fund will vary from time to time.
Municipal Securities also include the following securities:
o Bond Anticipation Notes usually are general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds.
o Tax Anticipation Notes are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. Tax anticipation notes are usually general obligations of the issuer.
o Revenue Anticipation Notes are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer.
o Tax-Exempt Commercial Paper (Municipal Paper) is similar to taxable commercial paper, except that tax-exempt commercial paper is issued by states, municipalities and their agencies.
The Funds also may purchase participation interests or custodial receipts from financial institutions. These participation interests give the purchaser an undivided interest in one or more underlying Municipal Securities.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease to be rated by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Services ("S&P"), or another nationally recognized statistical rating organization ("NRSRO"), or the rating of such a security may be reduced below the minimum rating required for purchase by a Fund. Neither event would require a Fund to dispose of the security, but AIM will consider such events to be relevant in determining whether the Fund should continue to hold the security. To the extent that the ratings applied by Moody's, S&P or another NRSRO to Municipal Securities may change as a result of changes in these rating systems, a Fund will attempt to use comparable ratings as standards for its investments in Municipal Securities in accordance with the investment policies described herein.
Quality Standards. The following quality standards apply at the time a security is purchased. Information concerning the ratings criteria of Moody's, S&P, and Fitch Investors Service, Inc. ("Fitch") appears herein under "Appendix A - Ratings of Debt Securities".
At least 80% of AIM Municipal Bond Fund's total assets will be invested in municipal securities rated within the four highest ratings for municipal obligations by Moody's (Aaa, Aa, A, or Baa), S&P (AAA, AA, A, or BBB), or have received a comparable rating from another NRSRO. The Fund may invest up to 20% of its total assets in municipal securities that are rated below Baa/BBB (or a comparable rating of any other NRSRO) or that are unrated. For purposes of the foregoing percentage limitations, municipal securities (i) which have been collateralized with U.S. Government obligations held in escrow until the municipal securities' scheduled redemption date or final maturity, but (ii) which have not been rated by a NRSRO subsequent to the date of escrow collateralization, will be treated by the Fund as the equivalent of Aaa/AAA rated securities.
Since the Fund invests in securities backed by insurance companies and other financial institutions, changes in the financial condition of these institutions could cause losses to the Fund and affect its share price.
The Fund may invest in securities which are insured by financial insurance companies. Since a limited number of entities provide such insurance, the Fund may invest more than 25% of its assets in securities insured by the same insurance company.
Other Considerations. The ability of the Fund to achieve its investment objective depends upon the continuing ability of the issuers or guarantors of Municipal Securities held by the Fund to meet their
obligations for the payment of interest and principal when due. The securities in which the Fund invests may not yield as high a level of current income as longer term or lower grade securities, which generally have less liquidity and greater fluctuation in value.
There is a risk that some or all of the interest received by the Fund from Municipal Securities might become taxable as a result of tax law changes or determinations of the Internal Revenue Service ("IRS").
The yields on Municipal Securities are dependent on a variety of factors, including general economic and monetary conditions, money market factors, conditions of the Municipal Securities market, size of a particular offering, and maturity and rating of the obligation. Generally, the yield realized by a Fund's shareholders will be the yield realized by the Fund on its investments, reduced by the general expenses of the Fund and the Trust. The market values of the Municipal Securities held by the Fund will be affected by changes in the yields available on similar securities. If yields increase following the purchase of a Municipal Security, the market value of such Municipal Security will generally decrease. Conversely, if yields decrease, the market value of a Municipal Security will generally increase.
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations, a type of Municipal Security, may take the form of a lease, an installment purchase or a conditional sales contract. Municipal lease obligations are issued by state and local governments and authorities to acquire land, equipment and facilities such as state and municipal vehicles, telecommunications and computer equipment, and other capital assets. Interest payments on qualifying municipal leases are exempt from federal income taxes. The Fund may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases are generally subject to greater risks than general obligation or revenue bonds. State laws set forth requirements that states or municipalities must meet in order to issue municipal obligations, and such obligations may contain a covenant by the issuer to budget for, appropriate, and make payments due under the obligation. However, certain municipal lease obligations may contain "non-appropriation" clauses which provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Accordingly, such obligations are subject to "non-appropriation" risk. While municipal leases are secured by the underlying capital asset, it may be difficult to dispose of such assets in the event of non-appropriation or other default. All direct investments by the Fund in municipal lease obligations shall be deemed illiquid and shall be valued according to the Fund's Procedures for Valuing Securities current at the time of such valuation.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund (except AIM Limited Maturity Treasury Fund) may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate.
A portion of each Fund's assets may be held in cash and high quality, short-term money market instruments such as certificates of deposit, commercial paper, bankers' acceptances, short-term U.S. Government obligations, taxable municipal securities, master notes, and repurchase agreements, pending investment in portfolio securities, to meet anticipated short-term cash needs such as dividend payments or redemptions of shares, or for temporary defensive purposes. The Funds, other than AIM High Yield Fund, AIM Income Fund and AIM Municipal Bond Fund, will purchase only investment grade corporate debt securities.
JUNK BONDS. Junk bonds are lower-rated or non-rated debt securities. Junk bonds are considered speculative with respect to their capacity to pay interest and repay principal in accordance
with the terms of the obligation. While generally providing greater income and opportunity for gain, non-investment grade debt securities are subject to greater risks than higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly leveraged issuers of high yield securities may experience financial stress, and may not have sufficient revenues to meet their interest payment obligations. Economic downturns tend to disrupt the market for junk bonds, lowering their values, and increasing their price volatility. The risk of issuer default is higher with respect to junk bonds because such issues are generally unsecured and are often subordinated to other creditors of the issuer.
The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. The lower the rating of a junk bond, the more speculative its characteristics.
AIM High Yield Fund, AIM Income Fund and AIM Municipal Bond Fund may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid secondary market may have an adverse effect on the market price and a Fund's ability to dispose of particular issues and may also make it more difficult for each Fund to obtain accurate market quotations of valuing these assets. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds at an unfavorable price. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments than those of higher-rated debt securities.
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), the Fund will indirectly
bear its proportionate share of the advisory fees and other operating expenses of such investment company. The Funds have obtained an exemptive order from the SEC allowing them to invest in money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"), provided that investments in Affiliated Money Market Funds do not exceed 25% of the total assets of the investing Fund.
The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies.
DEFAULTED SECURITIES. The Funds may invest in defaulted securities. In order to enforce its rights in defaulted securities, the Funds may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the defaulted securities. This could increase a Fund's operating expenses and adversely affect its net asset value. Any investments by the Funds in defaulted securities will also be considered illiquid securities subject to the limitations described herein, unless AIM determines that such defaulted securities are liquid under guidelines adopted by the Board of Trustees.
VARIABLE OR FLOATING RATE INSTRUMENTS. A Fund may invest in securities which have variable or floating interest rates which are readjusted on set dates (such as the last day of the month or calendar quarter) in the case of variable rates or whenever a specified interest rate change occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate securities than for fixed rate obligations. Many securities with variable or floating interest rates purchased by a Fund are subject to payment of principal and accrued interest (usually within seven days) on the Fund's demand. The terms of such demand instruments require payment of principal and accrued interest by the issuer, a guarantor, and/or a liquidity provider. All variable or floating rate instruments will meet the applicable quality standards of a Fund. AIM will monitor the pricing, quality and liquidity of the variable or floating rate securities held by the Funds.
ZERO-COUPON AND PAY-IN-KIND SECURITIES. A Fund may invest in zero-coupon or pay-in-kind securities. These securities are debt securities that do not make regular cash interest payments. Zero-coupon securities are sold at a deep discount to their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because zero-coupon and pay-in-kind securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. While these securities do not pay current cash income, federal tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accrued during that year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain excise taxes, AIM Short Term Bond Fund and AIM Total Return Bond Fund may be required to distribute a portion of such discount and income, and may be required to dispose of other portfolio securities, which could occur during periods of adverse market prices, in order to generate sufficient cash to meet these distribution requirements.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leveraging technique.
Investment in securities on a delayed delivery basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must sell another security in order to honor a when-issued commitment. If a Fund purchases a when-issued security, the Fund's custodian bank will segregate liquid assets in an amount equal to the when-issued commitment. If the market value of such segregated assets declines, additional liquid assets will be segregated on a daily basis so that the market value of the segregated assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. A Fund is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. A Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in a Fund's long position should be
reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount a Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining the number of shares to be sold short against a Fund's position in a convertible security, the anticipated fluctuation in the conversion premium is considered. A Fund may also make short sales to generate additional income from the investment of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and in an amount equal to, the securities sold short. To secure its obligation to deliver the securities sold short, a Fund will segregate with its custodian an equal amount to the securities sold short or securities convertible into or exchangeable for such securities. Each Fund (except for AIM Limited Maturity Treasury Fund and AIM Money Market Fund) may pledge no more than 10% of its total assets as collateral for short sales against the box.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin.
SWAP AGREEMENTS. AIM Short Term Bond Fund, AIM Total Return Bond Fund and AIM Income Fund may enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to the Fund than if it had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations which the parties to a swap agreement have agreed to exchange. Most swap agreements entered into by the Fund would calculate the obligations on a "net basis." Consequently, the Fund's obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). Obligations under a swap agreement will be accrued daily (offset against amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating liquid assets, to avoid any potential leveraging of the Fund. The Fund will not enter into a swap agreement with any single party if the net amount owed to or to be received under existing contracts with that party would exceed 5% of the Fund's total assets. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters - Swap Agreements."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other AIM Funds and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund
borrowings are outstanding, the Fund cannot make any additional investments. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of the Funds to lend its securities to other AIM Funds is subject to certain other terms and conditions.
BORROWING. The Funds may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash, letters of credit, or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Each Fund may lend portfolio securities to the extent of one-third of its total assets.
The Funds would continue to receive the income on loaned securities and would, at the same time, earn interest on the loan collateral or on the investment of any cash collateral. A Fund will not have the right to vote securities while they are lent, but it can call a loan in anticipation of an important vote. Any cash collateral pursuant to these loans would be invested in short-term money market instruments or Affiliated Money Market Funds. Lending securities entails a risk of loss to the Funds if and to the extent that the market value of the securities loaned increases and the collateral is not increased accordingly or in the event of default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during a Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, a Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days, and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act.
AIM Limited Maturity Treasury Fund's investment policies permit it to invest in repurchase agreements with banks and broker-dealers pertaining to U.S. Treasury obligations. However, in order to maximize the Fund's dividends which are exempt from state income taxation, as a matter of operating policy, the Fund does not currently invest in repurchase agreements.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are agreements that involve the sale of securities held by a Fund to financial institutions such as banks and broker-dealers,
with an agreement that the Fund will repurchase the securities at an agreed upon price and date. A Fund may employ reverse repurchase agreements (i) for temporary emergency purposes, such as to meet unanticipated net redemptions so as to avoid liquidating other portfolio securities during unfavorable market conditions; (ii) to cover short-term cash requirements resulting from the timing of trade settlements (except AIM Limited Maturity Treasury Fund); or (iii) to take advantage of market situations where the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. At the time it enters into a reverse repurchase agreement, a Fund will segregate liquid assets (U.S. Treasury obligations in the case of AIM Limited Maturity Treasury Fund) having a dollar value equal to the repurchase price, and will subsequently continually monitor the account to ensure that such equivalent value is maintained at all times. Reverse repurchase agreements involve the risk that the market value of securities to be purchased by the Fund may decline below the price at which it is obligated to repurchase the securities, or that the other party may default on its obligation, so that the Fund is delayed or prevented from completing the transaction. Reverse repurchase agreements are considered borrowings by a Fund under the 1940 Act.
DOLLAR ROLLS. AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund may engage in dollar roll transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC. A dollar roll involves the sale of a security, with an agreement to repurchase a substantially similar (i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are purchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, a Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for a Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. At the time a Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Funds typically enter into dollar roll transactions on mortgage securities to enhance their return either on an income or total return basis or to manage pre-payment risk. Dollar rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A, and thus may or may not constitute illiquid securities.
Each Fund (except AIM Money Market Fund) may invest up to 15% of its net assets in securities that are illiquid. AIM Money Market Fund may invest up to 10% of its net assets in securities that are illiquid, including repurchase agreements with remaining maturities in excess of seven (7) days. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while privately placed, are eligible for purchase and resale pursuant to Rule 144A under the 1933 Act. This Rule permits certain qualified institutional buyers, such as the Funds, to trade in privately placed securities even though such securities are not registered under the 1933 Act. AIM, under the supervision of the Board of Trustees, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the Funds'
restriction on investment in illiquid securities. Determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination AIM will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, AIM could consider the (i) frequency of trades and quotes; (ii) number of dealers and potential purchasers; (iii) dealer undertakings to make a market; and (iv) nature of the security and of market place trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). AIM will also monitor the liquidity of Rule 144A securities and, if as a result of changed conditions, AIM determines that a Rule 144A security is no longer liquid, AIM will review a Fund's holdings of illiquid securities to determine what, if any, action is required to assure that such Fund complies with its restriction on investment in illiquid securities. Investing in Rule 144A securities could increase the amount of each Fund's investments in illiquid securities if qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies.
SALE OF MONEY MARKET SECURITIES. AIM Money Market Fund does not seek profits through short-term trading and will generally hold portfolio securities to maturity. However, AIM may seek to enhance the yield of the Fund by taking advantage of yield disparities that occur in the money markets. For example, market conditions frequently result in similar securities trading at different prices. AIM may dispose of any portfolio security prior to its maturity if such disposition and reinvestment of proceeds are expected to enhance yield consistent with AIM's judgment as to desirable portfolio maturity structure. AIM may also dispose of any portfolio security prior to maturity to meet redemption requests, and as a result of a revised credit evaluation of the issuer or other circumstances or considerations. The Fund's policy of investing in securities with maturities of 397 days or less will result in high portfolio turnover. Since brokerage commissions are not normally paid on investments of the type made by the Fund, the high turnover should not adversely affect the Fund's net income.
Derivatives
AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund may each invest in forward currency contracts (except for AIM Intermediate Government Fund and AIM Short Term Bond Fund), futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with each Fund's investments. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities).
AIM Limited Maturity Treasury Fund, AIM Money Market Fund and AIM Municipal Bond Fund may not invest in puts, calls, straddles, spreads or any combination thereof, except, however, AIM Municipal Bond Fund may purchase and sell options on financial futures contracts and may sell covered call options.
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to write (sell) the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise.
If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into, or exchangeable, without payment of further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy, and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract
or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. The Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options as (i.e., the market value) illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter,
acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. A Fund, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Fund's overall position. A possible combined position would involve writing a covered call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written covered call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, the Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward currency contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares, except that only AIM Municipal Bond Fund is subject to restriction (9). Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) shall not be considered to be violated unless an excess over or a deficiency under the percentage occurs immediately after, and is caused by, an acquisition or disposition of securities or utilization of assets by the Fund.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its
portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the 1933 Act.
(4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments, or (iii) with respect to AIM Money Market Fund, bank instruments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
(8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund.
(9) Under normal circumstances, AIM Municipal Bond Fund will invest at least 80% of the value of its assets (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) in investments the income from which is exempt from federal income tax under regular tax rules.
The investment restrictions set forth above provide each of the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds has this flexibility, the Board of Trustees has adopted non-fundamental restrictions for each of the Funds relating to certain of these restrictions which the Funds' advisor must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets (and
for AIM Money Market Fund with respect to 100% of its total assets), purchase
the securities of any issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities), if, as a result,
(i) more than 5% of the Fund's total assets would be invested in the securities
of that issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that
issuer. The Fund may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of other money market funds and lend money to other investment
companies or their series portfolios that have AIM or an affiliate of AIM as an
investment
advisor (an "AIM Advised Fund"), subject to the terms and conditions of any exemptive orders issued by the SEC. In addition, in complying with the fundamental restriction regarding issuer diversification, AIM Municipal Bond Fund will regard each state and political subdivision, agency or instrumentality, and each multi-state agency of which such state is a member, as a separate issuer.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 331/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM Advised Fund. The Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets or when any borrowings from an AIM Advised Fund are outstanding.
(3) In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to 25% of its total assets in the securities of issuers whose principal business activities are in the same industry. For purposes of AIM Limited Maturity Treasury Fund's fundamental restriction regarding industry concentration, the United States Government shall not be considered an industry.
(4) In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 331/3% of its total assets and may lend money to an AIM Advised Fund, on such terms and conditions as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM High Yield Fund normally invests at least 80% of its assets in non-investment grade debt securities, i.e., "junk bonds". For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) AIM Intermediate Government Fund normally invests at least 80% of its assets in debt securities issued, guaranteed or otherwise backed by the U.S. government. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(3) AIM Limited Maturity Treasury Fund normally invests at least 80% of its assets in direct obligations of the U.S. Treasury, including bills, notes, and bonds. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(4) AIM Short Term Bond Fund normally invests at least 80% of its assets in a diversified portfolio of investment-grade fixed income securities. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide
written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(5) AIM Total Return Bond Fund normally invests at least 80% of its assets in a diversified portfolio of investment grade fixed income securities generally represented by the sector categories within the Lehman Brothers Aggregate Bond Index. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(6) Under normal circumstances, AIM Municipal Bond Fund will invest at least 80% of the value of its assets (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) in investments the income from which will not constitute an item of tax preference under the alternative minimum tax rules.
(7) AIM Municipal Bond Fund will not: invest 25% or more of its assets in (a) securities whose issuers are located in the same state; (b) securities the interest upon which is paid from revenues of similar type projects; or (c) industrial development bonds. The policy described in (b) does not apply, however, if the securities are subject to a guarantee. For securities subject to a guarantee, the Fund does not intend to purchase any such security if, after giving effect to the purchase, 25% or more of the Fund's assets would be invested in securities issued or guaranteed by entities in a particular industry. Securities issued or guaranteed by a bank or subject to financial guaranty insurance are not subject to the limitations set forth in the preceding sentence.
The Trust has obtained an opinion of Dechert Price & Rhoads, special counsel to the Trust, that shares of AIM Limited Maturity Treasury Fund are eligible for investment by a federal credit union. In order to ensure that shares of AIM Limited Maturity Treasury Fund meet the requirements for eligibility for investment by federal credit unions, that Fund has adopted the following additional non-fundamental policies:
(a) The Fund will enter into repurchase agreements only with:
(i) banks insured by the Federal Deposit Insurance Corporation (FDIC);
(ii) savings and loan associations insured by the FDIC; or (iii)
registered broker-dealers. The Fund will only enter into repurchase
transactions pursuant to a master repurchase agreement in writing with
the Fund's counterparty. Under the terms of a written agreement with
its custodian, the Fund receives on a daily basis written confirmation
of each purchase of a security subject to a repurchase agreement and a
receipt from the Fund's custodian evidencing each transaction. In
addition, securities subject to a repurchase agreement may be recorded
in the Federal Reserve Book-Entry System on behalf of the Fund by its
custodian. The Fund purchases securities subject to a repurchase
agreement only when the purchase price of the security acquired is
equal to or less than its market price at the time of the purchase.
(b) The Fund will only enter into reverse repurchase agreements and purchase additional securities with the proceeds when such proceeds are used to purchase other securities that either mature on a date simultaneous with or prior to the expiration date of the reverse repurchase agreement, or are subject to an agreement to resell such securities within that same time period.
(c) The Fund will only enter into securities lending transactions that comply with the same counterparty, safekeeping, maturity and borrowing restrictions that the Fund observes when participating in repurchase and reverse repurchase transactions.
(d) The Fund will enter into when-issued and delayed delivery transactions only when the time period between trade date and settlement date does not exceed 120 days, and only when settlement is on a cash basis. When the delivery of securities purchased in such
manner is to occur within 30 days of the trade date, the Fund will purchase the securities only at their market price as of the trade date.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or (with the exception of AIM Limited Maturity Treasury Fund) high-quality debt instruments. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Funds and the Trust is vested in the Board of Trustees. The Board of Trustees approves all significant agreements between the Trust, on behalf of one or more of the Funds, and persons or companies furnishing services to the Funds. The day-to-day operations of each Fund are delegated to the officers of the Trust and to AIM, subject always to the objective(s), restrictions and policies of the applicable Fund and to the general supervision of the Board of Trustees. Certain trustees and officers of the Trust are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the parent corporation of AIM. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during at least the last five years and certain other information concerning them are set forth in Appendix B.
The standing committees of the Board of Trustees are the Audit Committee, the Investments Committee, the Valuation Committee and the Committee on Directors/Trustees.
The members of the Audit Committee are Frank S. Bayley, Bruce L. Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M. Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-Davis and Ruth H. Quigley. The Audit Committee is responsible for: (i) the appointment, compensation and oversight of independent auditors employed by the Fund (including resolution of disagreements between Fund management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; (ii) overseeing the financial reporting process of the Fund; (iii) monitoring the process and resulting financial statements prepared by Fund management to promote accuracy of financial reporting and asset valuation; and (iv) preapproving permissible non-audit services that are provided to the Fund by its independent auditors. During the fiscal year ended July 31, 2002, the Audit Committee held five meetings.
The members of the Investments Committee are Messrs. Bayley, Crockett, Dowden, Dunn, Fields, Pennock and Sklar (Chair), Carl Frischling, Dr. Mathai-Davis (Vice Chair) and Miss Quigley. The Investments Committee is responsible for: (i) overseeing AIM's investment-related compliance systems and procedures to ensure their continued adequacy; and (ii) considering and acting, on an interim basis between meetings of the full Board, on investment-related matters requiring Board consideration, including dividends and distributions, brokerage policies and pricing matters. During the fiscal year ended July 31, 2002, the Investments Committee held five meetings.
The members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii)
periodically reviewing information provided by AIM regarding industry developments in connection with valuation; (iv) periodically reviewing information from AIM regarding fair value and liquidity determinations made pursuant to the Procedures, and making recommendations to the full Board in connection therewith (whether such information is provided only to the Committee or to the Committee and the full Board simultaneously); and (v) if requested by AIM, assisting AIM's internal valuation committee and/or the full Board in resolving particular valuation anomalies. During the fiscal year ended July 31, 2002, the Valuation Committee held one meeting.
The members of the Committee on Directors/Trustees are Messrs. Bayley,
Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar, Dr.
Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of the
Fund for election or appointment (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of the Fund at meetings called for the election of trustees;
(ii) nominating persons who are not interested persons of the Fund for selection
as, members of each committee of the Board, including without limitation, the
Audit Committee, the Committee on Directors/Trustees, the Investments Committee
and the Valuation Committee, and to nominate persons for selection as chair and
vice chair of each such committee; (iii) reviewing from time to time the
compensation payable to the independent trustees and making recommendations to
the Board regarding compensation; (iv) reviewing and evaluating from time to
time the functioning of the Board and the various committees of the Board; (v)
selecting independent legal counsel to the independent trustees and approving
the compensation paid to independent legal counsel; and (vi) approving the
compensation paid to independent counsel and other advisers, if any, to the
Audit Committee of the Fund. During the fiscal year ended July 31, 2002, the
Committee on Directors/Trustees held six meetings.
The Committee on Directors/Trustees will consider nominees recommended
by a shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustee within the AIM Funds complex, is set forth in Appendix B.
Factors Considered in Approving the Investment Advisory Agreement
The advisory agreement with AIM was re-approved for each Fund other than AIM Short Term Bond Fund by the Trust's Board at a meeting held on May 13-14, 2003. In evaluating the fairness and reasonableness of the advisory agreement, the Board of Trustees considered a variety of factors for each Fund, including: the requirements of each Fund for investment supervisory and administrative services; the quality of AIM's services, including a review of each Fund's investment performance and AIM's investment personnel; the size of the fees in relationship to the extent and quality of the investment advisory services rendered; fees charged to AIM's other clients; fees charged by competitive investment advisors; the size of the fees in light of services provided other than investment advisory services; the expenses borne by each Fund as a percentage of its assets and relationship to contractual limitations; any fee waivers (or payments of Fund expenses) by AIM; AIM's profitability; the benefits received by AIM from its relationship to each Fund, including soft dollar arrangements, and the extent to which each Fund shares in those benefits; the organizational capabilities and financial condition of AIM and conditions and trends prevailing in the economy, the securities markets and the mutual fund industry; and the historical relationship between each Fund and AIM.
In considering the above factors, the Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of each Fund may be invested in money market funds advised by AIM pursuant to the terms of an exemptive order. The
Board found that each Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that each Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board further determined that the proposed securities lending program and related procedures with respect to each of the lending Funds is in the best interests of each lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of each lending Fund and its respective shareholders.
After consideration of these factors, the Board found that: (i) the services provided to each Fund and its shareholders were adequate; (ii) the agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the agreements would have been obtained through arm's length negotiations. The Board therefore concluded that each Fund's advisory agreement was in the best interests of such Fund and its shareholders and continued the agreement for an additional year.
COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her services according to a fee schedule which recognizes the fact that such trustee also serves as a director or trustee of other AIM Funds. Each such trustee receives a fee, allocated among the AIM Funds for which he or she serves as a director or trustee, which consists of an annual retainer component and a meeting fee component.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002 is found in Appendix C.
Retirement Plan For Trustees
The trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM. The retirement plan includes a retirement policy as well as retirement benefits for the non-AIM-affiliated trustees.
The retirement policy permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the trustees may extend from time to time the retirement date of a trustee.
Annual retirement benefits are available to each non-AIM-affiliated
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a
predecessor fund) for a Covered Fund. The retirement benefits will equal 75% of
the trustee's annual retainer paid or accrued by any Covered Fund to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The annual retirement benefits are
payable in quarterly installments for a number of years equal to the lesser of
(i) ten or (ii) the number of such trustee's credited years of service. A death
benefit is also available under the plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased trustee's retirement benefits for the
same length of time that the trustee would have received based on his or her
service. A trustee must have attained the age of 65 (55 in the event of death or
disability) to receive any retirement benefit.
Deferred Compensation Agreements
Messrs. Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for purposes of this paragraph only, the "Deferring Trustees") have each executed a Deferred Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees have the option to elect to defer receipt of up to 100% of their compensation payable by the Trust, and
such amounts are placed into a deferral account. Currently, the Deferring Trustees have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested. Distributions from the Deferring Trustees' deferral accounts will be paid in cash, generally in equal quarterly installments over a period of up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. The Trust's Board of Trustees, in its sole discretion, also may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's retirement benefits commence under the Plan. The Board, in its sole discretion, also may accelerate or extend the distribution of such deferral accounts after the Deferring Trustee's termination of service as a trustee of the Trust. If a Deferring Trustee dies prior to the distribution of amounts in his or her deferral account, the balance of the deferral account will be distributed to his or her designated beneficiary. The Compensation Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation.
Purchase of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase
Class A shares of the Funds without paying an initial sales charge. AIM
Distributors permits such purchases because there is a reduced sales effort
involved in sales to such purchasers, thereby resulting in relatively low
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Trasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund - Purchases of Class A Shares at Net Asset Value."
CODES OF ETHICS
AIM, the Trust and AIM Distributors have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading. Personal trading, including personal trading involving securities that may be purchased or held by a Fund, is permitted by persons covered under the relevant Codes subject to certain restrictions; however those persons are generally required to pre-clear all security transactions with the Compliance Officer or his designee and to report all transactions on a regular basis.
PROXY VOTING POLICIES
The Board of Trustees of the Trust has delegated responsibility for decisions regarding proxy voting for securities held by each Fund to the Fund's investment advisor. The investment advisor will vote such proxies in accordance with its proxy policies and procedures, which have been reviewed by the Board of Trustees, and which are found in Appendix D.
Any material changes to the proxy policies and procedures will be submitted to the Board of Trustees of the Trust for approval. The Board of Trustees will be supplied with a summary quarterly report of each Fund's proxy voting record.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix E. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 190 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds' operations and provides investment advisory services to the Funds. AIM obtains and evaluates economic, statistical and financial information to formulate and implement investment programs for the Funds.
AIM is also responsible for furnishing to each Fund, at AIM's expense, the services of persons believed to be competent to perform all supervisory and administrative services required by each Fund, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders.
The Master Investment Advisory Agreement provides that each Fund will pay or cause to be paid all expenses of such Fund not assumed by AIM, including, without limitation: brokerage commissions, taxes, legal, auditing or governmental fees, the cost of preparing share certificates, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption, and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to trustee and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to shareholders.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its advisory agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the following annual rates, based on the average daily net assets of each Fund during the year:
FUND NAME NET ASSETS ANNUAL RATE
--------- ------------------------------ --------------------
AIM High Yield Fund First $200 million 0.625%
Next $300 million 0.55%
Next $500 million 0.50%
Amount over $1 billion 0.45%
------------------------------ --------------------
AIM Income Fund First $200 million 0.50%
AIM Intermediate Government Fund Next $300 million 0.40%
AIM Municipal Bond Fund Next $500 million 0.35%
Amount over $1 billion 0.30%
------------------------------ --------------------
AIM Money Market Fund First $1 billion 0.55%
Amount over $1 billion 0.50%
------------------------------ --------------------
AIM Limited Maturity Treasury Fund First $500 million 0.20%
Amount over $500 million 0.175%
------------------------------ --------------------
AIM Short Term Bond Fund All Assets 0.40%
------------------------------ --------------------
AIM Total Return Bond First $500 million 0.50%
Next $500 million 0.45%
Amount over $1 billion 0.40%
------------------------------ --------------------
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AIM may from time to time waive or reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed to waive a portion of advisory fees payable by each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's Investment of uninvested cash in an Affiliated Money Market Fund. Termination of this agreement requires approval by the Board of Trustees. See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies."
AIM has contractually agreed through July 31, 2004, to waive fees and/or reimburse expenses (excluding interest, taxes, dividends on short sales, fund merger and reorganization expenses, extraordinary items and increases in expenses due to expense offset arrangements, if any) for AIM Total Return Bond Fund's Class A, Class B and Class C shares to the extent necessary to limit the total operating expenses of Class A shares to 1.25% (e.g., if AIM waives 1.86% of Class A expenses, AIM will also waive 1.86% of Class B and Class C expenses). Such contractual fee waivers or reductions are set forth in the Fee Table to the Fund's Prospectus and may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has contractually agreed through July 31, 2004, to waive fees and/or reimburse expenses (excluding interest, taxes, dividends on short sales, fund merger and reorganization expenses, extraordinary items and increases in expenses due to expense offset arrangements, if any) for AIM Short Term Bond Fund's Class C shares to the extent necessary to limit the total operating expenses of Class C shares to 1.20%. Such contractual fee waivers or reductions are set forth in the Fee Table to the Fund's Prospectus and may not be terminated or amended to the Fund's detriment during the period stated in the agreements between AIM and the Fund.
The management fees payable by each Fund, the amounts waived by AIM and the net fee paid by each Fund for the last three fiscal years ended July 31, are found in Appendix F.
SECURITIES LENDING ARRANGEMENTS. If a Fund engages in securities
lending, AIM will provide the Fund investment advisory services and related
administrative services. The advisory agreement describes the administrative
services to be rendered by AIM if a Fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Services to be provided include: (a) overseeing participation in the
securities lending program to ensure compliance with all applicable regulatory
and investment guidelines; (b) assisting the securities lending agent or
principal (the "agent") in determining which specific securities are available
for loan; (c) monitoring the agent to ensure that securities loans are effected
in accordance with AIM's instructions and with procedures adopted by the Board;
(d) preparing appropriate periodic reports for, and seeking appropriate
approvals from, the Board with respect to securities lending activities; (e)
responding to agent inquiries; and (f) performing such other duties as may be
necessary.
AIM's compensation for advisory services rendered in connection with securities lending is included in the advisory fee schedule. As compensation for the related administrative services AIM will provide, a lending Fund will pay AIM a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. AIM currently intends to waive such fee, and has agreed to seek Board approval prior to its receipt of all or a portion of such fee.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the advisory agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board of Trustees. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three fiscal years ended July 31, are found in Appendix G.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. A I M Fund Services, Inc. ("AFS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.
The Transfer Agency and Service Agreement between the Trust and AFS provides that AFS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AFS will receive a per account fee plus out-of-pocket expenses to process orders for purchases, redemptions and exchanges of shares; prepare and transmit payments for dividends and distributions declared by the Funds; maintain shareholder accounts and provide shareholders with information regarding the Funds and their accounts. AFS may impose certain copying charges for requests for copies of shareholder account statements and other historical account information older than the current year and the immediately preceding year.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536 has entered into an agreement with the Trust (and certain other
AIM Funds), PFPC Inc. (formerly known as First Data Investor Service Group) and Financial Data Services, Inc., pursuant to which MLPF&S is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Fund(s).
Primerica Shareholder Services, Inc. ("PSS"), 3120 Breckinridge Boulevard, Duluth, Georgia 30099-0001 has also entered into an agreement with the Trust (and certain other AIM Funds), and AFS pursuant to which PSS is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Funds.
CUSTODIANS. State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund. The Bank of New York, 100 Church Street, New York, New York 10286, is custodian of all securities and cash of AIM Limited Maturity Fund, AIM Money Market Fund and AIM Municipal Bond Fund. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for purchases of shares of the Funds. The Bank of New York also serves as sub-custodian to facilitate cash management.
The custodians are authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country; the custodians are responsible for monitoring eligible foreign securities depositories.
Under their contracts with the Trust, the custodians maintain the portfolio securities of the Funds, administer the purchases and sales of portfolio securities, collect interest and dividends and other distributions made on the securities held in the portfolios of the Funds and perform other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets.
AUDITORS. The Funds' independent public accountants are responsible for auditing the financial statements of the Funds. The Board of Trustees selected Ernst & Young LLP, 5 Houston Center, 1401 McKinney, Suite 1200, Houston, Texas 77010-4035, as the independent public accountants to audit the financial statements of the Funds.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
AIM makes decisions to buy and sell securities for each Fund, selects broker-dealers, effects the Funds' investment portfolio transactions, allocates brokerage fees in such transactions and, where applicable, negotiates commissions and spreads on transactions. Since purchases and sales of portfolio securities by the Funds are usually principal transactions, the Funds incur little or no brokerage commission. AIM's primary consideration in effecting a security transaction is to obtain the most favorable execution of the order, which includes the best price on the security and a low commission rate. While AIM seeks reasonably competitive commission rates, the Funds may not pay the lowest commission or spread available. See "Brokerage Selection" below.
Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected at either net prices without commissions, but which include compensation to the broker-dealer in the form of a mark up or mark down, or on an
agency basis, which involves the payment of negotiated brokerage commissions to the broker-dealer, including electronic communication networks.
Traditionally, commission rates have not been negotiated on stock markets outside the United States. Although in recent years many overseas stock markets have adopted a system of negotiated rates, a number of markets maintain an established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended July 31, are found in Appendix H.
COMMISSIONS
During the last three fiscal years ended July 31, none of the Funds paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with banks and their affiliates that own 5% or more of the outstanding voting securities of an AIM Fund, provided the conditions of an exemptive order received by the AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to another AIM Fund or account (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of Directors/Trustees of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses.
Under the 1940 Act, certain persons affiliated with the Trust are prohibited from dealing with the Trust as principal in any purchase or sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. The 1940 Act also prohibits the Trust from purchasing a security being publicly underwritten by a syndicate of which certain persons affiliated with the Trust are members except in accordance with certain conditions. These conditions may restrict the ability of the Funds to purchase municipal securities being publicly underwritten by such syndicate, and the Funds may be required to wait until the syndicate has been terminated before buying such securities. At such time, the market price of the securities may be higher or lower than the original offering price. A person affiliated with the Trust may, from time to time, serve as placement agent or financial advisor to an issuer of Municipal Securities and be paid a fee by such issuer. The Funds may purchase such Municipal Securities directly from the issuer, provided that the purchase is reviewed by the Trust's Board of Trustees and a determination is made that the placement fee or other remuneration paid by the issuer to a person affiliated with the Trust is fair and reasonable in relation to the fees charged by others performing similar services.
BROKERAGE SELECTION
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM, under certain circumstances, lawfully may cause an account to pay a higher commission than the lowest available. Under Section 28(e)(1), AIM must make a good faith determination that the commissions paid are "reasonable in relation to the value of the brokerage and research services provided ... viewed in terms of either that particular transaction or [AIM's] overall responsibilities with respect to the accounts as to which [it] exercises investment discretion." The services provided by the broker also must lawfully and appropriately assist AIM in the performance of its investment decision-making responsibilities. Accordingly, in recognition of research services provided to it, a Fund may pay a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own research (and the research of its affiliates), and may include the following types of information: statistical and background information on the U.S. and foreign economies, industry groups and individual companies; forecasts and interpretations with respect to the U.S. and foreign economies, securities, markets, specific industry groups and individual companies; information on federal, state, local and foreign political developments; portfolio management strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied by specialized services to AIM and to the Trust's trustees with respect to the performance, investment activities, and fees and expenses of other mutual funds. Broker-dealers may communicate such information electronically, orally, in written form or on computer software. Research services may also include the providing of electronic communication of trade information and the providing of custody services, as well as the providing of equipment used to communicate research information, the providing of specialized consultations with AIM personnel with respect to computerized systems and data furnished to AIM as a component of other research services, the arranging of meetings with management of companies, and the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM since the broker-dealers used by AIM tend to follow a broader universe of securities and other matters than AIM's staff can follow. In addition, the research provides AIM with a diverse perspective on financial markets. Research services provided to AIM by broker-dealers are available for the benefit of all accounts managed or advised by AIM or by its affiliates. Some broker-dealers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by AIM's clients, including the Funds. However, the Funds are not under any obligation to deal with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the broker-dealer providing them. In other cases, the research services may be obtainable from alternative sources in return for cash payments. AIM believes that the research services are beneficial in supplementing AIM's research and analysis and that they improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. However, to the extent that AIM would have purchased research services had they not been provided by broker-dealers, the expenses to AIM could be considered to have been reduced accordingly.
AIM may determine target levels of brokerage business with various brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be based upon the following factors, among others: (1) the execution services provided by the broker; (2) the research services provided by the broker; and (3) the broker's interest in mutual funds in general and in the Funds and other mutual funds advised by AIM or A I M Capital Management, Inc. (collectively, the "AIM Funds") in particular, including sales of the Funds and of the other AIM Funds. In connection with (3) above, the Funds' trades may be executed directly by dealers that sell shares of the AIM Funds or by other broker- dealers with which such dealers have clearing arrangements, consistent with obtaining best execution. AIM will not enter into a binding commitment with brokers to place trades with such brokers involving brokerage commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended July 31, 2002 are found in Appendix I.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended July 31, 2002 is found in Appendix I.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some of these accounts may have investment objectives similar to the Funds. Occasionally, identical securities will be appropriate for investment by one of the Funds and by another Fund or one or more of these investment accounts. However, the position of each account in the same securities and the length of time that each account may hold its investment in the same securities may vary. The timing and amount of purchase by each
account will also be determined by its cash position. If the purchase or sale of securities is consistent with the investment policies of the Fund(s) and one or more of these accounts, and is considered at or about the same time, AIM will fairly allocate transactions in such securities among the Fund(s) and these accounts. AIM may combine such transactions, in accordance with applicable laws and regulations, to obtain the most favorable execution. Simultaneous transactions could, however, adversely affect a Fund's ability to obtain or dispose of the full amount of a security which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the various investment accounts advised by AIM results in transactions which could have an adverse effect on the price or amount of securities available to a Fund. In making such allocations, AIM considers the investment objectives and policies of its advisory clients, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held, and the judgments of the persons responsible for recommending the investment. This procedure would apply to transactions in both equity and fixed income securities.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in IPOs. Purchases of IPOs by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. It shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO, and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular IPO by reviewing a number of factors, including suitability of the investment with the AIM Fund's or account's investment objective, policies and strategies, the liquidity of the AIM Fund or account if such investment is purchased, and whether the portfolio manager intends to hold the security as a long-term investment. The allocation of securities issued in IPOs will be made to eligible AIM Funds and accounts in a manner designed to be fair and equitable for the eligible AIM Funds and accounts, and so that there is equal allocation of IPOs over the longer term. Where multiple funds or accounts are eligible, rotational participation may occur, based on the extent to which an AIM Fund or account has participated in previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund and account will be placed in one of four tiers, depending upon each AIM Fund's or account's asset level. The AIM Funds and accounts in the tier containing funds and accounts with the smallest asset levels will participate first, each receiving a 40 basis point allocation (rounded to the nearest share round lot that approximates 40 basis points) (the "Allocation"), based on that AIM Fund's or account's net assets. This process continues until all of the AIM Funds and accounts in the four tiers receive their Allocations, or until the shares are all allocated. Should securities remain after this process, eligible AIM Funds and accounts will receive their Allocations on a straight pro rata basis. In addition, Incubator Funds, as described in AIM's Incubator and New Fund Investment Policy, will each be limited to a 40 basis point allocation only. Such allocations will be allocated to the nearest share round lot that approximates 40 basis points.
When any AIM Funds and/or accounts with substantially identical investment objectives and policies participate in IPOs, they will do so in amounts that are substantially proportionate to each other. In these cases, the net assets of the largest participating AIM Fund will be used to determine in which tier, as described in the paragraph above, such group of AIM Funds or accounts will be placed. If no AIM Fund is participating, then the net assets of the largest account will be used to determine tier placement. The price per share of securities purchased in such IPOs transactions will be the same for each AIM Fund and account.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund
INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund and AIM Money Market Fund) is grouped into one of three categories to determine the applicable initial sales charge for its Class A Shares. The sales charge is used to compensate AIM Distributors and participating dealers for their expenses incurred in connection with the distribution of the Funds' shares. You may also be charged a transaction or other fee by the financial institution managing your account.
Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Aggressive Growth Fund AIM Large Cap Growth Fund AIM Asia Pacific Growth Fund AIM Libra Fund AIM Basic Value Fund AIM Mid Cap Basic Value Fund AIM Blue Chip Fund AIM Mid Cap Core Equity Fund AIM Capital Development Fund AIM Mid Cap Growth Fund AIM Charter Fund AIM New Technology Fund AIM Constellation Fund AIM Opportunities I Fund AIM Dent Demographic Trends Fund AIM Opportunities II Fund AIM Diversified Dividend Fund AIM Opportunities III Fund AIM Emerging Growth Fund AIM Premier Equity Fund AIM European Growth Fund AIM Premier Equity II Fund AIM European Small Company Fund AIM Select Equity Fund AIM Global Utilities Fund AIM Small Cap Equity Fund AIM Global Value Fund AIM Small Cap Growth Fund AIM International Emerging Growth Fund AIM Weingarten Fund AIM International Growth Fund AIM International Core Equity Fund AIM Large Cap Basic Value Fund |
Dealer
Investor's Sales Charge Concession
------------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
----------------------- -------------- -------------- --------------
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $ 1,000,000 2.00 2.04 1.60
|
(1) AIM Opportunities I Fund will not accept any single purchase in excess of $250,000.
CATEGORY II FUNDS
AIM Balanced Fund AIM Global Trends Fund
AIM Basic Balanced Fund AIM High Income Municipal Fund
AIM Developing Markets Fund AIM High Yield Fund
AIM Global Aggressive Growth Fund AIM Income Fund
AIM Global Energy Fund AIM Intermediate Government Fund
AIM Global Financial Services Fund AIM Municipal Bond Fund
AIM Global Growth Fund AIM Real Estate Fund
AIM Global Health Care Fund AIM Total Return Bond Fund
AIM Global Science and
Technology Fund
|
Dealer
Investor's Sales Charge Concession
-------------------------------- ----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- -------------- -------------- --------------
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$ 100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
|
CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
Dealer
Investor's Sales Charge Concession
-------------------------------- ----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- -------------- -------------- --------------
Less than $ 100,000 1.00% 1.01% 0.75%
$ 100,000 but less than $ 250,000 0.75 0.76 0.50
$ 250,000 but less than $1,000,000 0.50 0.50 0.40
|
Beginning on October 31, 2002 Class A Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund was closed to new investors. Current investors must maintain a share balance in order to continue to make incremental purchases.
LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or more of Class A Shares of Category I, II or III Funds do not pay an initial sales charge. In addition, investors who currently own Class A shares of Category I, II, or III Funds and make additional purchases that result in account balances of $1,000,000 or more do not pay an initial sales charge on the additional purchases. The
additional purchases, as well as initial purchases of $1,000,000 or more, are referred to as Large Purchases. If an investor makes a Large Purchase of Class A shares of a Category I or II Fund, however, each share will generally be subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems those shares within 18 months after purchase. Large Purchases of Class A shares of Category III Funds made on or after November 15, 2001 and through October 30, 2002 will be subject to a 0.25% CDSC if the investor redeems those shares within 12 months after purchase.
AIM Distributors may pay a dealer concession and/or advance a service fee on Large Purchases, as set forth below. Exchanges between the AIM Funds may affect total compensation paid.
AIM Distributors may make the following payments to dealers of record
for Large Purchases of Class A shares of Category I or II Funds by investors
other than: (i) retirement plans that are maintained pursuant to Sections 401
and 457 of the Internal Revenue Code of 1986, as amended (the Code"), and (ii)
retirement plans that are maintained pursuant to Section 403 of the Code if the
employer or plan sponsor is a tax-exempt organization operated pursuant to
Section 501(c)(3) of the Code:
PERCENT OF PURCHASES
1% of the first $2 million
plus 0.80% of the next $1 million
plus 0.50% of the next $17 million
plus 0.25% of amounts in excess of $20 million
If (i) the amount of any single purchase order plus (ii) the net asset value of all other shares owned by the same customer submitting the purchase order on the day on which the purchase order is received equals or exceeds $1,000,000, the purchase will be considered a "jumbo accumulation purchase." With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same customer over the life of his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay an additional dealer concession of 0.75% upon exchange.
If an investor makes a Large Purchase of Class A shares of a Category I or II Fund on or after November 15, 2001 and exchanges those shares for Class A shares of a Category III Fund, AIM Distributors will not pay any additional dealer compensation upon the exchange. Beginning on February 17, 2003, Class A Shares of a Category I or II Fund may not be exchanged for Class A Shares of a Category III Fund.
If an investor makes a Large Purchase of Class A3 shares of a Category III Fund on and after October 31, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay 1.00% of such purchases as dealer compensation upon the exchange. The Class A Shares of the Category I or II Fund received in exchange generally will be subject to a 1.00% CDSC if the investor redeems such shares within 18 months from the date of exchange.
If an investor makes a Large Purchase of Class A shares of a Category III Fund and exchanges those shares for Class A shares of another Category III Fund, AIM Distributors will not pay any additional dealer concession upon the exchange. Beginning on February 17, 2003, Class A Shares of a Category III Fund may not be exchanged for Class A Shares of another Category III Fund.
PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. Effective November 1, 2002, for purchases of Class A shares of Category I and II Funds, AIM Distributors may make the
following payments to investment dealers or other financial service firms for sales of such shares at net asset value ("NAV") to certain retirement plans provided that the applicable dealer of record is able to establish that the retirement plan's purchase of Class A shares is a new investment (as defined below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at NAV by the following types of retirement plans: (i) all plans maintained pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii) an exchange of AIM Fund shares or (iii) the repayment of one or more retirement plan loans that were funded through the redemption of AIM Fund shares. If AIM Distributors pays a dealer concession in connection with a plan's purchase of Class A shares at NAV, such shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing on the date the plan first invests in Class A shares of an AIM Fund. If the applicable dealer of record is unable to establish that a plan's purchase of Class A shares at NAV is a new investment, AIM Distributors will not pay a dealer concession in connection with such purchase and such shares will not be subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same plan over the life of the plan's account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in the tables above, purchases of certain amounts of AIM Fund shares may reduce the initial sales charges. These reductions are available to purchasers that meet the qualifications listed below. We will refer to purchasers that meet these qualifications as "Qualified Purchasers."
INDIVIDUALS
o an individual (including his or her spouse or domestic partner, and children);
o any trust established exclusively for the benefit of an individual ; and
o a retirement plan established exclusively for the benefit of an individual, specifically including, but not limited to, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax-sheltered 403(b)(7) custodial account; and
o a qualified tuition plan account, maintained pursuant to
Section 529 of the Code, or a Coverdell Education Savings
Account, maintained pursuant to Section 530 of the Code (in
either case, the account must be established by an individual
or have an individual named as the beneficiary thereof).
EMPLOYER-SPONSORED RETIREMENT PLANS
o a retirement plan maintained pursuant to Sections 401, 403 (only if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP and SIMPLE IRA plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all participating employees in a single contribution transmittal (the AIM Funds will not accept separate contributions submitted with respect to individual participants);
b. each transmittal is accompanied by a single check or wire transfer; and
c. if the AIM Funds are expected to carry separate accounts in the names of each of the plan participants, (i) the employer or plan sponsor notifies AIM Distributors in writing that the separate accounts of all plan participants should be linked, and (ii) all new participant accounts are established by submitting an appropriate Account Application on behalf of each new participant with the contribution transmittal.
TRUSTEES AND FIDUCIARIES
o a trustee or fiduciary purchasing for a single trust, estate or fiduciary account.
OTHER GROUPS
o any organized group of persons, whether incorporated or not, purchasing AIM Fund shares through a single account provided that:
a. the organization has been in existence for at least six months; and
b. the organization has some purpose other than the purchase at a discount of redeemable securities of a registered investment company.
HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following sections discuss different ways that a Qualified Purchaser can qualify for a reduction in the initial sales charges for purchases of Class A shares of the AIM Funds.
LETTERS OF INTENT
A Qualified Purchaser may pay reduced initial sales charges by (i) indicating on the Account Application that he, she or it intends to provide a Letter of Intent ("LOI"); and (ii) subsequently fulfilling the conditions of that LOI.
The LOI confirms the total investment in shares of the AIM Funds that the Qualified Purchaser intends to make within the next 13 months. By marking the LOI section on the account application and by signing the account application, the Qualified Purchaser indicates that he, she or it understands and agrees to the terms of the LOI and is bound by the provisions described below:
Calculating the Initial Sales Charge
o Each purchase of fund shares normally subject to an initial sales charge made during the 13-month period will be made at the public offering price applicable to a single transaction of the total dollar amount indicated by the LOI (to determine what the applicable public offering price is, look at the sales charge table in the section on "Initial Sales Charges" above).
o It is the purchaser's responsibility at the time of purchase to specify the account numbers that should be considered in determining the appropriate sales charge.
o The offering price may be further reduced as described below under "Rights of Accumulation" if the Transfer Agent is advised of all other accounts at the time of the investment.
o Shares acquired through reinvestment of dividends and capital gains distributions will not be applied to the LOI.
Calculating the Number of Shares to be Purchased
o Purchases made within 90 days before signing an LOI will be applied toward completion of the LOI. The LOI effective date will be the date of the first purchase within the 90-day period.
o Purchases made more than 90 days before signing an LOI will be applied toward the completion of the LOI based on the value of the shares purchased that is calculated at the public offering price on the effective date of the LOI.
o If a purchaser meets the original obligation at any time during the 13-month period, he or she may revise the intended investment amount upward by submitting a written and signed request. This revision will not change the original expiration date.
o The Transfer Agent will process necessary adjustments upon the expiration or completion date of the LOI.
Fulfilling the Intended Investment
o By signing an LOI, a purchaser is not making a binding commitment to purchase additional shares, but if purchases made within the 13-month period do not total the amount specified, the purchaser will have to pay the increased amount of sales charge.
o To assure compliance with the provisions of the 1940 Act, the Transfer Agent will escrow in the form of shares an appropriate dollar amount (computed to the nearest full share) out of the initial purchase (or subsequent purchases if necessary). All dividends and any capital gain distributions on the escrowed shares will be credited to the purchaser. All shares purchased, including those escrowed, will be registered in the purchaser's name. If the total investment specified under this LOI is completed within the 13-month period, the escrowed shares will be promptly released.
o If the intended investment is not completed, the purchaser will pay the Transfer Agent the difference between the sales charge on the specified amount and the sales charge on the amount actually purchased. If the purchaser does not pay such difference within 20 days of the expiration date, he or she irrevocably constitutes and appoints the Transfer Agent as his attorney to surrender for redemption any or all shares, to make up such difference within 60 days of the expiration date.
Canceling the LOI
o If at any time before completing the LOI Program, the purchaser wishes to cancel the agreement, he or she must give written notice to AIM Distributors.
o If at any time before completing the LOI Program the purchaser requests the Transfer Agent to liquidate or transfer beneficial ownership of his total shares, the LOI will be automatically canceled. If the total amount purchased is less than the amount specified in the LOI, the Transfer Agent will redeem an appropriate number of escrowed shares equal to the difference between the sales charge actually paid and the sales charge that would have been paid if the total purchases had been made at a single time.
Other Persons Eligible for the LOI Privilege
The LOI privilege is also available to holders of the Connecticut General Guaranteed Account, established for tax qualified group annuities, for contracts purchased on or before June 30, 1992.
LOIs and Contingent Deferred Sales Charges
If an investor entered into an LOI to purchase $1,000,000 or more of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002, such shares will be subject to a 12-month, 0.25% CDSC. Purchases of Class A shares of a Category III Fund made pursuant to an LOI to purchase $1,000,000 or more of shares entered into prior to November 15, 2001 or after October 30, 2002 will not be subject to this CDSC. All LOIs to purchase $1,000,000 or more of Class A Shares of Category I and II Funds are subject to an 18-month, 1% CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges based upon his, her or its existing investment in shares of any of the AIM Funds at the time of the proposed purchase. To determine whether or not a reduced initial sales charge applies to a proposed purchase, AIM Distributors takes into account not only the money which is invested upon such proposed purchase, but also the value of all shares of the AIM Funds owned by such purchaser, calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales charge applies to the total amount of money being invested, even if only a portion of that amount exceeds the breakpoint for the reduced sales charge. For example, if a purchaser already owns qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000 in a fund with a maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to the full $20,000 purchase and not just to the $15,000 in excess of the $25,000 breakpoint.
To qualify for obtaining the discount applicable to a particular purchase, the purchaser or his dealer must furnish the Transfer Agent with a list of the account numbers and the names in which such accounts of the purchaser are registered at the time the purchase is made.
Rights of Accumulation are also available to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contracts purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund is at net asset value, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 18 month holding period (12 months for Category III Fund shares). For new purchases of Class A shares of Category III Funds at net asset value made on and after November 15, 2001 and through October 30, 2002, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 12 month holding period.
OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed above, investors or dealers seeking to qualify orders for a reduced initial sales charge must identify such orders and, if necessary, support their qualification for the reduced charge. AIM Distributors reserves the right to determine whether any purchaser is entitled to the reduced sales charge based on the definition of a Qualified Purchaser listed above. No person or entity may distribute shares of the AIM Funds without payment of the applicable sales charge other than to Qualified Purchasers.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund, and Class B and Class C shares of AIM Floating Rate Fund and Investor Class shares will
not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits certain categories of persons to purchase Class A shares of AIM Funds without paying an initial sales charge. These are typically categories of persons whose transactions involve little expense, such as:
o Persons who have a relationship with the funds or with AIM and its affiliates, and are therefore familiar with the funds, and who place unsolicited orders directly with AIM Distributors; or
o Programs for purchase that involve little expense because of the size of the transaction and shareholder records required.
AIM Distributors believes that it is appropriate and in the Funds' best interests that such persons, and certain other persons whose purchases result in relatively low expenses of distribution, be permitted to purchase shares through AIM Distributors without payment of a sales charge.
Accordingly, the following purchasers will not pay initial sales charges on purchases of Class A shares because there is a reduced sales effort involved in sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members of their immediate family) of AIM Management, its affiliates or The AIM Family of Funds,--Registered Trademark--and any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons;
o Any current or retired officer, director, or employee (and members of their immediate family), of DST Systems, Inc. or Personix, a division of Fiserv Solutions, Inc.;
o Sales representatives and employees (and members of their immediate family) of selling group members of financial institutions that have arrangements with such selling group members;
o Purchases through approved fee-based programs;
o Employer-sponsored retirement plans that are Qualified Purchasers, as defined above, provided that:
a. a plan's initial investment is at least $1 million;
b. the employer or plan sponsor signs a $1 million LOI;
c. there are at least 100 employees eligible to participate in the plan; or
d. all plan transactions are executed through a single omnibus account per AIM Fund and the financial institution or service organization has entered into the appropriate agreement with the distributor; further provided that
e. retirement plans maintained pursuant to Section 403(b) of the Code are not eligible to purchase shares at NAV based on the aggregate investment made by the plan or the number of eligible employees unless the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code; and
f. purchases of AIM Opportunities I Fund by all retirement plans are subject to initial sales charges;
o Shareholders of record of Advisor Class shares of AIM International Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who have continuously owned shares of the AIM Funds;
o Shareholders of record or discretionary advised clients of any investment advisor holding shares of AIM Weingarten Fund or AIM Constellation Fund on September 8, 1986, or of AIM Charter Fund on November 17, 1986, who have continuously owned shares having a market value of at least $500 and who purchase additional shares of the same Fund;
o Unitholders of G/SET series unit investment trusts investing proceeds from such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund; provided, however, prior to the termination date of the trusts, a unitholder may invest proceeds from the redemption or repurchase of his units only when the investment in shares of AIM Weingarten Fund and AIM Constellation Fund is effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM Fund or that sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who since that date continually have owned shares of one or more of these funds;
o Certain former AMA Investment Advisers' shareholders who became shareholders of the AIM Global Health Care Fund in October 1989, and who have continuously held shares in the GT Global funds since that time;
o Shareholders of record of Advisor Class shares of an AIM Fund on February 11, 2000 who have continuously owned shares of that AIM Fund, and who purchase additional shares of that AIM Fund;
o Qualified Tuition Programs created and maintained in accordance with
Section 529 of the Code;
o Initial purchases made by Qualified Purchasers, as defined above, within one (1) year after the registered representative who services their account(s) has become affiliated with a selling group member with which AIM Distributors has entered into a written agreement; and
o Participants in select brokerage programs for retirement plans and rollover IRAs who purchase shares through an electronic brokerage platform offered by entities with which AIM Distributors has entered into a written agreement.
As used above, immediate family includes an individual and his or her spouse or domestic partner, children, parents and parents of spouse or domestic partner.
In addition, an investor may acquire shares of any of the AIM Funds at net asset value in connection with:
o the reinvestment of dividends and distributions from a Fund;
o exchanges of shares of certain Funds;
o use of the reinstatement privilege; or
o a merger, consolidation or acquisition of assets of a Fund.
PAYMENTS TO DEALERS. AIM Distributors may elect to re-allow the entire initial sales charge to dealers for all sales with respect to which orders are placed with AIM Distributors during a particular
period. Dealers to whom substantially the entire sales charge is re-allowed may be deemed to be "underwriters" as that term is defined under the 1933 Act.
In addition to, or instead of, amounts paid to dealers as a sales commission, AIM Distributors may, from time to time, at its expense or as an expense for which it may be compensated under a distribution plan, if applicable, pay a bonus or other consideration or incentive to dealers. The total amount of such additional bonus payments or other consideration shall not exceed 0.25% of the public offering price of the shares sold or of average daily net assets of the AIM Fund attributable to that particular dealer. At the option of the dealer, such incentives may take the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives and their families to places within or outside the United States. Any such bonus or incentive programs will not change the price paid by investors for the purchase of the applicable AIM Fund's shares or the amount that any particular AIM Fund will receive as proceeds from such sales. Dealers may not use sales of the AIM Funds' shares to qualify for any incentives to the extent that such incentives may be prohibited by the laws of any state.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within six years after purchase. See the Prospectus for additional information regarding contingent deferred sales charges. AIM Distributors may pay sales commissions to dealers and institutions who sell Class B shares of the AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase price and will consist of a sales commission equal to 3.75% plus an advance of the first year service fee of 0.25%.
Purchases of Class C Shares
Class C shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within the first year after purchase (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for additional information regarding this CDSC. AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds (except for Class C shares of AIM Short Term Bond Fund) at the time of such sales. Payments will equal 1.00% of the purchase price and will consist of a sales commission of 0.75% plus an advance of the first year service fee of 0.25%. These commissions are not paid on sales to investors exempt from the CDSC, including shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who purchase additional shares in any of the Funds on or after May 1, 1995, and in circumstances where AIM Distributors grants an exemption on particular transactions.
AIM Distributors may pay dealers and institutions who sell Class C shares of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence immediately.
Purchases of Class R Shares
Class R shares are sold at net asset value, and are not subject to an initial sales charge. If AIM Distributors pays a concession to the dealer of record, however, the Class R shares are subject to a 0.75% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the retirement plan's initial purchase. For purchases of Class R shares of Category I or II Funds, AIM Distributors may make the following payments to dealers of record provided that the applicable dealer of record is able to establish that the purchase of Class R shares is a new investment or a rollover from a retirement plan in which an AIM Fund was offered as an investment option:
Percent of Cumulative Purchases
0.75% of the first $5 million plus 0.50% of amounts in excess of $5 million |
With regard to any individual purchase of Class R shares, AIM Distributors may make payment to the dealer of record based on the cumulative total of purchases made by the same plan over the life of the plan's account(s).
Purchases of Investor Class Shares
Investor Class shares are sold at net asset value, and are not subject to an initial sales charge. or to a CDSC. AIM Distributors may pay dealers and institutions an annual service fe of 0.25% of average daily net assets and such payments will commence immediately.
Exchanges
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be acquired by exchange are purchased at their net asset value or applicable offering price, as the case may be, determined on the date that such request is received, but under unusual market conditions such purchases may be delayed for up to five business days if it is determined that a fund would be materially disadvantaged by an immediate transfer of the proceeds of the exchange. If a shareholder is exchanging into a fund paying daily dividends, and the release of the exchange proceeds is delayed for the foregoing five-day period, such shareholder will not begin to accrue dividends until the sixth business day after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain dealers and investment advisory firms to accept telephone instructions to exchange shares between any of the AIM Funds. AIM Distributors reserves the right to impose conditions on dealers or investment advisors who make telephone exchanges of shares of the funds, including the condition that any such dealer or investment advisor enter into an agreement (which contains additional conditions with respect to exchanges of shares) with AIM Distributors. To exchange shares by telephone, a shareholder, dealer or investment advisor who has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach AFS by telephone, he may also request exchanges by fax, telegraph or use overnight courier services to expedite exchanges by mail, which will be effective on the business day received by AFS as long as such request is received prior to the close of the customary trading session of the New York Stock Exchange ("NYSE"). AFS and AIM Distributors may in certain cases be liable for losses due to unauthorized or fraudulent transactions if they do not follow reasonable procedures for verification of telephone transactions. Such reasonable procedures may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transaction.
Redemptions
GENERAL. Shares of the AIM Funds may be redeemed directly through AIM Distributors or through any dealer who has entered into an agreement with AIM Distributors. In addition to the Funds' obligation to redeem shares, AIM Distributors may also repurchase shares as an accommodation to shareholders. To effect a repurchase, those dealers who have executed Selected Dealer Agreements with AIM Distributors must phone orders to the order desk of the Funds at (800) 959-4246 and guarantee delivery of all required documents in good order. A repurchase is effected at the net asset value per share of the applicable Fund next determined after the repurchase order is received. Such an arrangement is subject to timely receipt by AFS, the Funds' transfer agent, of all required documents in good order. If such documents are not received within a reasonable time after the order is placed, the order is subject to cancellation. While there is no charge imposed by a Fund or by AIM Distributors (other
than any applicable contingent deferred sales charge) when shares are redeemed or repurchased, dealers may charge a fair service fee for handling the transaction.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date of payment postponed when (a) trading on the NYSE is restricted, as determined by applicable rules and regulations of the SEC, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the SEC has by order permitted such suspension, or (d) an emergency as determined by the SEC exists making disposition of portfolio securities or the valuation of the net assets of a Fund not reasonably practicable.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor appoints AFS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AFS in the designated account(s), present or future, with full power of substitution in the premises. AFS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption. An investor acknowledges by signing the form that he understands and agrees that AFS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone redemption requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transactions. AFS reserves the right to cease to act as attorney-in-fact subject to this appointment, and AIM Distributors reserves the right to modify or terminate the telephone redemption privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any redemptions must be effected in writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a shareholder of an AIM Fund to withdraw on a regular basis at least $50 per withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AFS and all dividends and distributions are reinvested in shares of the applicable AIM Fund by AFS. To provide funds for payments made under the Systematic Redemption Plan, AFS redeems sufficient full and fractional shares at their net asset value in effect at the time of each such redemption.
Payments under a Systematic Redemption Plan constitute taxable events. Since such payments are funded by the redemption of shares, they may result in a return of capital and in capital gains or losses, rather than in ordinary income. Because sales charges are imposed on additional purchases of shares (other than Class B, Class C or Class R shares of the Funds), it is disadvantageous to effect such purchases while a Systematic Redemption Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic Redemption Plan.
Contingent Deferred Sales Charges Imposed upon Redemption of Shares
A CDSC may be imposed upon the redemption of Large Purchases of Class A shares of Category I and II Funds or upon the redemption of Class B shares or Class C shares (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund) and, in certain circumstances, upon the redemption of Class R shares. On and after November 15, 2001 and through October 30, 2002, a CDSC also may be imposed upon the redemption of Large Purchases of Class A Shares of Category III Funds. See the Prospectus for additional information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a Category I, II, or III Fund will not be subject to a CDSC upon the redemption of those shares in the following situations:
o Redemptions of shares of Category I or II Funds held more than 18 months;
o Redemptions of shares of Category III Funds purchased prior to November 15, 2001 or after October 30, 2002;
o Redemptions of shares of Category III Funds purchased on or after November 15, 2001 and through October 30, 2002 and held for more than 12 months;
o Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class A shares of an AIM Fund for at least 12 months, or (ii) the redemption is not a complete redemption of shares held by the plan;
o Redemptions from private foundations or endowment funds;
o Redemptions of shares by the investor where the investor's dealer waives the amounts otherwise payable to it by the distributor and notifies the distributor prior to the time of investment;
o Redemptions of shares of Category I, II or III Funds or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category I or II Fund, unless the shares acquired by exchange (on or after November 15, 2001 and through October 30, 2002 with respect to Category III Funds) are redeemed within 18 months of the original purchase of the exchanges of Category I or II Fund shares;
o Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased prior to November 15, 2001;
o Redemptions of shares of Category I or II Funds acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002, unless the shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category III Fund shares;
o Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002, unless the shares acquired by exchange are redeemed within 12 months of the original purchase of the exchanged Category III Fund shares;
o Redemptions of shares of Category I or II Funds acquired by exchange on and after November 15, 2001 from AIM Cash Reserve Shares of AIM Money Market Fund if the AIM Cash Reserve Shares were acquired by exchange from a Category I or II Fund, unless the Category I or II Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds shares;
o Redemptions of Category I or II Funds by retirement plan participants resulting from a total redemption of the plan assets that occurs more than one year from the date of the plan's initial purchase; and
o Redemptions of shares of Category I or II Funds held by an Investor Class shareholder.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES. Investors who purchased former GT Global funds Class B shares before June 1, 1998 are subject to the following waivers from the CDSC otherwise due upon redemption:
o Total or partial redemptions resulting from a distribution following retirement in the case of a tax-qualified employer-sponsored retirement;
o Minimum required distributions made in connection with an IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other retirement plan following attainment of age 70 1/2;
o Redemptions pursuant to distributions from a tax-qualified employer-sponsored retirement plan, which is invested in the former GT Global funds, which are permitted to be made without penalty pursuant to the Code, other than tax-free rollovers or transfers of assets, and the proceeds of which are reinvested in the former GT Global funds;
o Redemptions made in connection with participant-directed exchanges between options in an employer-sponsored benefit plan;
o Redemptions made for the purpose of providing cash to fund a loan to a participant in a tax-qualified retirement plan;
o Redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of
Section 72(t)(2) of the Code, and the regulations promulgated
thereunder;
o Redemptions made in connection with a distribution from a qualified profit-sharing or stock bonus plan described in Section 401(k) of the Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and
o Redemptions made by or for the benefit of certain states, counties or cities, or any instrumentalities, departments or authorities thereof where such entities are prohibited or limited by applicable law from paying a sales charge or commission.
CDSCs will not apply to the following redemptions of Class B or Class C shares, as applicable:
o Additional purchases of Class C shares of AIM International Core Equity Fund (formerly known as AIM International Value Fund) and AIM Real Estate Fund by shareholders of record on April 30, 1995, of these Funds, except that shareholders whose broker-dealers maintain a single omnibus account with AFS on behalf of those shareholders, perform sub-accounting functions with respect to those shareholders, and are unable to segregate shareholders of record prior to April 30, 1995, from shareholders whose accounts were opened after that date will be subject to a CDSC on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of (1) any registered shareholders on an account or (2) a settlor of a living trust, of shares held in the account at the time of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i) required
minimum distributions to plan participants or beneficiaries who are age
70 1/2 or older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the participant's or
beneficiary's account value in a particular AIM Fund; (ii) in kind
transfers of assets where the participant or beneficiary notifies the
distributor of the transfer no later than the time the transfer occurs;
(iii) tax-free rollovers or transfers of assets to another plan of the
type described above invested in Class B or Class C shares of one or
more of the AIM Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral amounts; and (v) distributions on the death or disability (as defined in the Code) of the participant or beneficiary;
o Amounts from a Systematic Redemption Plan of up to an annual amount of 12% of the account value on a per fund basis, at the time the withdrawal plan is established, provided the investor reinvests his dividends;
o Liquidation by the Fund when the account value falls below the minimum required account size of $500; and
o Investment account(s) of AIM.
CDSCs will not apply to the following redemptions of Class C shares:
o A total or partial redemption of shares where the investor's dealer of record notified the distributor prior to the time of investment that the dealer would waive the upfront payment otherwise payable to him;
o A total or partial redemption which is necessary to fund a distribution
requested by a participant in a retirement plan maintained pursuant to
Section 401, 403, or 457 of the Code;
o Redemptions of Class C shares of an AIM Fund other than AIM Short Term Bond Fund if you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund; and
o Redemptions of Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC.
CDSCs will not apply to the following redemptions of Class R shares:
o Class R shares where the retirement plan's dealer of record notifies the distributor prior to the time of investment that the dealer waives the upfront payment otherwise payable to him; and
o Redemptions of shares held by retirement plans in cases where (i) the plan has remained invested in Class R shares of an AIM Fund for at least 12 months, or (ii) the redemption is not a complete redemption of all Class R shares held by the plan.
General Information Regarding Purchases, Exchanges and Redemptions
GOOD ORDER. Purchase, exchange and redemption orders must be received in good order. To be in good order, an investor must supply AFS with all required information an documentation, including signature guarantees when required. In addition, if a purchase of shares is made by check, the check must be received in good order. This means that the check must be properly completed and signed, and legible to AFS in its sole discretion.
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other financial intermediary to ensure that all orders are transmitted on a timely basis to AFS. Any loss resulting from the failure of the dealer or financial intermediary to submit an order within the prescribed time frame will be borne by that dealer or financial intermediary. If a check used to purchase shares does not clear, or if any investment order must be canceled due to nonpayment, the investor will be responsible for any resulting loss to an AIM Fund or to AIM Distributors.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the "Shareholder Information" section of each Fund's prospectus, signature guarantees are required in the following situations: (1) requests to transfer the registration of shares to another owner; (2) telephone exchange and telephone redemption authorization forms; (3) changes in previously designated wiring or electronic funds transfer instructions; and (4) written redemptions or exchanges of shares previously reported as lost, whether or not the redemption amount is under $250,000 or the proceeds are to be sent to the address of record. AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national securities exchanges, savings associations and any other organization, provided that such institution or organization qualifies as an "eligible guarantor institution" as that term is defined in rules adopted by the SEC, and further provided that such guarantor institution is listed in one of the reference guides contained in AFS' current Signature Guarantee Standards and Procedures, such as certain domestic banks, credit unions, securities dealers, or securities exchanges. AFS will also accept signatures with either: (1) a signature guaranteed with a medallion stamp of the STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE Medallion Signature Program, provided that in either event, the amount of the transaction involved does not exceed the surety coverage amount indicated on the medallion. For information regarding whether a particular institution or organization qualifies as an "eligible guarantor institution," an investor should contact the Client Services Department of AFS.
TRANSACTIONS BY TELEPHONE. By signing an account application form, an investor appoints AFS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AFS in the designated account(s), or in any other account with any of the AIM Funds, present or future, which has the identical registration as the designated account(s), with full power of substitution in the premises. AFS and AIM Distributors are thereby authorized and directed to accept and act upon any telephone redemptions of shares held in any of the account(s) listed, from any person who requests the redemption proceeds to be applied to purchase shares in any one or more of the AIM Funds, provided that such fund is available for sale and provided that the registration and mailing address of the shares to be purchased are identical to the registration of the shares being redeemed. An investor acknowledges by signing the form that he understands and agrees that AFS and AIM Distributors may not be liable for any loss, expense or cost arising out of any telephone exchange requests effected in accordance with the authorization set forth in these instructions if they reasonably believe such request to be genuine, but may in certain cases be liable for losses due to unauthorized or fraudulent transactions. Procedures for verification of telephone transactions may include recordings of telephone transactions (maintained for six months), requests for confirmation of the shareholder's Social Security Number and current address, and mailings of confirmations promptly after the transactions. AFS reserves the right to modify or terminate the telephone exchange privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any exchanges must be effected in writing by the investor.
INTERNET TRANSACTIONS. An investor may effect transactions in his account through the internet by establishing a Personal Identification Number (PIN). By establishing a PIN the investor acknowledges and agrees that neither AFS nor AIM Distributors will be liable for any loss, expense or cost arising out of any internet transaction effected by them in accordance with any instructions submitted by a user who transmits the PIN as authentication of his or her identity. Procedures for verification of internet transactions include requests for confirmation of the shareholder's personal identification number and mailing of confirmations promptly after the transactions. The investor also acknowledges that the ability to effect internet transactions may be terminated at any time by the AIM Funds.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that AFS maintains a correct address for his account(s). An incorrect address may cause an investor's account statements and other mailings to be returned to AFS. Upon receiving returned mail, AFS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AFS will retain a shareholder locator service with a national information database to conduct periodic searches for the investor. If the search firm is
unable to locate the investor, the search firm will determine whether the investor's account has legally been abandoned. AFS is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
OFFERING PRICE
The following formula may be used to determine the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price ) = Offering Price.
For example, at the close of business on July 31, 2002, AIM High Yield Fund - Class A shares had a net asset value per share of $3.70. The offering price, assuming an initial sales charge of 4.75%, therefore was $3.88.
Calculation of Net Asset Value
For AIM Money Market Fund
The net asset value per share of the Fund is determined daily as of 12:00 noon and the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern time) on a particular day, the net asset value of the Fund is determined as of the close of the NYSE on such day. Net asset value per share is determined by dividing the value of the Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the number of shares outstanding of that class and rounding the resulting per share net asset value to the nearest one cent. Determination of the net asset value per share is made in accordance with generally accepted accounting principles.
The Fund uses the amortized cost method to determine its net asset value. Under the amortized cost method, each investment is valued at its cost and thereafter any discount or premium is amortized on a constant basis to maturity. While this method provides certainty of valuation, it may result in periods in which the amortized cost value of the Fund's investments is higher or lower than the price that would be received if the investments were sold. During periods of declining interest rates, use by the Fund of the amortized cost method of valuing its portfolio may result in a lower value than the market value of the portfolio, which could be an advantage to new investors relative to existing shareholders. The converse would apply in a period of rising interest rates.
The Fund may use the amortized cost method to determine its net asset value so long as the Fund does not (a) purchase any instrument with a remaining maturity greater than 397 days (for these purposes, repurchase agreements shall not be deemed to involve the purchase by the Fund of the securities pledged as collateral in connection with such agreements) or (b) maintain a dollar-weighted average portfolio maturity in excess of 90 days, and otherwise complies with the terms of rules adopted by the SEC.
The Board of Trustees has established procedures designed to stabilize the Fund's net asset value per share at $1.00, to the extent reasonably possible. Such procedures include review of portfolio holdings by the trustees at such intervals as they may deem appropriate. The reviews are used to determine whether net asset value, calculated by using available market quotations, deviates from $1.00 per share and, if so, whether such deviation may result in material dilution or is otherwise unfair to investors or existing shareholders. In the event the trustees determine that a material deviation exists, they intend to take such corrective action as they deem necessary and appropriate. Such actions may include selling portfolio securities prior to maturity in order to realize capital gains or losses or to shorten average portfolio maturity, withholding dividends, redeeming shares in kind, or establishing a net asset value per share by using available market quotations are used to establish net asset value, the net asset
value could possibly be more or less than $1.00 per share. AIM Money Market Fund intends to comply with any amendments made to Rule 2a-7 which may require corresponding changes in the Fund's procedures which are designed to stabilize the Fund's price per share at $1.00.
For AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Limited Maturity Treasury Fund, AIM Municipal Bond Fund, AIM Short Term Bond Fund, AIM Total Return Bond Fund
Each Fund determines its net asset value per share once daily as of the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, the Fund will generally use futures and options contract closing prices which are available fifteen (15) minutes after the close of the customary trading session of the NYSE. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles.
Each security (excluding convertible bonds) held by a Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP, at the closing bid price on that day; option contracts are valued at the mean between the closing bid and asked prices on the exchange where the contracts are principally traded; futures contracts are valued at final settlement price quotations from the primary exchange on which they are traded. Debt securities (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data.
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 at the last bid price in the case of equity securities and in the case of
debt obligations, the mean between the last bid and ask 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 investments are valued at amortized cost when the security has 60
days or less to maturity. AIM Municipal Bond Fund values all variable rate
securities with an unconditional demand or put feature exercisable within seven
(7) days or less are valued at par, which reflects the market value of such
securities.
Foreign securities are converted into U.S. dollars using exchange rates as of the close of the NYSE. Generally, trading in foreign securities, corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of each Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE which will not be reflected in the computation of a Fund's net asset value. If a development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as of the close of the applicable market, may be adjusted to reflect the fair value of the affected securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
Fund securities primarily traded in foreign markets may be traded in such markets on days which are not business days of the Fund. Because the net asset value per share of each Fund is determined only on business days of the Fund, the net asset value per share of a Fund may be significantly affected on days when an investor cannot exchange or redeem shares of the Fund.
REDEMPTION IN KIND
AIM intends to redeem all shares of the Funds in cash. It is possible that future conditions may make it undesirable for a Fund to pay for redeemed shares in cash. In such cases, the Fund may make payment in securities or other property. If a Fund has made an election under Rule 18f-1 under the 1940 Act, the Fund is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. Securities delivered in payment of redemptions are valued at the same value assigned to them in computing the applicable Fund's net asset value per share. Shareholders receiving such securities are likely to incur brokerage costs on their subsequent sales of such securities.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form W-9 (certifying exempt status) accompanying the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, generally must withhold 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect TIN;
3. the investor or the Fund is notified by the IRS that the investor is subject to backup withholding because the investor failed to report all of the interest and dividends on such investor's tax return (for reportable interest and dividends only);
4. the investor fails to certify to the Fund that the investor is not subject to backup withholding under (3) above (for reportable interest and dividend accounts opened after 1983 only); or
5. the investor does not certify his TIN. This applies only to non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all five situations discussed above. Redemption proceeds and long-term gain distributions are subject to backup withholding only if (1), (2) or (5) above applies.
Certain payees and payments are exempt from backup withholding and information reporting. AIM or AFS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning withholding.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct TIN will be subject to a $50 penalty imposed by the IRS unless such failure is due to reasonable cause and not willful neglect. If an investor falsifies information on this form or makes any other false statement resulting in no backup withholding on an account which should be subject to backup withholding, such investor may be subject to a $500 penalty imposed by the IRS and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities are not subject to the backup withholding previously discussed, but must certify their foreign status by attaching IRS Form W-8 to their application. Form W-8 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare daily and pay monthly net investment income dividends and declare and pay annually any capital gain distributions. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gains. In determining the amount of capital gains, if any, available for distribution, capital gains will be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment." Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested.
Dividends are declared to shareholders of record immediately prior to the determination of the net asset value of each Fund. For each Fund, except AIM Money Market Fund, dividends begin accruing on the first business day on which a purchase order for shares of the Fund is effective (settle date), and accrue through the day prior to which a redemption order is effective (settle date). Thus, if a purchase order is effective on Friday, dividends will begin accruing on Friday (unless Friday is not a business day of the Fund). For AIM Money Market Fund, dividends begin accruing one day after a purchase order for shares is effective and accrue through the day a redemption order is effective. Thus, if a purchase order is effective on Thursday, dividends will begin accruing on Friday (unless Friday is not a business day of the Fund).
Distributions paid by a fund, other than daily dividends, have the effect of reducing the net asset value per share on the ex-dividend date by the amount of the dividend or distribution. Therefore, a dividend or distribution declared shortly after a purchase of shares by an investor would represent, in substance, a return of capital to the shareholder with respect to such shares even though it would be subject to income taxes.
Dividends on Class B and Class C shares are expected to be lower than those for Class A or Class A3 shares because of higher distribution fees paid by Class B and Class C shares. Dividends on Class R shares may be lower than those for Class A shares, depending on whether the Class R shares pay higher distribution fees than the Class A shares. Other class-specific expenses may also affect dividends on shares of those classes. Expenses attributable to a particular class ("Class Expenses") include distribution plan expenses, which must be allocated to the class for which they are incurred. Other expenses may be allocated as Class Expenses, consistent with applicable legal principles under the 1940 Act and the Code.
Should the Trust incur or anticipate any unusual expense, loss or depreciation, which would adversely affect the net asset value per share of the AIM Money Market Fund or the net income per share of a class of the Fund for a particular period, the Board of Trustees would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light of then prevailing circumstances. For example, if the net asset value per share of the AIM Money Market Fund was reduced, or was anticipated to be reduced, below $1.00, the Board of Trustees might suspend further dividend payments on shares of the Fund until the net asset value returns to $1.00. Thus, such expense, loss or depreciation might result in a shareholder receiving no dividends for the period during which it held shares of the Fund and/or its receiving upon redemption a price per share lower than that which it paid.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualifications as such in each of its taxable years. As a regulated investment company, each Fund is not subject to federal income tax on the portion of its net investment income (i.e., taxable interest, dividends and other taxable ordinary income, net of expenses) and capital gain net income (i.e., the excess of capital gains over capital losses) that it distributes to shareholders, provided that it distributes (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) for the taxable year (the "Distribution Requirement"), and satisfies certain other requirements of the Code that are described below. Distributions by a Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gain of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment company must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies (to the extent such currency gain is directly related to the regulated investment company's principal business of investing in stock or securities) and other income (including, but not limited to, gains from options, futures or forward contracts) derived from its business of investing in such stock, securities or currencies (the "Income Requirement"). Under certain circumstances, a Fund may be required to sell portfolio holdings in order to meet this requirement.
In addition to satisfying the requirements described above, each Fund must satisfy an asset diversification test in order to qualify as a regulated investment company (the "Asset Diversification Test"). Under this test, at the close of each quarter of each Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies, and securities of other issuers, as to which the Fund has not invested more than 5% of the value of the Fund's total assets in securities of such issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of such issuer, and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses.
Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.
For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such future contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test.
If for any taxable year a Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of such Fund's current and accumulated earnings and profits. Such distributions generally will be eligible for the dividends received deduction in the case of corporate shareholders and will be included in the qualified dividend income of noncorporate shareholders. See "Fund Distributions" below..
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In general, gain or loss recognized by a Fund on the disposition of an asset will be a capital gain or loss. However, gain recognized on the disposition of a debt obligation purchased by a Fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount which accrued during the period of time the Fund held the debt obligation unless the Fund made an election to accrue market discount into income. If a Fund purchases a debt obligation that was originally issued at a discount, the Fund is generally required to include in gross income each year the portion of the original issue discount which accrues during such year. In addition, under the rules of Code Section 988, gain or loss recognized on the disposition of a debt obligation denominated in a foreign currency or an option with respect thereto (but only to the extent attributable to changes in foreign currency exchange rates), and gain or loss recognized on the disposition of a foreign currency forward contract or of foreign currency itself, will generally be treated as ordinary income or loss.
Certain hedging transactions that may be engaged in by certain of the Funds (such as short sales "against the box") may be subject to special tax treatment as "constructive sales" under Section 1259 of the Code if a Fund holds certain "appreciated financial positions" (defined generally as any interest (including a futures or forward contract, short sale or option) with respect to stock, certain debt instruments, or partnership interests if there would be a gain were such interest sold, assigned, or otherwise terminated at its fair market value). Upon entering into a constructive sales transaction with respect to an appreciated financial position, a Fund will generally be deemed to have constructively sold such appreciated financial position and will recognize gain as if such position were sold, assigned, or otherwise terminated at its fair market value on the date of such constructive sale (and will take into account any gain for the taxable year which includes such date).
Some of the forward foreign currency exchange contracts, options and futures contracts that certain of the Funds may enter into will be subject to special tax treatment as "Section 1256 contracts." Section 1256 contracts that a Fund holds are treated as if they are sold for their fair market value on the last business day of the taxable year, regardless of whether a taxpayer's obligations (or rights) under such contracts have terminated (by delivery, exercise, entering into a closing transaction or otherwise) as
of such date. Any gain or loss recognized as a consequence of the year-end deemed disposition of Section 1256 contracts is combined with any other gain or loss that was previously recognized upon the termination of Section 1256 contracts during that taxable year. The net amount of such gain or loss for the entire taxable year (including gain or loss arising as a consequence of the year-end deemed sale of such contracts) is deemed to be 60% long-term and 40% short-term gain or loss. However, in the case of Section 1256 contracts that are forward foreign currency exchange contracts, the net gain or loss is separately determined and (as discussed above) generally treated as ordinary income or loss. If such a future or option is held as an offsetting position and can be considered a straddle under Section 1092 of the Code, such a straddle will constitute a mixed straddle. A mixed straddle will be subject to both Section 1256 and Section 1092 unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income, qualified dividend income, or long-term capital gain may also differ from the book income of the Fund and may be increased or decreased as compared to a fund that did not engage in such transactions.
AIM Limited Maturity Treasury Fund may enter into notional principal contracts, including interest rate swaps, caps, floors and collars. Under Treasury regulations, in general, the net income or deduction from a notional principal contract for a taxable year is included in or deducted from gross income for that taxable year. The net income or deduction from a notional principal contract for a taxable year equals the total of all of the periodic payments (generally, payments that are payable or receivable at fixed periodic intervals of one year or less during the entire term of the contract) that are recognized from that contract for the taxable year and all of the non-periodic payments (including premiums for caps, floors and collars), even if paid in periodic installments, that are recognized from that contract for the taxable year. A periodic payment is recognized ratably over the period to which it relates. In general, a non-periodic payment must be recognized over the term of the notional principal contract in a manner that reflects the economic substance of the contract. A non-periodic payment that relates to an interest rate swap, cap, floor or collar shall be recognized over the term of the contract by allocating it in accordance with the values of a series of cash-settled forward or option contracts that reflect the specified index and notional principal amount upon which the notional principal contract is based (or, in the case of a swap or of a cap or floor that hedges a debt instrument, under alternative methods contained in the regulations and, in the case of other notional principal contracts, under alternative methods that the IRS may provide in a revenue procedure).
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise tax is imposed on a regulated investment company that fails to distribute in each calendar year an amount equal to 98% of ordinary taxable income for the calendar year and 98% of capital gain net income (excess of capital gains over capital losses) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year (a "taxable year election")). The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
Each Fund generally intends to make sufficient distributions or deemed distributions of its ordinary taxable income and capital gain net income prior to the end of each calendar year to avoid liability for the excise tax. Moreover, investors should note that a Fund may in certain circumstances be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity securities and thus may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition and character of income with respect to PFIC stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons the amount that must be distributed to shareholders, and which will be taxed to shareholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to a fund that did not invest in PFIC stock.
SWAP AGREEMENTS. AIM Income Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund may each enter into swap agreements. The rules governing the tax aspects of swap agreements are in a developing stage and are not entirely clear in certain respects. Accordingly, while such Funds intend to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. If it did not, the status of the Trust as a regulated investment company might be affected. The Trust intends to monitor developments in this area. Certain requirements that must be met under the Code in order for the Trust to qualify as a regulated investment company may limit the extent to which these Funds will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations and as qualified dividend income for individuals and other noncorporate taxpayers to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 15% for noncorporate shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. However, certain capital gain dividends distributed to noncorporate shareholders for the Fund's fiscal year ending July 31, 2003 may be taxable at a maximum rate of 20%. Conversely, if a Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain
on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year will qualify for the 70% dividends received deduction generally available to corporations (other than corporations, such as "S" corporations, which are not eligible for the deduction because of their special characteristics and other than for purposes of special taxes such as the accumulated earnings tax and the personal holding company tax) to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction.
Ordinary income dividends paid by a Fund to individuals and other noncorporate taxpayers will be treated as qualified dividend income that is subject to tax as a maximum rate of 15% to the extent of the amount of qualifying dividends received by the Fund from domestic corporations and from foreign corporations that are either incorporated in a possession of the United States, eligible for benefits under certain income tax treaties with the United States that include an exchange of information program, or have stock of the same class with respect to which the dividends are paid that is readily tradable on an established securities market within the United States. However, dividends received by the Fund from foreign personal holding companies, foreign investment companies or PFICs are not qualifying dividends. If the qualifying dividend income received by a Fund is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the extent it exceeds, the regular tax and is computed at a maximum rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount. However, the AMT on capital gain dividends and qualified dividend income paid by a Fund to a noncorporate shareholder may not exceed a maximum rate of 15%. The corporate dividends received deduction is not itself an item of tax preference that must be added back to taxable income or is otherwise disallowed in determining a corporation's AMTI. However, corporate shareholders will generally be required to take the full amount of any dividend received from the Fund into account (without a dividends received deduction) in determining their adjusted current earnings, which are used in computing an additional corporate preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings over its AMTI (determined without regard to this item and the AMTI net operating loss deduction)) that is includable in AMTI. However, certain small corporations are wholly exempt from the AMT.
Distributions by a Fund that do not constitute earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them.
AIM MUNICIPAL BOND FUND. With respect to interest income that is exempt from federal income tax, the Fund intends to comply with Section 852(b)(5) of the Code, which enables exempt-interest dividends paid by the Fund from exempt interest to be treated as tax-exempt income by shareholders. Interest income that the Fund receives from municipal securities is generally tax-exempt for purposes of the regular income tax and the alternative minimum tax, subject to the exceptions described below.
Exempt-interest dividends derived from certain private activity bonds issued after August 7, 1986 will generally constitute an item of tax preference for taxpayers that are subject to alternative minimum tax. In addition, exempt-interest dividends derived from all other municipal securities must be taken into account by corporations subject to alternative minimum tax in determining their adjusted current earnings adjustment. Consistent with its stated investment objective, AIM Municipal Bond Fund intends to limit its investments in private activity bonds subject to the alternative minimum tax to no more than 20% of its total assets in any given year.
Original issue discount on tax-exempt bonds shall be accrued by the Fund as tax-exempt interest (except for a portion thereof in the case of certain stripped tax-exempt bonds), and included in the tax basis of the security for capital gain and loss computation purposes. Any gain or loss from the sale or other disposition of a tax-exempt security is generally treated as either long-term or short-term capital gain or loss, depending upon its holding period, and is fully taxable. However, gain recognized from the sale or other disposition of a tax-exempt security purchased after April 30, 1993, will be treated as ordinary income to the extent of the accrued market discount on such security.
Interest on indebtedness incurred by shareholders will not be deductible for federal income tax purposes to the extent the proceeds of the borrowing was used to purchase or carry Fund shares. The purchase of Fund shares may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to the purchase of Fund shares. Further, certain persons who regularly use facilities financed by municipal securities in their trade or business (or persons related thereto) may be "substantial users" of such facilities and should consult their tax advisors before purchasing Fund shares.
Income that is exempt from federal income tax or alternative minimum tax is not necessarily exempt from tax under state and local laws. Shareholders should consult their tax advisors as to the treatment of exempt-interest dividends under state and local laws.
The 1986 Act also applied limitations on the issuance of bonds whose proceeds are used by organizations exempt from tax under Code Section 501(c)(3), as well as general limitations on the amount of Qualified Private Activity Bonds governmental units may issue.
The 1986 Act limitations on tax-exempt bonds apply generally to bonds issued after August 16, 1986. The private activity bond rules are generally applicable to bonds issued on or after September 1, 1986, with the alternative minimum tax rules applicable generally to bonds issued on or after August 7, 1986. Municipal Bond intends to limit its investments in Qualified Private Activity Bonds and taxable securities to no more than 20% of its total assets in any given year, consistent with its stated investment objective.
Original issue discount on tax-exempt bonds is accrued as tax-exempt interest (except for a portion thereof in the case of certain stripped tax-exempt bonds), and is included in the tax basis of the security for capital gain and loss computation purposes. Any gain or loss from the sale or other disposition of a tax-exempt security is generally treated as either long-term or short-term capital gain or
loss, depending upon its holding period, and is fully taxable. However, gain recognized from the sale or other disposition of a tax-exempt security purchased after April 30, 1993, will be treated as ordinary income to the extent of the accrued market discount on such security.
Interest on indebtedness incurred by shareholders (including financial institutions) will not be deductible for FIT purposes to the extent that the money was used to purchase or carry tax-exempt securities. The purchase of Fund shares may be considered to have been made with borrowed funds even though the borrowed funds are not directly traceable to the purchase of Fund shares. Further, persons who are "substantial users" (or persons related thereto) of facilities financed by private activity bonds should consult their own tax advisor before purchasing Fund shares.
The exemption of interest income for FIT purposes does not necessarily result in exemption under state and local laws. Shareholders should consult their tax advisors as to the treatment of such income under state and local laws.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred under the wash sale rules if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to a maximum tax rate of 15%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less than 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of distributions and/or redemption payments. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term capital gain) will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the distribution. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the redemption of shares of a Fund, capital gain dividends and amounts retained by a Fund that are designated as undistributed net capital gain.
If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required to withhold U.S. federal income tax at a rate of 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign shareholders may be subject to U.S. withholding tax at a rate of 30% on the income resulting from the Fund's election to treat any foreign income tax paid by it as paid by its shareholders, but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S. tax refund and who are not eligible to obtain a social security number must apply to the IRS for an individual taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please contact your tax advisor or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exception applies. In the absence of a treaty, there is a $13,000 statutory estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund, including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from sources within foreign countries may be subject to foreign income tax withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Funds to a reduced rate of, or exemption from, tax on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of each taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income, or to use it (subject to various Code limitations) as a foreign tax credit against Federal income tax (but not both). No deduction for foreign tax may be claimed by a non-corporate shareholder who does not itemize deductions or who is subject to alternative minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to the limitation that it may not exceed the shareholder's U.S. tax (determined without regard to the availability of the credit) attributable to the shareholder's foreign source taxable income. In determining the source and character of distributions received from a Fund for this purpose, shareholders will be required to allocate Fund distributions according to the source of the income realized by the Fund. Each Fund's gain from the sale of stock and securities and certain currency fluctuation gain and loss will generally be treated as derived from U.S. sources. In addition, the limitation on the foreign tax credit is applied separately to foreign source "passive" income, such as dividend income, and the portion of foreign source income consisting of qualified dividend income is reduced by approximately 57% to account for the tax rate differential. Individuals who have no more than $300 ($600 for married persons filing jointly) of creditable foreign tax included on Form 1099 and whose foreign source income is all "qualified passive income" may elect each year to be exempt from the foreign tax credit limitation and will be able to claim a foreign tax credit without filing Form 1116 with its corresponding requirement to report income and tax by country. Moreover, no foreign tax credit will be allowable to any shareholder who has not held his shares of the
Fund for at least 16 days during the 30-day period beginning 15 days before the day such shares become ex-dividend with respect to any Fund distribution to which foreign income taxes are attributed (taking into account certain holding period reduction requirements of the Code). Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on June 10, 2003. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income, qualified dividend income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder's particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly from those summarized above. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Class A shares (other than AIM Money Market Fund and AIM Short Term Bond Fund), Class A3 shares of AIM Limited Maturity Treasury Fund, Class B shares (other than AIM Short Term Bond Fund), Class C shares, Class R (other than AIM Short Term Bond Fund) shares and Investor Class shares, if applicable, and AIM Cash Reserve Shares of AIM Money Market Fund (collectively the "Plans"). Each Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate, shown immediately below, of the Fund's average daily net assets of the applicable class.
INVESTOR
--------
FUND CLASS A* CLASS A3 CLASS B CLASS C CLASS R CLASS
---- -------- -------- ------- ------- ------- -----
AIM High Yield Fund 0.25% N/A 1.00% 1.00% N/A 0.25%
AIM Income Fund 0.25 N/A 1.00 1.00 0.50% 0.25
AIM Intermediate Government Fund 0.25 N/A 1.00 1.00 0.50 0.25
AIM Limited Maturity Treasury Fund 0.15 0.35% N/A N/A N/A N/A
AIM Money Market Fund 0.25 N/A 1.00 1.00 0.50 0.25
AIM Municipal Bond Fund 0.25 N/A 1.00 1.00 N/A 0.25
AIM Short Term Bond Fund N/A N/A N/A 1.00 N/A N/A
AIM Total Return Bond Fund 0.35 N/A 1.00 1.00 N/A N/A
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* AIM Cash Reserve shares of AIM Money Market Fund
All of the Plans compensate AIM Distributors for the purpose of financing any activity which is primarily intended to result in the sale of shares of the Funds. Such activities include, but are not limited to, the following: printing of prospectuses and statements of additional information and reports for other than existing shareholders; overhead; preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers and other institutions such as asset-based sales charges or as payments of service fees under shareholder service arrangements; and costs of administering each Plan.
Amounts payable by a Fund under the Plans need not be directly related to the expenses actually incurred by AIM Distributors on behalf of each Fund. The Plans do not obligate the Funds to reimburse AIM Distributors for the actual expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to AIM Distributors at any given time, the Funds will not be obligated to pay more than that fee. If AIM Distributors' expenses are less than the fee it receives, AIM Distributors will retain the full amount of the fee.
AIM Distributors may from time to time waive or reduce any portion of its 12b-1 fee for Class A, Class A3, Class C, Class R or Investor Class shares. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM Distributors will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM Distributors and the Fund.
AIM Distributors has contractually agreed through July 31, 2004, to waive up to 0.10% of average net assets of AIM Total Return Bond Fund's Class A shares Rule 12b-1 distribution plan payments. This contractual fee waiver is set forth in the Fee Table to the Fund's Prospectus and may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM Distributors and the Fund.
AIM Distributors has contractually agreed through July 31, 2004, to waive 0.40% of average net assets of AIM Short Term Bond Fund's Class C shares Rule 12b-1 distribution plan payments. This contractual fee waiver is set forth in the Fee Table to the Fund's Prospectus and may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM Distributors and the Fund.
The Funds may pay a service fee of 0.25% of the average daily net assets of the Class A, Class A3, Class B, Class C, Class R and Investor Class shares (0.15% of the average daily net assets of the Class A shares of AIM Limited Maturity Treasury Fund), as applicable, attributable to the customers of selected dealers and financial institutions to such dealers and financial institutions, including AIM Distributors, acting as principal, who furnish continuing personal shareholder services to their customers who purchase and own the applicable class of shares of the Fund. Under the terms of a shareholder service agreement, such personal shareholder services include responding to customer inquiries and providing customers with information about their investments. Any amounts not paid as a service fee under each Plan would constitute an asset-based sales charge.
AIM Distributors may pay dealers and institutions who sell Class R shares an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence either on the thirteenth month after the first purchase, on accounts on which a dealer concession was paid, or immediately, on accounts on which a dealer concession was not paid. If AIM Distributors pays a dealer concession, it will retain all payments received by it relating to Class R shares for the first year after they are purchased. AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class R shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to selected dealers and other institutions who render the foregoing services to their customers. The fees payable under a Shareholder Service Agreement will be calculated at the end of each payment period for each business day of the Funds during such period at the annual rate specified in each agreement based on the average daily net asset value of the Funds' shares purchased or acquired through exchange. Fees shall be paid only to those selected dealers or other institutions who are dealers or institutions of record at the close of business on the last business day of the applicable payment period for the account in which such Fund's shares are held.
Selected dealers and other institutions entitled to receive compensation for selling Fund shares may receive different compensation for selling shares of one particular class over another. Under the Plans, certain financial institutions which have entered into service agreements and which sell shares of the Funds on an agency basis, may receive payments from the Funds pursuant to the respective Plans.
AIM Distributors does not act as principal, but rather as agent for the Funds, in making dealer incentive and shareholder servicing payments to dealers and other financial institutions under the Plans. These payments are an obligation of the Funds and not of AIM Distributors.
Payments pursuant to the Plans are subject to any applicable limitations imposed by rules of the National Association of Securities Dealers, Inc. ("NASD").
See Appendix J for a list of the amounts paid by each class of shares of each Fund to AIM Distributors pursuant to the Plans for the fiscal year ended July 31, 2002 and Appendix K for an estimate by category of the allocation of actual fees paid by each class of shares of each Fund pursuant to its respective distribution plan for the fiscal year ended July 31, 2002.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service Agreements were approved by the Board of Trustees, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plans or in any agreements related to the Plans (the "Rule 12b-1 Trustees"). In approving the Plans in accordance with the requirements of Rule 12b-1, the trustees considered various factors and determined that there is a reasonable likelihood that the Plans would benefit each class of the Funds and its respective shareholders.
The anticipated benefits that may result from the Plans with respect to each Fund and/or the classes of each Fund and its shareholders include but are not limited to the following: (1) rapid account access; (2) relatively predictable flow of cash; and (3) a well-developed, dependable network of shareholder service agents to help to curb sharp fluctuations in rates of redemptions and sales, thereby reducing the chance that an unanticipated increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans continue from year to year as long as such continuance is specifically approved, in person, at least annually by the Board of Trustees, including a majority of the Rule 12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution expenses paid by the applicable class requires shareholder approval; otherwise, the Plans may be amended by the trustees, including a majority of the Rule 12b-1 Trustees, by votes cast in person at a meeting called for the purpose of voting upon such amendment. As long as the Plans are in effect, the selection or nomination of the Independent Trustees is committed to the discretion of the Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to AIM Distributors following termination of the Class B shares Distribution Agreement with respect to Class B shares sold by or attributable to the distribution efforts of AIM Distributors or its predecessors, unless there has been a complete termination of the Class B Plan (as defined in such Plan) and the Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through other broker-dealers with whom
AIM Distributors has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources to dealers and institutions who sell Class B and Class C shares of the Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.00% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. In the future, if multiple distributors serve a Fund, each such distributor (or its assignee or transferee) would receive a share of the payments under the Class B Plan based on the portion of the Fund's Class B shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds (except for AIM Short Term Bond Fund) at the time of such sales. Payments with respect to Class C shares (except for AIM Short Term Bond Fund) will equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution, and will consist of a sales commission of 0.75% of the purchase price of the Class C shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. AIM Distributors will retain all payments received by it relating to Class C shares (except for AIM Short Term Bond Fund) for the first year after they are purchased. The portion of the payments to AIM Distributors under the Class A, Class C and Class R Plan attributable to Class C shares which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of the sales commissions to dealers plus financing costs, if any. After the first full year, AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class C shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. These payments will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.
AIM Distributors may pay dealers and institutions who sell Class C shares of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence immediately.
The Trust (on behalf of any class of any Fund) or AIM Distributors may terminate the Distribution Agreements on 60 days' written notice without penalty. The Distribution Agreements will terminate automatically in the event of their assignment. In the event the Class B shares Distribution Agreement is terminated, AIM Distributors would continue to receive payments of asset-based distribution fees in respect of the outstanding Class B shares attributable to the distribution efforts of AIM Distributors or its predecessors; provided, however that a complete termination of the Class B Plan (as defined in such Plan) would terminate all payments to AIM Distributors. Termination of the Class B Plan or the Distribution Agreement for Class B shares would not affect the obligation of Class B shareholders to pay contingent deferred sales charges.
Total sales charges (front end and contingent deferred sales charges) paid in connection with the sale of shares of each class of each Fund, if applicable, for the last three fiscal years ended July 31, are found in Appendix L.
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as follows:
n P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
one, five, or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the one, five, or ten year
periods (or fractional portion of such period).
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The average annual total returns for each Fund, with respect to its Class A, Class A3, Class B, Class C and Class R, Investor Class and AIM Cash Reserve shares, if applicable, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are found in Appendix M.
Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period.
Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return. Standardized total return for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class A3 shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value; (3) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; (4) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value; and (5) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value. Standardized total return for AIM Cash Reserve Shares does not reflect a deduction of any sales charge, since that class is sold and redeemed at net asset value.
A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula:
n P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of only
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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The cumulative total returns for each Fund, with respect to its Class A, Class A3, Class B, Class C and Class R, Investor Class and AIM Cash Reserve shares, if applicable, shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are found in Appendix M.
Calculation of Certain Performance Data
Funds offering Class A3 or Class R shares may use a restated or a blended performance calculation to derive certain performance data shown in this Statement of Additional Information and in each Fund's advertisements and other sales material. If the Fund's Class A3 or Class R shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class A3 and Class R shares. If the Fund's Class A3 or Class R shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of the Fund's Class A3 or Class R shares since their inception and the restated historical performance of the Fund's Class A shares (for periods prior to inception of the Class A3 or Class R shares). If the Fund's Class A3 or Class R shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Fund's Class A3 or Class R shares.
AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund and AIM Municipal Bond Fund may also use a restated or a blended performance calculation to derive certain performance data shown for their Investor Class shares in this Statement of Additional Information and in the Funds' advertisements and other sales material. If the Funds' Investor Class shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Funds' Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Investor Class shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of the Funds' Investor Class shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to
inception of the Investor Class shares) at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Investor Class shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Funds' Investor Class shares.
A restated or blended performance calculation may be used to derive (i) the Funds', except for AIM Money Market Fund, standardized average annual total returns over a stated period and (ii) the Funds', except for AIM Money Market Fund, non-standardized cumulative total returns over a stated period.
A restated or blended performance calculation may be used to derive (i) AIM Money Market Fund's non-standardized average annual total returns over a stated period, and (ii) AIM Money Market Fund's non-standardized cumulative total returns over a stated period.
Average Annual Total Return (After Taxes on Distributions) Quotations
A Fund's average annual total return (after taxes on distributions) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on distributions, but not on redemption proceeds. Average annual total returns (after taxes on distributions) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, the Fund may separate its average annual total returns (after taxes on distributions) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions) is:
n P(1+T) =ATV
D
where P = a hypothetical initial payment of $1,000 ;
T = average annual total return (after taxes on
distributions);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
D the beginning of the one, five, or ten year periods (or
since inception, if applicable) at the end of the one,
five, or ten year periods (or since inception, if
applicable), after taxes on fund distributions but not
after taxes on redemption.
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Standardized average annual total return (after taxes on distributions) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class A3 shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value; (3) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (4) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Class A, Class A3, Class B, Class C and Investor Class shares, for the one, five, and ten year periods (or since inception if less than ten years) ended January 31, 2003 are found in Appendix M.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n P(1+T) =ATV
DR
where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the one, five, or ten year periods (or
since inception, if applicable) at the end of the one,
five, or ten year periods (or since inception, if
applicable), after taxes on fund distributions and
redemption.
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Standardized average annual total return (after taxes on distributions and redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class A3 shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value; (3) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (4) Investor Class shares does not reflect a deduction of any sales charge since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on the Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal
individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and redemption) for each fund, with respect to its Class A, Class A3, Class B, Class C and Investor Class shares, for the one, five, and ten year periods (or since inception if less than ten years) ended January 31, 2003 are found in Appendix M.
Yield Quotation
Yield is a function of the type and quality of a Fund's investments, the maturity of the securities held in a Fund's portfolio and the operating expense ratio of the Fund. Yield is computed in accordance with standardized formulas described below and can be expected to fluctuate from time to time and is not necessarily indicative of future results. Accordingly, yield information may not provide a basis for comparison with investments which pay a fixed rate of interest for a stated period of time.
A Fund's tax equivalent yield is the rate an investor would have to earn from a fully taxable investment in order to equal the Fund's yield after taxes. Tax equivalent yields are calculated by dividing the Fund's yield by one minus a stated tax rate (if only a portion of the Fund's yield was tax-exempt, only that portion would be adjusted in the calculation).
A Fund may quote its distribution rate, which uses the most recent dividend paid annualized as a percentage of the Fund's offering price.
Income calculated for purposes of calculating a Fund's yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding assumed in yield calculations, the yield quoted for a Fund may differ from the rate of distributions from the Fund paid over the same period or the rate of income reported in the Fund's financial statements.
The standard formula for calculating yield for each Fund is as follows:
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued
rather than recorded on the ex-dividend date. Interest
earned under this formula must generally be calculated based
on the yield to maturity of each obligation (or, if more
appropriate, based on yield to call date).
b = expenses accrued during period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
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The standard formula for calculating annualized 7-day yield for AIM Money Market Fund is as follows:
Y = (V1 -- V ) x 365
0
---------- ---
V 7
0
Where Y = annualized yield.
V = the value of a hypothetical pre-existing account
0 in the AIM Money Market Fund having a balance of
one share at the beginning of a stated seven-day
period.
V = the value of such an account at the end of the
1 stated period.
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The standard formula for calculating effective annualized yield for the AIM Money Market Fund is as follows:
365/7 EY = (Y + 1) - 1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
The yield for each Fund, the yield and corresponding tax-equivalent yield for AIM Municipal Bond Fund, and the annualized and effective annualized yield for the AIM Cash Reserve Shares, Class B, Class C, Class R and Investor Class shares of AIM Money Market Fund are found in Appendix M. In addition, the distribution rates for each Fund (other than AIM Money Market Fund) are found in Appendix M.
Performance Information
All advertisements of the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results are not necessarily indicative of future results.
Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities:
Advertising Age Forbes Nation's Business Barron's Fortune New York Times Best's Review Hartford Courant Pension World Broker World Inc. Pensions & Investments Business Week Institutional Investor Personal Investor Changing Times Insurance Forum Philadelphia Inquirer Christian Science Monitor Insurance Week USA Today |
Consumer Reports Investor's Business Daily U.S. News & World Report Economist Journal of the American Wall Street Journal FACS of the Week Society of CLU & ChFC Washington Post Financial Planning Kiplinger Letter CNN Financial Product News Money CNBC Financial Services Week Mutual Fund Forecaster PBS Financial World |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Stanger Donoghue's Weisenberger Mutual Fund Values (Morningstar) Lipper, Inc. |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Consumer Price Index
Lehman Brothers Aggregate Bond Index
Lehman Brothers High Yield Index
Lehman Brothers Intermediate Government Bond Index
Lehman Brothers 1-2 year Government Bond Index
Lehman Brothers 1-3 year Government/Credit Index
Lehman Brothers Municipal Bond Index
Lipper BBB Rated Fund Index
Lipper General Municipal Debt Fund Index
Lipper High Yield Bond Fund Index
Lipper Intermediate U.S. Government Fund Index
Lipper Money Market Fund Index
Lipper Short U.S. Treasury Fund Index
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of
general economic conditions and interest rates. Advertising for such Funds may
also include references to the use of those Funds as part of an individual's
overall retirement investment program. From time to time, sales literature
and/or advertisements for any of the Funds may disclose: (i) the largest
holdings in the Funds' portfolios; (ii) certain selling group members; and/or
(iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch:
MOODY'S LONG-TERM DEBT RATINGS
Moody's corporate ratings areas follows:
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk in Aa rated bonds appear somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade , to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
Note: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt.
Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Baa: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same.
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
NR: Not Rated.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note); and source of payment (the more dependant the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns, governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood
of getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments of any security.
The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the
program concerned; it should not be assumed that these ratings apply to every
issue made under the program. In particular, in the case of non-standard issues,
i.e., those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and are valued on the basis of their prospects for achieving partial or full recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as in the case of the higher ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment default.
APPENDIX B
TRUSTEES AND OFFICERS
As of January 1, 2003
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 89 portfolios in the AIM Funds complex. Column two below includes length of time served with any predecessor entities.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(s) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(s) DURING PAST 5 DIRECTORSHIP(s)
TRUST SINCE YEARS HELD BY TRUSTEE
--------------------------- -------- ----------------------------------------- -----------------
INTERESTED PERSONS
------------------
Robert H. Graham(1)--1946 1988 Director and Chairman, A I M Management None
Trustee, Chairman and Group Inc. (financial services holding
President company); Director and Vice Chairman,
AMVESCAP PLC and Chairman of AMVESCAP PLC-
AIM Division (parent of AIM and a global
investment management firm)
Formerly: President and Chief
Executive Officer, A I M Management
Group Inc.; Director, Chairman and
President, A I M Advisors, Inc.
(registered investment advisor);
Director and Chairman, A I M Capital
Management, Inc. (registered investment
advisor), A I M Distributors, Inc.
(registered broker dealer), A I M Fund
Services, Inc. (registered transfer
agent), and Fund Management Company
(registered broker dealer); and Chief
Executive Officer, AMVESCAP PLC -
Managed Products
--------------------------- -------- ----------------------------------------- -----------------
Mark H. Williamson(2)--1951 2003 Director, President and Chief Executive Director and
Trustee and Executive Officer, A I M Management Group Inc. Chairman,
Vice President (financial services holding company); INVESCO Bond
Director, Chairman and President, A I M Funds, Inc.,
Advisors, Inc. (registered investment INVESCO
advisor); Director, A I M Capital Combination
Management, Inc. (registered investment Stock & Bond
advisor) and A I M Distributors, Inc. Funds, Inc.,
(registered broker dealer), Director INVESCO
and Chairman, A I M Fund Services, Inc. Counselor
(registered transfer agent), and Fund Series Funds,
Management Company Inc., INVESCO
(registered broker dealer); and Chief International
Executive Officer, AMVESCAP PLC - AIM Funds, Inc.,
Division (parent of AIM and a global INVESCO Manage
investment management firm) Series Funds, r
Inc., INVESCO
Formerly: Director, Chairman, Money Market
President and Chief Executive Officer, Funds, Inc.,
INVESCO Funds Group, Inc.; and INVESCO INVESCO Sector
Distributors, Inc.; Chief Executive Funds, Inc.,
Officer, AMVESCAP PLC - Managed INVESCO Stock
Products; Chairman and Chief Executive Funds, Inc.,
Officer of NationsBanc Advisors, Inc.;
and
--------------------------- -------- ----------------------------------------- -----------------
|
1 Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust.
2 Mr. Williamson is considered an interested person of the Trust because
he is an officer and a director of the advisor to, and a director of
the principal underwriter of, the Trust. Mr. Williamson became
Executive Vice President of the Trust on March 4, 2003.
|
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(s) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(s) DURING PAST 5 DIRECTORSHIP(s)
TRUST SINCE YEARS HELD BY TRUSTEE
--------------------------- -------- ----------------------------------------- -----------------
Chairman of NationsBanc Investments, Inc. INVESCO
Treasurer's
Series Funds,
Inc. and
INVESCO
Variable
Investment
Funds, Inc.
INDEPENDENT TRUSTEES
--------------------------- -------- ----------------------------------------- -----------------
Frank S. Bayley--1939 2001 Of Counsel, law firm of Baker & McKenzie Badgley Funds,
Trustee Inc.
(registered
investment
company)
--------------------------- -------- ----------------------------------------- -----------------
Bruce L. Crockett--1944 1992 Chairman, Crockett Technology ACE
Trustee Associates (technology consulting Limited
company) (insurance
company);
and
Captaris,
Inc.
unified
(messaging
provider)
--------------------------- -------- ----------------------------------------- -----------------
Albert R. Dowden -- 1941 2000 Director, Magellan Insurance Company; Cortland Trust,
Trustee Member of Advisory Board of Rotary Power Inc.
International (designer, manufacturer, and (registered
seller of rotary power engines) and investment
Director, The Boss Group (private equity company)
group) and Annuity & Life Re (Holdings),
Ltd. (re-insurance company)
Formerly: Director, President and
Chief Executive Officer, Volvo Group
North America, Inc.; Senior Vice
President, AB Volvo; and director of
various affiliated Volvo companies
--------------------------- -------- ----------------------------------------- -----------------
Edward K. Dunn, Jr.--1935 1998 Formerly: Chairman, Mercantile None
Trustee Mortgage Corp.; President and Chief
Operating Officer, Mercantile-Safe
Deposit & Trust Co.; and President,
Mercantile Bankshares Corp.
--------------------------- -------- ----------------------------------------- -----------------
Jack M. Fields--1952 1997 Chief Executive Officer, Twenty First Administaff
Trustee Century Group, Inc. (government affairs
company) and Texana Timber LP
--------------------------- -------- ----------------------------------------- -----------------
Carl Frischling--1937 1990 Partner, law firm of Kramer Levin Cortland Trust,
Trustee Naftalis and Frankel LLP Inc.
(registered
investment
company)
--------------------------- -------- ----------------------------------------- -----------------
|
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(s) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(s) DURING PAST 5 DIRECTORSHIP(s)
TRUST SINCE YEARS HELD BY TRUSTEE
--------------------------- -------- ----------------------------------------- -----------------
Prema Mathai-Davis--1950 1998 Formerly, Chief Executive Officer, YWCA None
Trustee of the USA
--------------------------- -------- ----------------------------------------- -----------------
Lewis F. Pennock--1942 1988 Partner, law firm of Pennock & Cooper None
Trustee
--------------------------- -------- ----------------------------------------- -----------------
Ruth H. Quigley--1935 2001 Retired None
Trustee
--------------------------- -------- ----------------------------------------- -----------------
Louis S. Sklar--1939 1990 Executive Vice President, Hines (real None
Trustee estate development company)
--------------------------- -------- ----------------------------------------- -----------------
OTHER OFFICERS
--------------------------- -------- ----------------------------------------- -----------------
Kevin M. Carome(3)-1956 2003 Director, Senior Vice President, N/A
Senior Vice President Secretary and General Counsel, A I M
Management Group Inc. (financial
services holding company) and A I M
Advisors, Inc.; and Vice President, A I
M Capital Management, Inc., A I M
Distributors, Inc. and A I M Fund
Services, Inc.; Director, Vice
President and General Counsel, Fund
Management Company
Formerly: Senior Vice President and
General Counsel, Liberty Financial
Companies, Inc.; and Senior Vice
President and General Counsel, Liberty
Funds Group, LLC
--------------------------- -------- ----------------------------------------- -----------------
Gary T. Crum(4)--1947 1991 Director, Chairman and Director of N/A
Senior Vice President Investments, A I M Capital Management,
Inc.; Director and Executive Vice
President, A I M Management Group Inc.;
Director and Senior Vice President, A I
M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC
Formerly: Chief Executive Officer and
President, A I M Capital Management,
Inc.
--------------------------- -------- ----------------------------------------- -----------------
Stuart W. Coco--1955 2002 Managing Director and Chief Research N/A
Vice President Officer - Fixed Income, A I M Capital
Management, Inc.; and Vice President, A
I M Advisors, Inc.
--------------------------- -------- ----------------------------------------- -----------------
|
3 Mr. Carome became Senior Vice President of the Company on May 13, 2003.
4 Information is current as of January 10, 2003.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(s) HELD WITH THE OFFICER PRINCIPAL OCCUPATION(s) DURING PAST 5 DIRECTORSHIP(s)
TRUST SINCE YEARS HELD BY TRUSTEE
--------------------------- -------- ----------------------------------------- -----------------
Melville B. Cox--1943 1992 Vice President and Chief Compliance N/A
Vice President Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice
President, A I M Fund Services, Inc.
--------------------------- -------- ----------------------------------------- -----------------
Edgar M. Larsen(4)-1940 2002 Vice President, A I M Advisors, Inc.; N/A
Vice President and President, Chief Executive Officer
and Chief Investment Officer, A I M
Capital Management, Inc.
--------------------------- -------- ----------------------------------------- -----------------
Karen Dunn Kelley--1960 1992 Managing Director and Chief Cash N/A
Vice President Management Officer, A I M Capital
Management, Inc.; Director and
President, Fund Management Company; and
Vice President, A I M Advisors, Inc.
--------------------------- -------- ----------------------------------------- -----------------
Dana R. Sutton--1959 1988 Vice President and Fund Treasurer, A I N/A
Vice President and M Advisors, Inc.
Treasurer
--------------------------- -------- ----------------------------------------- -----------------
Nancy L. Martin(5)-1957 2003 Vice President, A I M Advisors, Inc.; N/A
Secretary and Vice President and General Counsel,
A I M Capital Management, Inc.
--------------------------- -------- ----------------------------------------- -----------------
|
4 Information is current as of January 10, 2003.
5 Ms. Martin became Secretary of the Trust on April 1, 2003.
TRUSTEE OWNERSHIP OF FUND SHARES AS OF JANUARY 1, 2003
-----------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS(R)
---------------------- ----------------------------------------- ------------------------------
Robert H. Graham High Yield $10,001 - $50,000 Over $100,000
Limited Maturity Treasury Over $100,000
Money Market Over $100,000
Municipal Bond Over $100,000
---------------------- ----------------------------------------- ------------------------------
Mark H. Williamson - 0 - $10,001 - $50,000
---------------------- ----------------------------------------- ------------------------------
Frank S. Bayley - 0 - $10,001 - $50,000
---------------------- ----------------------------------------- ------------------------------
Bruce L. Crockett High Yield $1 - $10,000 $1 - $10,000
---------------------- ----------------------------------------- ------------------------------
Albert R. Dowden - 0 - $50,001 - $100,000
---------------------- ----------------------------------------- ------------------------------
Edward K. Dunn, Jr. High Yield $1 - $10,000
Money Market Over $100,000 Over $100,000(6)
---------------------- ----------------------------------------- ------------------------------
Jack M. Fields - 0 - Over $100,000(6)
---------------------- ----------------------------------------- ------------------------------
Carl Frischling High Yield II $10,001 - $50,000 Over $100,000(6)
---------------------- ----------------------------------------- ------------------------------
Prema Mathai-Davis - 0 - Over $100,000(6)
---------------------- ----------------------------------------- ------------------------------
Lewis F. Pennock High Yield $1 - $10,000 $50,001 - $100,000
Money Market $1 - $10,000
---------------------- ----------------------------------------- ------------------------------
Ruth H. Quigley - 0 - $1 -$10,000
---------------------- ----------------------------------------- ------------------------------
Louis S. Sklar - 0 - Over $100,000(6)
--------------------- ----------------------------------------- ------------------------------
|
6 Includes the total amount of compensation deferred by the trustee at
his or her election pursuant to a deferred compensation plan. Such
deferred compensation is placed in a deferral account and deemed to be
invested in one or more of the AIM Funds.
|
APPENDIX C
TRUSTEES COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002:
RETIREMENT ESTIMATED
AGGREGATE BENEFITS ANNUAL TOTAL
COMPENSATION ACCRUED BENEFITS COMPENSATION
FROM THE BY ALL UPON FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
----------------------------------- ------------ ------------ ------------- ------------
Frank S. Bayley $ 7,711 $142,800 $ 90,000 $150,000
----------------------------------- -------- -------- -------- --------
Bruce L. Crockett 8,943 50,132 90,000 149,000
----------------------------------- -------- -------- -------- --------
Albert R. Dowden 8,943 57,955 90,000 150,000
----------------------------------- -------- -------- -------- --------
Edward K. Dunn, Jr 8,943 94,149 90,000 149,000
----------------------------------- -------- -------- -------- --------
Jack M. Fields 8,913 29,153 90,000 153,000
----------------------------------- -------- -------- -------- --------
Carl Frischling(5) 8,913 74,511 90,000 150,000
----------------------------------- -------- -------- -------- --------
Prema Mathai-Davis 8,943 33,931 90,000 150,000
----------------------------------- -------- -------- -------- --------
Lewis F. Pennock 9,205 54,802 90,000 154,000
----------------------------------- -------- -------- -------- --------
Ruth H. Quigley 7,741 142,502 90,000 153,000
----------------------------------- -------- -------- -------- --------
Louis S. Sklar 9,205 78,500 90,000 153,000
=================================== ======== ======== ======== ========
|
(1) The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended July 31, 2002, including earnings, was $47,728.
(2) During the fiscal year ended July 31, 2002, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $8,680.
(3) Amounts shown assume each trustee serves until his or her normal retirement date.
(4) All trustees currently serve as directors or trustees of seventeen registered investment companies advised by AIM.
(5) During the fiscal year ended July 31, 2002, the Trust paid $40,617 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm.
APPENDIX D
PROXY VOTING POLICIES
The Proxy Voting Policies applicable to each Fund follow:
PROXY POLICIES AND PROCEDURES
REVIEWED BY THE AIM FUNDS BOARD OF DIRECTORS/TRUSTEES JUNE 10-11, 2003
A. Proxy Policies
Each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. and AIM Alternative Asset Management Company (each an "AIM Advisor" and collectively "AIM") has the fiduciary obligation to, at all times, make the economic best interest of advisory clients the sole consideration when voting proxies of companies held in client accounts. As a general rule, each AIM Advisor shall vote against any actions that would reduce the rights or options of shareholders, reduce shareholder influence over the board of directors and management, reduce the alignment of interests between management and shareholders, or reduce the value of shareholders' investments. At the same time, AIM believes in supporting the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors, and the AIM portfolio managers who chose to invest in the companies. Therefore, on most issues, our votes have been cast in accordance with the recommendations of the company's board of directors, and we do not currently expect that trend to change. Although AIM's proxy voting policies are stated below, AIM's proxy committee considers all relevant facts and circumstances, and retains the right to vote proxies as deemed appropriate.
I. Boards Of Directors
A board that has at least a majority of independent directors is integral to good corporate governance. Key board committees, including audit, compensation and nominating committees, should be completely independent.
There are some actions by directors that should result in votes being withheld. These instances include directors who:
o Are not independent directors and sit on the board's audit, compensation or nominating committee;
o Attend less than 75 percent of the board and committee meetings without a valid excuse;
o Implement or renew a dead-hand or modified dead-hand poison pill;
o Enacted egregious corporate governance policies or failed to replace management as appropriate;
o Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or
o Ignore a shareholder proposal that is approved by a majority of the shares outstanding.
Votes in a contested election of directors must be evaluated on a case-by-case basis, considering the following factors:
o Long-term financial performance of the target company relative to its industry;
o Management's track record;
o Portfolio manager's assessment;
o Qualifications of director nominees (both slates);
o Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and
o Background to the proxy contest.
II. Independent Auditors
A company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence. We will support the reappointment of the company's auditors unless:
o It is not clear that the auditors will be able to fulfill their function;
o There is reason to believe the independent auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or
o The auditors have a significant professional or personal relationship with the issuer that compromises the auditors' independence.
III. Compensation Programs
Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider all incentives, awards and compensation, and compare them to a company-specific adjusted allowable dilution cap and a weighted average estimate of shareholder wealth transfer and voting power dilution.
o We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
o We will support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value.
o We will vote against plans that have any of the following structural features: ability to re-price underwater options without shareholder approval, ability to issue options with an exercise price below the stock's current market price, ability to issue reload options, or automatic share replenishment ("evergreen") feature.
o We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.
o We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages.
IV. Corporate Matters
We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers and acquisitions on a case by case basis, considering the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns.
o We will vote for merger and acquisition proposals that the proxy committee and relevant portfolio managers believe, based on their review of the materials, will result in financial and operating benefits, have a fair offer price, have favorable prospects
for the combined companies, and will not have a negative impact on corporate governance or shareholder rights.
o We will vote against proposals to increase the number of authorized shares of any class of stock that has superior voting rights to another class of stock.
o We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns.
o We will vote for proposals to institute open-market share repurchase plans in which all shareholders participate on an equal basis.
V. Shareholder Proposals
Shareholder proposals can be extremely complex, and the impact on share value can rarely be anticipated with any high degree of confidence. The proxy committee reviews shareholder proposals on a case-by-case basis, giving careful consideration to such factors as: the proposal's impact on the company's short-term and long-term share value, its effect on the company's reputation, the economic effect of the proposal, industry and regional norms applicable to the company, the company's overall corporate governance provisions, and the reasonableness of the request.
o We will generally abstain from shareholder social and environmental proposals.
o We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
o We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted.
o We will generally vote for proposals to lower barriers to shareholder action.
o We will generally vote for proposals to subject shareholder rights plans to a shareholder vote. In evaluating these plans, we give favorable consideration to the presence of "TIDE" provisions (short-term sunset provisions, qualified bid/permitted offer provisions, and/or mandatory review by a committee of independent directors at least every three years).
VI. Other
o We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
o We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.
o We will vote any matters not specifically covered by these proxy policies and procedures in the economic best interest of advisory clients.
AIM's proxy policies, and the procedures noted below, may be amended from time to time.
B. Proxy Committee Procedures
The proxy committee currently consists of representatives from the Legal and Compliance Department, the Investments Department and the Finance Department.
The committee members review detailed reports analyzing the proxy issues and have access to proxy statements and annual reports. The committee then discusses the issues and determines the vote. The committee shall give appropriate and significant weight to portfolio managers' views regarding a proposal's impact on shareholders. A proxy committee meeting requires a quorum of three committee members, voting in person or by proxy.
AIM's proxy committee shall consider its fiduciary responsibility to all clients when addressing proxy issues and vote accordingly. The proxy committee may enlist the services of reputable outside professionals and/or proxy evaluation services, such as Institutional Shareholder Services or any of its subsidiaries ("ISS"), to assist with the analysis of voting issues and/or to carry out the actual voting process. To the extent the services of ISS or another provider are used, the proxy committee shall periodically review the policies of that provider.
In addition to the foregoing, the following shall be strictly adhered to unless contrary action receives the prior approval of Funds' Board of Directors/Trustees:
1. Other than by voting proxies and participating in Creditors' committees, AIM shall not engage in conduct that involves an attempt to change or influence the control of a company.
2. AIM will not publicly announce its voting intentions and the reasons therefore.
3. AIM shall not participate in a proxy solicitation or otherwise seek proxy-voting authority from any other public company shareholder.
4. All communications regarding proxy issues between the proxy committee and companies or their agents, or with fellow shareholders shall be for the sole purpose of expressing and discussing AIM's concerns for its advisory clients' interests and not for an attempt to influence or control management.
C. Business/Disaster Recovery
If the proxy committee is unable to meet due to a temporary business interruption, such as a power outage, a sub-committee of the proxy committee may vote proxies in accordance with the policies stated herein. If the sub-committee of the proxy committee is not able to vote proxies, ISS shall vote proxies by default in accordance with ISS' proxy policies and procedures, which may vary slightly from AIM's.
D. Restrictions Affecting Voting
If a country's laws allow a company in that country to block the sale of the company's shares by a shareholder in advance of a shareholder meeting, AIM will not vote in shareholder meetings held in that country. Administrative or other procedures, such as securities lending, may also cause AIM to refrain from voting. Although AIM considers proxy voting to be an important shareholder right, the proxy committee will not impede a portfolio manager's ability to trade in a stock in order to vote at a shareholder meeting.
E. Conflicts of Interest
The proxy committee reviews each proxy to assess the extent to which there may be a material conflict between AIM's interests and those of advisory clients. A potential conflict of interest situation may include where AIM or an affiliate manages assets for, administers an employee benefit plan for, provides other financial products or services to, or otherwise has a material business relationship
with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm AIM's relationship with the company. In order to avoid even the appearance of impropriety, the proxy committee will not take AIM's relationship with the company into account, and will vote the company's proxies in the best interest of the advisory clients, in accordance with these proxy policies and procedures.
To the extent that a committee member has any conflict of interest with respect to a company or an issue presented, that committee member should inform the proxy committee of such conflict and abstain from voting on that company or issue.
APPENDIX E
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of June 24, 2003.
AIM HIGH YIELD FUND
CLASS A CLASS B CLASS C INVESTOR CLASS
SHARES SHARES SHARES SHARES*
--------------------------------- ----------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
--------------------------------- -------------- ---------------- --------------- ----------------
Citigroup Global Markets House
Acct.
00109801250 5.62% 7.12% 5.62% N/A
Attn: Cindy Tempesta, 7th Floor
333 West 34th St.
New York, NY 10001-2402
--------------------------------- -------------- ---------------- --------------- ----------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers - 7.67% 9.03% N/A
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd
Floor
Jacksonville, FL 32246
--------------------------------- -------------- ---------------- --------------- ----------------
|
* Investor Class shares have not commenced operations.
AIM INCOME FUND
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES**
-------------------------------- ------------ ------------ ------------ ------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
-------------------------------- ------------ ------------ ------------ ------------- ------------
Dennis C. McCluskey M.D. &
Associates Inc. 401K & PSP
Dennis C. McCluskey TTEE
Omnibus Account -- -- -- 6.56% N/A
754 S. Cleveland Ave., Ste. 300
Mogadore, OH 44260-2205
-------------------------------- ------------ ------------ ------------ ------------- ------------
D & L Manufacturing Inc. 401K
PSP
Lee Eslicker TTEE -- -- -- 12.64% N/A
Omnibus Account
P. O. Box 52427
Tulsa, OK 74152-0427
------------------------------- ------------ ------------ ------------ ------------- ------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers -- 5.29% 8.53% --
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd
Floor
Jacksonville, FL 32246
-------------------------------- ------------ ------------ ------------ ------------- ------------
Reliance Trust Company
Custodian
FBO Continental Products Inc. -- -- -- 48.74% N/A
401K Plan
P. O. Box 48529
Atlanta, GA 30362-1529
-------------------------------- ------------ ------------ ------------ ------------- ------------
Citigroup Global Markets House
Attn: Cindy Tempesta 7th A 5.63% -- -- -- N/A
333 West 34th Street
New York, NY 10001-2402
-------------------------------- ------------ ------------ ------------ ------------- ------------
|
** Investor Class shares have not commenced operations.
AIM INTERMEDIATE GOVERNMENT FUND
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES *
-------------------------------- ------------ ------------ ------------ ------------- ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
-------------------------------- ------------ ------------ ------------ ------------- ------------
AMVESCAP National Trust Co.
FBO Equator Technologies, Inc. -- -- -- 6.81% N/A
401 (k) Retirement Plan
P. O. Box 105779
Atlanta, GA 30348-5779
-------------------------------- ------------ ------------ ------------ ------------- ------------
INVESCO Trust Company TTEE
FBO Big Horn Basin
Orthopedic Clinic PC -- -- -- 27.28% N/A
401K Profit Sharing Plan
P. O. Box 105779
Atlanta, GA 30348-5779
-------------------------------- ------------ ------------ ------------ ------------- ------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers 11.23% 11.18% 16.50% -- N/A
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd
Floor
Jacksonville, FL 32246
-------------------------------- ------------ ------------ ------------ ------------- ------------
Reliance Trust Company FBO
Northern Printing Network 401K -- -- -- 12.59% N/A
P. O. Box 48529
Atlanta, GA 30362-1529
-------------------------------- ------------ ------------ ------------ ------------- ------------
Reliance Trust Co.
FBO LIPSON, NEILSON, COLE,
SELTZER & GARN N/A N/A N/A 6.22% N/A
P.O. Box 48529
Atlanta, GA 30362-1529
-------------------------------- ------------ ------------ ------------ ------------- ------------
|
* Investor Class shares have not commenced operations.
AIM LIMITED MATURITY TREASURY FUND
CLASS A CLASS A3 INSTITUTIONAL
SHARES SHARES CLASS SHARES
-------------------------------------- ----------------- -------------------- --------------------
PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------- ----------------- -------------------- --------------------
ANTC Cust. Rollover IRA FBO
Thomas M. Watlington, III -- 10.09% N/A
1630 Ridout Rd.
Annapolis, MD 21401-5537
-------------------------------------- ----------------- -------------------- --------------------
ESOR & Co.
Attn: Trust Operations - Lynn Knight -- -- 14.30%
P.O. Box 19006
Green Bay, WI 54307-9006
-------------------------------------- ----------------- -------------------- --------------------
ANT C CUST ROLLOVER IRA
FBO Thomas M. Watlington -- -- 10.68%
1630 Ridout Road
Annapolis, MD 21401-5537
-------------------------------------- ----------------- -------------------- --------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 9.69% -- --
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
-------------------------------------- ----------------- -------------------- --------------------
MUIR & Co.
c/o Frost National Bank Texas -- -- 68.92%
P.O. Box 2479
San Antonio, TX 78298
--------------------------------------------------------------------------------------------------
|
AIM MONEY MARKET FUND
CASH INVESTOR
RESERVE CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES SHARES*
------------------------------- ------------ ------------- ------------- ------------ ------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------- ------------ ------------- ------------- ------------ ------------
AMVESCAP National Trust Co.
FBO Equator Technologies,
Inc. 401 (K) Retirement Plan -- -- -- 10.52% N/A
P. O. Box 105779
Atlanta, GA 30348-5779
------------------------------- ------------ ------------- ------------- ------------ ------------
AMVESCAP National Trust Co.
FBO
West Boylston Insurance
Agency Inc. 401 (K) Plan -- -- -- 19.23% N/A
P. O. Box 105779
Atlanta, GA 30348-5779
------------------------------- ------------ ------------- ------------- ------------ ------------
Citigroup Global Markets
House Acct. -- 5.87% -- -- N/A
Attn: Cindy Tempesta
333 West 34th St., 7th Floor
New York, NY 10001-2402
------------------------------- ------------ ------------- ------------- ------------ ------------
Reliance Trust Company
Custodian
FBO Stadtmauer Bailkin LLP -- -- -- 11.82% N/A
401K Plan
P. O. Box 48529
Atlanta, GA 30362-1529
------------------------------- ------------ ------------- ------------- ------------ ------------
Ataghi Partners Safe Harbor
401k
Ali Taghizadeh or Houshang -- -- -- 8.06% N/A
5116 Westheimer
Houston, TX 77056-5506
------------------------------- ------------ ------------- ------------- ------------ ------------
|
* Investor Class shares have not commenced operations.
AIM MUNICIPAL BOND FUND
INVESTOR
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS SHARES*
--------------------------------- --------------- ---------------- --------------- ---------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
--------------------------------- --------------- ---------------- --------------- ---------------
Robert A. Merkel & Margaret M.
Merkel
TTEES Robert A. Merkel &
Margaret M. Merkel Trust Dtd. -- -- 6.24%
05/27/94
5118 S. 288th Pl.
Auburn, WA 98001
--------------------------------- --------------- ---------------- --------------- ---------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers -- 8.44% 12.86%
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd
Floor
Jacksonville, FL 32246
--------------------------------- --------------- ---------------- --------------- ---------------
Citigroup Global Markets House
Account
Attn: Cindy Tempesta -- 6.73% 6.78%
333 West 34th St., 7th Floor
New York, NY 10001-2402
--------------------------------- --------------- ---------------- --------------- ---------------
|
* Investor Class shares have not commenced operations.
AIM TOTAL RETURN BOND FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------------------- ------------------ ------------------- -------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------- ------------------ ------------------- -------------------
Citigroup Global Markets House Acct.
00109801250
Attn: Cindy Tempesta, 7th Floor -- -- 5.30%
333 West 34th St.
New York, NY 10001-2402
--------------------------------------- ------------------ ------------------- -------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration -- 5.19% 8.12%
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
--------------------------------------- ------------------ ------------------- -------------------
|
MANAGEMENT OWNERSHIP
As of June 24, 2003, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund, except that the trustees and officers as a group owned 1.22% of AIM Cash Reserve Shares and 4.13% of Class A shares of AIM Municipal Bond Fund.
APPENDIX F
MANAGEMENT FEES
For the last three fiscal years ended July 31, the management fees payable by each Fund, the amounts waived by AIM and the net fee paid by each Fund were as follows:
FUND NAME 2002 2001
--------------------------- ---------------------------------------- -----------------------------------------
NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
--------------------------- ----------- ----------- ---------- ----------- ------------ ----------
AIM High $6,811,857 $ (6,338) $6,805,519 $9,230,307 $ (835) $ 9,229
Yield Fund
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Income Fund 2,544,570 (1,176) 2,543,394 2,549,509 (109) 2,549,400
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Intermediate 3,328,024 (28,397) 3,299,627 2,247,495 1,187) 2,246,308
Government Fund
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Limited 1,200,432 N/A 1,200,432 712,990 N/A 712,990
Maturity Treasury
Fund
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Money Market 9,087,854 N/A 9,087,854 7,202,907 N/A 7,202,907
Fund
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Municipal Bond 2,040,421 N/A 2,040,421 1,729,991 N/A 1,729,991
Fund
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Short Term N/A N/A N/A N/A N/A N/A
Bond Fund(2)
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
AIM Total Return 26,520 (46,520) $ -0- N/A N/A N/A
Bond Fund(3)
--------------------------- ---------- ---------- ---------- ---------- ------------ ----------
FUND NAME 2000(1)
--------------------------- -----------------------------------------
MANAGEMENT NET
MANAGEMENT FEE MANAGEMENT
FEE PAYABLE WAIVERS FEE PAID
--------------------------- ----------- ------------ ----------
AIM High $7,537,550 N/A $7,537,550
Yield Fund
--------------------------- ---------- ------------ ----------
AIM Income Fund 1,512,830 N/A 1,512,830
--------------------------- ---------- ------------ ----------
AIM Intermediate 1,513,654 NA 1,513,654
Government Fund
--------------------------- ---------- ------------ ----------
AIM Limited 70,741 NA 705,741
Maturity Treasury
Fund
--------------------------- ---------- ------------ ----------
AIM Money Market 4,041,617 N/A 4,041,617
Fund
--------------------------- ---------- ------------ ----------
AIM Municipal Bond 953,308 NA 953,308
Fund
--------------------------- ---------- ------------ ----------
AIM Short Term N/A N/A N/A
Bond Fund(2)
--------------------------- ---------- ------------ ----------
AIM Total Return N/A N/A N/A
Bond Fund(3)
--------------------------- ---------- ------------ ----------
|
1 AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund,
AIM Money Market Fund and AIM Municipal Bond Fund were in a different
registrant prior to June 1, 2000; therefore, the reporting period for
these funds was from January 1, 2000 through July 31, 2000.
2 Commenced operations on August 30, 2002.
3 Commenced operations on December 31, 2001.
|
APPENDIX G
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended July 31:
FUND NAME 2002 2001 2000(1)
-------------------------------- -------- -------- --------
AIM High Yield Fund $205,198 $168,568 $107,029
-------------------------------- -------- -------- --------
AIM Income Fund 131,802 123,589 72,169
-------------------------------- -------- -------- --------
AIM Intermediate
Government Fund 158,838 120,488 63,465
-------------------------------- -------- -------- --------
AIM Limited Maturity
Treasury Fund 122,783 81,565 80,566
-------------------------------- -------- -------- --------
AIM Money Market Fund 251,839 150,215 83,475
-------------------------------- -------- -------- --------
AIM Municipal Bond Fund 112,021 96,500 53,056
-------------------------------- -------- -------- --------
AIM Short Term Bond Fund(2) N/A N/A N/A
-------------------------------- -------- -------- --------
AIM Total Return Bond
Fund(3) 29,178 N/A N/A
-------------------------------- -------- -------- --------
|
1 AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund,
AIM Money Market Fund and AIM Municipal Bond Fund were in a different
registrant prior to June 1, 2000; therefore, the reporting for these
funds was from January 1, 2000 through July 31, 2000.
2 Commenced operations on August 30, 2002.
3 Commenced operations on December 31, 2001.
|
APPENDIX H
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended July 31 were as follows:
FUND 2002 2001 2000(2)
---- ------------- ------------- -------------
AIM High Yield Fund(3) $ 72,345 $ 3,642 $ 2,882
AIM Income Fund(3) 1,549 10,514 8,000
AIM Intermediate Government Fund -0- -0- -0-
AIM Limited Maturity Treasury Fund -0- -0- -0-
AIM Money Market Fund -0- -0- -0-
AIM Municipal Bond Fund -0- -0- -0-
AIM Short Term Bond Fund(5) N/A N/A N/A
AIM Total Return Bond Fund(6) -0- N/A N/A
|
1 Disclosure regarding brokerage commissions paid on agency trades and
designated as such on the trade confirm.
2 AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund,
AIM Money Market Fund and AIM Municipal Bond Fund were in a different
registrant prior to June 1, 2000; therefore, the reporting period for
these funds was from January 1, 2000 through July 31, 2000.
3 The variation in brokerage commission paid to AIM High Yield Fund and
AIM Income Fund for the fiscal year ended July 31, 2002, as compared to
the two prior fiscal years, was due to an increase in equity trading
activity in the funds on which commissions were paid.
|
5 Commenced operations on August 30, 2002.
6 Commenced operations on December 31, 2001.
APPENDIX I
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASE
OF SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended July 31, 2002, none of the Funds, except AIM High Yield Fund, paid directed brokerage commissions. AIM High Yield Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research statistics and other information:
Related
Fund Transactions Brokerage Commissions
---- ------------ ---------------------
AIM High Yield Fund $541,954 $22,378
|
During the last fiscal year ended July 31, 2002, none of AIM High Yield Fund, AIM Intermediate Government Fund, AIM Limited Maturity Treasury Fund, AIM Municipal Bond Fund or AIM Short Term Bond Fund purchased securities of their "regular" brokers or dealers.
During the last fiscal year ended July 31, 2002, the Funds held securities issued by the following companies, which are "regular" brokers or dealers of one or more of the Funds identified below:
Fund Security Market Value
---- -------- ------------
AIM Income Fund
Lehman Brothers Holdings Inc. Medium Term Discount Notes $ 1,189,116
Salomon Smith Barney Holdings Inc. Unsecured Notes 3,496,481
Fidelity Investments Bonds 4,287,038
AIM Money Market Fund
Credit Suisse First Boston Floating Rate Notes $ 33,000,000
Goldman Sachs Group, Inc. Promissory Notes 75,000,000
Merrill Lynch Mortgage Capital, Inc. Master Notes 70,000,000
Morgan Stanley Dean Witter & Co. Master Notes 80,000,000
AIM Total Return Bond Fund
Fidelity Investments Bonds $ 215,700
Lehman Brothers Holdings Inc. Notes 62,501
|
APPENDIX J
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plans for the fiscal year ended January 31, 2003 were as follows:
CLASS A(1) CLASS B CLASS C CLASS R
FUND SHARES SHARES SHARES SHARES
--------------------------------------- ---------- ---------- ---------- -------
AIM High Yield Fund $1,478,678 $6,539,461 $ 683,287 N/A
AIM Income Fund(2) 797,679 2,361,879 431,875 $ 8
AIM Intermediate Government Fund(2) 913,667 3,744,307 823,922 14
AIM Limited Maturity Treasury Fund(3) 921,799 N/A N/A N/A
AIM Money Market Fund(2) 2,735,865 5,230,124 1,002,104 9
AIM Municipal Bond Fund 853,515 947,150 239,843 N/A
AIM Short Term Bond Fund(4) N/A N/A N/A N/A
AIM Total Return Bond Fund(5) 5,039 23,688 9,195 N/A
|
1 For AIM Cash Reserve Shares of AIM Money Market Fund.
2 Information on Class R shares in the table is for the period June 3,
2002 (the date Class R shares commenced operations) to July 31, 2002.
3 Information on Class A3 shares is not reflected in the table above
since Class A3 shares commenced operations on October 31, 2002.
4 Commenced operations on August 30, 2002.
|
5 Commenced operations on December 31, 2001.
APPENDIX K
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class A Shares (for AIM Money Market Fund, AIM Cash Reserve Shares) of the Funds during the fiscal year ended July 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- ---------- ------------ ------------
AIM High Yield Fund $ 0 $ 0 $ 0 $-0- $1,478,678
AIM Income Fund 0 0 0 -0- 797,679
AIM Intermediate Government Fund 0 0 0 -0- 913,667
AIM Limited Maturity Treasury Fund 0 0 0 -0- 921,799
AIM Money Market Fund 0 0 0 -0- 2,735,865
AIM Municipal Bond Fund 0 0 0 -0- 853,515
AIM Total Return Bond Fund(1) N/A N/A N/A N/A 5,039
|
An estimate by category of the allocation of actual fees paid by Class B Shares of the Funds during the fiscal year ended July 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- ---------- ------------ ------------
AIM High Yield Fund $ 57,514 $ 6,101 $ 19,814 $4,904,596 $1,551,436
AIM Income Fund 31,746 3,278 11,208 1,771,409 544,238
AIM Intermediate Government Fund 64,586 6,990 22,082 2,808,230 842,419
AIM Limited Maturity Treasury Fund N/A N/A N/A N/A N/A
AIM Money Market Fund 65,709 6,840 22,110 3,922,594 1,212,871
AIM Municipal Bond Fund 15,354 1,672 4,664 710,362 215,118
AIM Total Return Bond Fund(1) 2,604 572 -0- 17,766 2,746
|
An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the fiscal year ended July 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ---------- -------- ------------ ------------
AIM High Yield Fund $ 16,362 $ 1,703 $ 6,022 $121,292 $537,908
AIM Income Fund 14,169 1,520 4,828 112,240 299,118
AIM Intermediate Government Fund 29,820 3,200 10,160 223,525 557,217
AIM Limited Maturity Treasury Fund N/A N/A N/A N/A N/A
AIM Money Market Fund 41,874 4,477 14,697 318,808 622,248
AIM Municipal Bond Fund 10,738 1,062 3,371 80,913 143,759
AIM Short Term Bond Fund(2) N/A N/A N/A N/A N/A
AIM Total Return Bond Fund(1) 1,700 373 -0- 6,219 903
|
1 Commenced operations on December 31, 2001.
2 Commenced operations on August 30, 2002.
Class R shares of AIM Income Fund, AIM Intermediate Government Fund and
|
AIM Money Market Fund commenced operations on June 3, 2002. The fees paid by Class R shares of the Funds for the above noted categories during the fiscal year ended July 31, 2002 were $8.00, $14.00 and $9.00, respectively. Class A3 shares of AIM Limited Maturity Treasury Fund commenced operations on October 31, 2002.
APPENDIX L
TOTAL SALES CHARGES
The following chart reflects the total sales charges paid in connection with the sale of Class A shares (for AIM Money Market Fund, AIM Cash Reserve Shares) of each Fund and the amount retained by AIM Distributors for the last three fiscal years ended July 31:
2002 2001 2000(1)
------------------------ ------------------------ ------------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES CHARGES CHARGES RETAINED CHARGES RETAINED
---------- ---------- ---------- ---------- ---------- ----------
AIM High Yield Fund $ 900,144 $ 163,249 $2,210,223 $ 388,238 $1,492,443 $ 265,022
AIM Income Fund 719,480 130,523 1,331,391 241,096 777,478 133,679
AIM Intermediate
Government Fund 1,659,371 300,212 1,265,501 215,039 582,038 103,411
AIM Limited Maturity
Treasury Fund 1,032,517 262,205 417,964 100,352 219,047 57,087
AIM Money Market Fund N/A N/A N/A N/A N/A N/A
AIM Municipal Bond Fund 370,282 67,279 524,615 94,615 167,101 33,406
AIM Total Return Bond Fund(2) 76,644 13,297 N/A N/A N/A N/A
|
1 AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund,
AIM Money Market Fund, AIM Municipal Bond Fund were in a different
registrant prior to June 1, 2000; therefore the reporting period for
these funds was from January 1, 2000 through July 31, 2000.
2 Commenced operations on December 31, 2001.
The following chart reflects the contingent deferred sales charges paid
|
by Class A (for AIM Money Market Fund, AIM Cash Reserve Shares), Class B, Class C and Class R shareholders and retained by AIM Distributors for the last three fiscal years ended July 31:
2002 2001* 2000(1)
---------- ---------- ----------
AIM High Yield Fund $ 287,974 $ 105,346 $ 136,582
AIM Income Fund(4) 73,150 52,982 23,462
AIM Intermediate Government Fund(4) 283,571 209,395 44,911
AIM Limited Maturity Treasury Fund 82,921 N/A N/A
AIM Money Market Fund(4) 5,957,473 2,800,220 740,774
AIM Municipal Bond Fund 97,058 25,351 31,486
AIM Short Term Bond Fund(2) N/A N/A N/A
AIM Total Return Bond Fund(3) 14 N/A N/A
|
1 AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund,
AIM Money Market Fund, AIM Municipal Bond Fund were in a different
registrant prior to June 1, 2000; therefore the reporting period for
these funds was from January 1, 2000 through July 31, 2000.
2 Commenced operations on August 30, 2002.
3 Commenced operations on December 31, 2001.
4 Information on Class R shares in the table above is for the period June
3, 2002 (the date Class R shares commenced operations) to July 31,
2002.
|
APPENDIX M
PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns (including sales loads) for each Fund, with respect to its Class A shares for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
----------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------------------------- -------- -------- -------- --------- ---------
AIM High Yield Fund -12.41% -9.31% 0.70% N/A 07/11/78
AIM Income Fund -2.28 0.17 4.75 N/A 05/03/68
AIM Intermediate Government Fund 3.74 4.93 5.48 N/A 04/28/87
AIM Limited Maturity Treasury Fund 3.54 5.20 5.12 N/A 12/15/87
AIM Municipal Bond Fund 1.30 3.38 4.80 N/A 03/28/77
AIM Total Return Bond Fund 2.68 N/A N/A 3.33% 12/31/01
|
The average annual total return for AIM Cash Reserve Shares of AIM Money Market Fund for the one year period ended January 31, 2003, was 0.85%; for the five year period ended January 31, 2003, was 3.60%; and since inception (October 16, 1993), was 3.92%.
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -12.80% -9.34% N/A -0.44% 09/01/93
AIM Income Fund -2.89 0.08 N/A 3.34 09/07/93
AIM Intermediate Government Fund 3.08 4.85 N/A 5.04 09/07/93
AIM Money Market Fund -4.85 2.46 N/A 3.24 10/16/93
AIM Municipal Bond Fund 0.45 3.27 N/A 4.07 09/01/93
AIM Total Return Bond Fund 1.97 N/A N/A 3.62 12/31/01
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
---------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ----------
AIM High Yield Fund -9.53% -9.12% N/A -7.31% 08/04/97
AIM Income Fund 0.96 0.37 N/A 1.53 08/04/97
AIM Intermediate Government Fund 7.00 5.15 N/A 5.58 08/04/97
AIM Money Market Fund -0.84 2.83 N/A 2.93 08/04/97
AIM Municipal Bond Fund 4.59 3.62 N/A 3.86 08/04/97
AIM Short Term Bond Fund N/A N/A N/A N/A 08/30/02
AIM Total Return Bond Fund 5.97 N/A N/A 7.29 12/31/01
|
The average annual total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
------------------------------------------------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM Income Fund 2.26% 0.89% 5.00% N/A 05/03/68
AIM Intermediate Government Fund 8.61 5.68 5.72 N/A 04/28/87
AIM Money Market Fund 0.59 3.34 N/A 3.06% 10/16/93
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class R shares since June 3, 2002 and the restated historical performance of the Fund's Class A shares (for periods prior to June 3, 2002) at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares.
** The inception date shown in the table is that of AIM Income Fund's and AIM Intermediate Government Fund's Class A shares and AIM Money Market Fund's Cash Reserve Shares. The inception date of the Fund's Class R shares is June 3, 2002.
The average annual total returns for AIM Limited Maturity Treasury Fund, with respect to its Class A3 shares, for the one, five and ten year period ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
-----------------------------------------------------------
SINCE INCEPTION
CLASS A3 SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------------------------------- -------- -------- -------- --------- ---------
AIM Limited Maturity Treasury Fund 4.33% 5.20% 5.01% N/A 12/15/87
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class A3 shares since October 31, 2002 and the restated historical performance of the Funds' Class A shares (for periods prior to October 31, 2002) at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A3 shares.
** The inception date shown in the table is that of AIM Limited Maturity Treasury Fund's Class A shares. The inception date of the Fund's Class A3 shares is October 31, 2002.
The average annual total returns for each Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
---------------------------------------------------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -8.00% -8.43% 1.20% N/A 07/11/78
AIM Income Fund 2.53 1.15 5.26 N/A 05/03/68
AIM Intermediate Government Fund 8.88 5.95 5.99 N/A 04/28/87
AIM Money Market Fund 0.85 3.60 N/A 3.92% 10/16/93
AIM Municipal Bond Fund 6.38 4.39 N/A N/A 03/28/77
|
* The returns shown for these periods are the restated historical performance of the Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
** The inception date shown is that of the Class A shares of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Municipal Bond Fund and that of AIM Cash Reserve Shares of AIM Money Market Fund.
CUMULATIVE TOTAL RETURNS
The cumulative total returns (including sales load) for each Fund with respect to its Class A shares for the one, five and ten year periods (or since inception, if less than ten years), ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
----------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------------------------- -------- -------- -------- --------- ---------
AIM High Yield Fund -12.41% -38.66% 7.27% N/A 07/11/78
AIM Income Fund -2.28 0.85 59.02 N/A 05/03/68
AIM Intermediate Government Fund 3.74 27.21 70.41 N/A 04/28/87
AIM Limited Maturity Treasury Fund 3.54 28.83 64.78 N/A 12/15/87
AIM Municipal Bond Fund 1.30 18.07 59.76 N/A 03/28/77
AIM Total Return Bond Fund 2.68 N/A N/A 3.62% 12/31/01
|
The cumulative total returns for AIM Cash Reserves Shares of AIM Money Market Fund for the one-year period ended January 31, 2003 was 0.85%; and for the five-year period ended January 31, 2003 was 19.32%; and since inception was 42.93%.
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each of the named Funds' Class B shares for the one, five and ten year periods (or since inception, if less than ten years), ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -12.80% -38.76% N/A -4.08% 09/01/93
AIM Income Fund -2.89 0.38 N/A 36.19 09/07/93
AIM Intermediate Government Fund 3.08 26.73 N/A 58.76 09/07/93
AIM Money Market Fund -4.85 12.94 N/A 34.46 10/16/93
AIM Municipal Bond Fund 0.45 17.48 N/A 45.65 09/01/93
AIM Total Return Bond Fund 1.97 N/A N/A 3.93 12/31/01
|
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each of the named Funds' Class C shares for the one, five and ten year periods (or since inception, if less than ten years), ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -9.53% -38.00% N/A -34.08% 08/04/97
AIM Income Fund 0.96 1.89 N/A 8.69 08/04/97
AIM Intermediate Government Fund 7.00 28.56 N/A 34.74 08/04/97
AIM Money Market Fund -0.84 14.96 N/A 17.17 08/04/97
AIM Municipal Bond Fund 4.59 19.44 N/A 23.12 08/04/97
AIM Short Term Bond Fund N/A N/A N/A 1.46 08/30/02
AIM Total Return Bond Fund 5.97 N/A N/A 7.93 12/31/01
|
The cumulative total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
------------------------------------------------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM Income Fund 2.26% 4.53% 62.86% N/A 05/03/68
AIM Intermediate Government Fund 8.61 31.84 74.48 N/A 04/28/87
AIM Money Market Fund 0.59 17.83 N/A 39.64% 10/16/93
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class R shares since June 3, 2002 and the restated historical performance of the Fund's Class A shares (for periods prior to June 3, 2002) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares.
** The inception date shown in the table is that of the AIM Income Fund's and AIM Intermediate Government Fund's Class A shares and AIM Money Market Fund's Cash Reserve Shares. The inception date of the Fund's Class R shares is June 3, 2002.
The cumulative annual total returns for AIM Limited Maturity Treasury Fund, with respect to its Class A3 shares, for the one, five and ten year periods ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
--------------------------------------------------
SINCE INCEPTION
CLASS A3 SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
--------------- ------ ------- -------- --------- ---------
AIM Limited Maturity Treasury Fund 4.33% 28.82% 63.12% N/A 12/15/87
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class A3 shares since October 31, 2002 and the restated historical performance of the Fund's Class A shares (for periods prior to October 31, 2002) at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A3 shares.
** The inception date shown in the table is that of AIM Limited Maturity Treasury Fund's Class A shares. The inception date of the Fund's Class A3 shares is October 31, 2002.
The cumulative annual total returns for each Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
----------------------------------------------------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -8.00% -35.61% 12.64% N/A 07/11/78
AIM Income Fund 2.53 5.86 67.00 N/A 05/03/68
AIM Intermediate Government Fund 8.88 33.50 78.87 N/A 04/28/87
AIM Money Market Fund 0.85 19.32 N/A 42.93% 10/16/93
AIM Municipal Bond Fund 6.38 23.98 67.66 N/A 03/28/77
|
* The returns shown for these periods are the restated historical performance of the Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
** The inception date shown is that of the Class A shares of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Municipal Bond Fund and that of AIM Cash Reserve Shares of AIM Money Market Fund.
AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTION)
The average annual total returns (after taxes on distributions and including sales load) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
---------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------------------------- -------- -------- -------- --------- ---------
AIM High Yield Fund -16.09% -13.17% -3.35% N/A 07/11/78
AIM Income Fund -4.58 -2.43 1.86 N/A 05/03/68
AIM Intermediate Government Fund 1.95 2.53 2.85 N/A 04/28/87
AIM Limited Maturity Treasury Fund 2.16 5.33 3.14 N/A 12/15/87
AIM Municipal Bond Fund 1.30 3.37 4.74 N/A 03/28/77
AIM Total Return Bond Fund 1.08 N/A N/A 1.76% 12/31/01
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -16.38% -12.97% N/A -4.20% 09/01/93
AIM Income Fund -5.00 -2.24 N/A 0.78 09/07/93
AIM Intermediate Government Fund 1.51 2.74 N/A 2.72 09/07/93
AIM Municipal Bond Fund 0.45 3.26 N/A 4.01 09/01/93
AIM Total Return Bond Fund 0.61 N/A N/A 2.28 12/31/01
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -13.11% -12.71% N/A -10.91% 08/04/97
AIM Income Fund -1.15 -1.92 N/A -0.81 08/04/97
AIM Intermediate Government Fund 5.42 3.06 N/A 3.46 08/04/97
AIM Municipal Bond Fund 4.59 3.61 N/A 3.85 08/04/97
AIM Short Term Bond Fund N/A N/A N/A N/A 08/30/02
AIM Total Return Bond Fund 4.61 N/A N/A 5.95 12/31/01
|
The average annual total returns (after taxes on distributions) for AIM Limited Maturity Treasury Fund, with respect to its Class A3 shares, for the one, five and ten year periods ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
------------------------------------------------------------
SINCE INCEPTION
CLASS A3 SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------------------------------- -------- -------- -------- --------- ---------
AIM Limited Maturity Treasury Fund 2.96% 3.34% 3.04% 3.93% 12/15/87
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class A3 shares since October 31, 2002 and the restated historical performance of the Fund's Class A shares (for periods prior to October 31, 2002) at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A3 shares.
** The inception date shown in the table is that of AIM Limited Maturity Treasury Fund's Class A shares. The inception date of the Fund's Class A3 shares is October 31, 2002.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
--------------------------------------------------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -11.87% -12.32% -2.88% N/A 07/11/78
AIM Income Fund 0.12 -1.48 2.36 N/A 05/03/68
AIM Intermediate Government Fund 7.00 3.52 3.35 N/A 04/28/87
AIM Municipal Bond Fund 6.38 4.38 5.24 N/A 03/28/77
|
* The returns shown for these periods are the restated historical performance of the Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
** The inception date shown is that of the Class A shares of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund and AIM Municipal Bond Fund.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption and including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
---------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------------------------------- -------- -------- -------- --------- ---------
AIM High Yield Fund -7.65% -8.47% -1.01% N/A 07/11/78
AIM Income Fund -1.45 -1.14 2.36 N/A 05/03/68
AIM Intermediate Government Fund 2.26 2.70 3.00 N/A 04/28/87
AIM Limited Maturity Treasury Fund 2.16 3.23 3.10 N/A 12/15/87
AIM Municipal Bond Fund 2.58 3.64 4.82 N/A 03/28/77
AIM Total Return Bond Fund 1.61 N/A N/A 1.89% 12/31/01
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -7.88% -8.39% N/A -1.74% 09/01/93
AIM Income Fund -1.82 -1.06 N/A 1.89 09/07/93
AIM Intermediate Government Fund 1.86 2.80 N/A 2.82 09/07/93
AIM Municipal Bond Fund 1.84 3.44 N/A 4.10 09/01/93
AIM Total Return Bond Fund 1.18 N/A N/A 2.23 12/31/01
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003
--------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -5.87% -8.22% N/A -6.85% 08/04/97
AIM Income Fund 0.55 -0.81 N/A 0.09 08/04/97
AIM Intermediate Government Fund 4.26 3.05 N/A 3.39 08/04/97
AIM Municipal Bond Fund 4.39 3.72 N/A 3.92 08/04/97
AIM Short Term Bond Fund N/A N/A N/A N/A 08/30/02
AIM Total Return Bond Fund 3.64 N/A N/A 5.17 12/31/01
|
The average annual total returns (after taxes on distributions and redemption) for AIM Limited Maturity Treasury Fund, with respect to its Class A3 shares, for the one, five and ten year periods ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
------------------------------------------------------------
SINCE INCEPTION
CLASS A3 SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------------------------------- -------- -------- -------- --------- ---------
AIM Limited Maturity Treasury Fund 2.65% 3.23% 3.01% 3.89% 12/15/87
|
* The returns shown for these periods are the blended returns of the historical performance of the Fund's Class A3 shares since October 31, 2002 and the restated historical performance of the Fund's Class A shares (for periods prior to October 31, 2002) at the net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class A3 shares.
** The inception date shown in the table is that of AIM Limited Maturity Treasury Fund's Class A shares. The inception date of the Fund's Class A3 shares is October 31, 2002.
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended January 31, 2003 are as follows:
PERIODS ENDED JANUARY 31, 2003*
---------------------------------------------------------
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
------------------------------------ -------- -------- -------- --------- ---------
AIM High Yield Fund -4.94% -7.85% -0.63% N/A 07/11/78
AIM Income Fund 1.50 -0.37 2.79 N/A 05/03/68
AIM Intermediate Government Fund 5.41 3.52 3.43 N/A 04/28/87
AIM Municipal Bond Fund 5.78 4.49 5.27 N/A 03/28/77
|
* The returns shown for these periods are the restated historical performance of the Fund's Class A shares at the net asset value, and reflect the higher Rule 12b-1 fees applicable to Class A shares.
** The inception date shown is that of the Class A shares of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund and AIM Municipal Bond Fund.
YIELDS
The 30-day yields for each of the named Funds are as follows:
30 DAYS ENDED JANUARY 31, 2003
--------------------------------------------
CLASS A1 CLASS B CLASS C CLASS R INVESTOR
CLASS
-------- ------- ------- ------- --------
AIM High Yield Fund 8.63% 8.29% 8.29% N/A N/A
AIM Income Fund 4.56 4.03 4.03 4.48% N/A
AIM Intermediate Government Fund 3.37 2.79 2.79 3.27 N/A
AIM Limited Maturity Treasury Fund 0.87 N/A N/A N/A 1.10%
AIM Municipal Bond Fund 3.53 2.96 2.96 N/A N/A
AIM Short Term Bond Fund N/A N/A 1.59 N/A N/A
AIM Total Return Bond Fund 3.39 2.82 2.82 N/A N/A
|
1 For Class A3 shares of AIM Limited Maturity Treasury Fund.
The tax equivalent yield, assuming a tax rate of 38.6% for Class A
shares, Class B shares and Class C shares of AIM Municipal Bond Fund are as
|
follows:
TAX-EQUIVALENT YIELD JANUARY 31, 2003
------------------------------------------
CLASS A CLASS B CLASS C INVESTOR CLASS
------- ------- ------- --------------
AIM Municipal Bond Fund 5.75% 4.82% 4.82% N/A
|
The 7-day annualized yield for AIM Cash Reserve Shares, Class B shares, Class C shares and Class R shares of AIM Money Market Fund are as follows:
7 DAYS ENDED JANUARY 31, 2003
--------------------------------------------
CASH CLASS B CLASS C CLASS R INVESTOR
RESERVE CLASS
------- ------- ------- ------- --------
AIM Money Market Fund 0.55% 0.05% 0.05% 0.29% N/A
|
DISTRIBUTION RATES
The distribution rates at offering price for each of the named Funds are as follows:
30 DAYS ENDED JANUARY 31, 2003
---------------------------------------------
30-DAY: CLASS A1 CLASS B CLASS C CLASS R INVESTOR
CLASS
----------------------------------------------- -------- ------- ------- ------- --------
AIM High Yield Fund 9.87% 9.68% 9.70% N/A N/A
AIM Income Fund 5.59 5.12 5.12 5.59% N/A
AIM Intermediate Government Fund 3.63 3.10 3.11 3.55 N/A
AIM Limited Maturity Treasury Fund N/A N/A N/A N/A N/A
AIM Municipal Bond Fund 4.45 3.92 3.93 N/A N/A
AIM Short Term Bond Fund N/A N/A 2.87 N/A N/A
AIM Total Return Bond Fund 3.84 3.28 3.28 N/A N/A
|
1 For Class A3 shares of AIM Limited Maturity Treasury Fund.
12 MONTHS ENDED JANUARY 31, 2003
--------------------------------
12-MONTH: CLASS A1 CLASS B CLASS C
----------------------------------- ---------- ------- ---------
AIM High Yield Fund 11.10% 10.82% 10.85%
AIM Income Fund 6.13 5.68 5.69
AIM Intermediate Government Fund 4.23 3.73 3.75
AIM Limited Maturity Treasury Fund 2.49 N/A N/A
AIM Municipal Bond Fund 4.45 3.92 3.93
AIM Short Term Bond Fund(2) N/A N/A N/A
AIM Total Return Bond Fund 3.65 3.09 3.09
|
1 For Class A3 shares of AIM Limited Maturity Treasury Fund.
2 Commenced operations on August 30, 2002.
Yield and distribution rate information on Investor Class shares is not reflected in the tables above since Investor Class shares have not yet commenced operations.
Information on Class A3 shares and Class R shares is not reflected in the 12-month distribution rate table above since they commenced operations on October 31, 2002 and June 3, 2002, respectively.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X unaudited financials for the period ended January 31, 2003, for Registrant's portfolios have been included in addition to the portfolios' audited financials for the period ended July 31, 2002. Such financials reflect all adjustments which are of a normal recurring nature and which are, in the opinion of management, necessary to a fair statement of the results for the periods presented.
FS
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM High Yield Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM High Yield Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM High Yield Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Houston, Texas
September 10, 2002
|
FS-1
JULY 31, 2002
PRINCIPAL MARKET
AMOUNT VALUE
BONDS & NOTES-95.32%
AEROSPACE & DEFENSE-1.10%
Dunlop Standard Aerospace Holdings PLC
(United Kingdom), Sr. Unsec. Sub. Yankee
Notes, 11.88%, 05/15/09 $ 8,135,000 $ 8,501,075
-------------------------------------------------------------------------
Sequa Corp.-Class A, Sr. Unsec. Notes, 9.00%,
08/01/09 1,770,000 1,770,000
=========================================================================
10,271,075
=========================================================================
AIRLINES-1.02%
Air Canada (Canada), Sr. Unsec. Yankee Notes,
10.25%, 03/15/11 5,445,000 3,566,475
-------------------------------------------------------------------------
Northwest Airlines Inc., Sr. Unsec. Gtd.
Notes, 8.88%, 06/01/06 7,780,000 6,029,500
=========================================================================
9,595,975
=========================================================================
ALUMINUM-0.33%
Jorgensen (Earle M.) Co., Sr. Sec. Notes,
9.75%, 06/01/12(a) 3,115,000 3,068,275
=========================================================================
APPAREL RETAIL-2.00%
Big 5 Corp.-Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 8,945,000 9,481,700
-------------------------------------------------------------------------
Gap, Inc. (The), Unsec. Notes, 9.90%,
12/15/05 5,325,000 5,245,125
-------------------------------------------------------------------------
Mothers Work, Inc., Sr. Notes, 11.25%,
08/01/10 4,010,000 3,991,999
=========================================================================
18,718,824
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.94%
Perry Ellis International, Inc., Sr. Sec.
Notes, 9.50%, 03/15/09 (Acquired 03/15/02;
Cost $1,765,203)(b) 1,810,000 1,837,150
-------------------------------------------------------------------------
Russell Corp., Sr. Notes, 9.25%, 05/01/10(a) 2,640,000 2,719,200
-------------------------------------------------------------------------
Samsonite Corp., Sr. Unsec. Sub. Notes,
10.75%, 06/15/08 150,000 125,250
-------------------------------------------------------------------------
William Carter Co. (The), Sr. Unsec. Gtd.
Sub. Notes, 10.88%, 08/15/11 3,805,000 4,109,400
=========================================================================
8,791,000
=========================================================================
AUTO PARTS & EQUIPMENT-1.33%
Advance Stores Co., Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 10.25%, 04/15/08 8,880,000 9,368,400
-------------------------------------------------------------------------
Dura Operating Corp.-Series B, Sr. Unsec.
Gtd. Notes, 8.63%, 04/15/12 425,000 429,250
-------------------------------------------------------------------------
Intermet Corp., Sr. Notes, 9.75%, 06/15/09(a) 2,670,000 2,670,000
-------------------------------------------------------------------------
Key Plastics Holdings, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
03/15/07(c)(d) 23,770,000 2,377
=========================================================================
12,470,027
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
BANKS-0.40%
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12 $ 3,845,000 $ 3,748,875
=========================================================================
BROADCASTING & CABLE TV-13.07%
Acme Communications, Inc.-Series B, Sr.
Unsec. Unsub. Gtd. Notes, 10.88%, 09/30/04 12,355,000 12,231,450
-------------------------------------------------------------------------
Adelphia Communications Corp.,
Series B, Sr. Unsec. Notes, 9.88%,
03/01/07(d) 4,220,000 1,371,500
-------------------------------------------------------------------------
Sr. Unsec. Notes, 10.88%, 10/01/10(d) 9,595,000 3,118,375
-------------------------------------------------------------------------
Alliance Atlantis Communications Inc.
(Canada), Sr. Unsec. Sub. Yankee Notes,
13.00%, 12/15/09 6,960,000 7,482,000
-------------------------------------------------------------------------
Charter Communications Holdings, LLC/
Charter Communications Holdings
Capital Corp.,
Sr. Unsec. Disc. Notes, 9.92%, 04/01/11(e) 25,190,000 10,957,650
-------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 11.13%, 01/15/11 3,975,000 2,643,375
-------------------------------------------------------------------------
Clear Channel Communications, Inc., Sr.
Unsec. Notes, 7.65%, 09/15/10 3,590,000 3,379,411
-------------------------------------------------------------------------
Comcast UK Cable Partners Ltd. (Bermuda), Sr.
Unsec. Yankee Deb., 11.20%, 11/15/07 9,395,000 8,314,575
-------------------------------------------------------------------------
Corus Entertainment Inc. (Canada), Sr. Unsec.
Sub. Yankee Notes, 8.75%, 03/01/12 2,135,000 2,124,325
-------------------------------------------------------------------------
CSC Holdings Inc.-Series B, Sr. Unsec. Notes,
7.63%, 04/01/11 4,200,000 3,297,000
-------------------------------------------------------------------------
Echostar Broadband Corp., Sr. Unsec. Notes,
10.38%, 10/01/07 4,605,000 4,420,800
-------------------------------------------------------------------------
Fox Family Worldwide, Inc., Sr. Unsec. Notes,
10.25%, 11/01/07 1,959,044 2,071,689
-------------------------------------------------------------------------
Insight Midwest, L.P., Sr. Unsec. Notes,
10.50%, 11/01/10 6,435,000 5,373,225
-------------------------------------------------------------------------
Knology Holdings, Inc., Sr. Unsub. Disc.
Notes, 11.88%, 10/15/07(e) 18,240,000 5,426,400
-------------------------------------------------------------------------
LIN Holdings Corp., Sr. Unsec. Disc. Notes,
10.00%, 03/01/08(e) 6,135,000 5,797,575
-------------------------------------------------------------------------
Mediacomm LLC, Sr. Unsec. Notes, 9.50%,
01/15/13 8,140,000 5,657,300
-------------------------------------------------------------------------
ONO Finance PLC (United Kingdom), Sr. Unsec.
Gtd. Euro Notes, 13.00%, 05/01/09 17,740,000 3,326,250
-------------------------------------------------------------------------
Pegasus Communications Corp.-Series B, Sr.
Notes, 9.63%, 10/15/05 7,700,000 3,580,500
-------------------------------------------------------------------------
Sr. Unsec. Notes, 12.50%, 08/01/07 14,500,000 7,177,500
-------------------------------------------------------------------------
Radio One, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 8.88%, 07/01/11 6,595,000 6,644,462
-------------------------------------------------------------------------
|
FS-2
PRINCIPAL MARKET
AMOUNT VALUE
BROADCASTING & CABLE TV-(CONTINUED)
Salem Communications Holding Corp.-Series B,
Sr. Unsec. Gtd. Sub. Notes, 9.00%, 07/01/11 $ 5,070,000 $ 5,146,050
-------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., Sr. Unsec.
Gtd. Sub. Notes, 8.75%, 12/15/11 4,410,000 4,432,050
-------------------------------------------------------------------------
Spanish Broadcasting System, Inc., Sr. Unsec.
Gtd. Sub. Notes, 9.63%, 11/01/09 3,409,000 3,340,820
-------------------------------------------------------------------------
United Pan-Europe Communications N.V.
(Netherlands)-Series B, Sr. Unsec. Yankee
Notes,
11.25%, 02/01/10(c) 12,385,000 1,114,650
-------------------------------------------------------------------------
11.50%, 02/01/10(c) 8,200,000 738,000
-------------------------------------------------------------------------
Young Broadcasting Inc.,
Series B, Sr. Unsec. Gtd. Sub. Notes,
9.00%, 01/15/06 785,000 722,200
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 8.50%, 12/15/08 2,630,000 2,643,150
=========================================================================
122,532,282
=========================================================================
BUILDING PRODUCTS-2.43%
Associated Materials Inc., Sr. Unsec. Sub.
Notes, 9.75%, 04/15/12(a) 1,780,000 1,824,500
-------------------------------------------------------------------------
Atrium Cos., Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 05/01/09 2,660,000 2,673,300
-------------------------------------------------------------------------
Brand Services, Inc., Sr. Unsec. Notes,
10.25%, 02/15/08 9,930,000 9,582,450
-------------------------------------------------------------------------
MMI Products, Inc.-Series B, Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 8,720,000 8,720,000
=========================================================================
22,800,250
=========================================================================
CASINOS & GAMBLING-4.76%
Ameristar Casinos, Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.75%, 02/15/09 7,925,000 8,519,375
-------------------------------------------------------------------------
Boyd Gaming Corp.,
Sr. Unsec. Gtd. Notes, 9.25%, 08/01/09 5,000,000 5,275,000
-------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 8.75%, 04/15/12 4,450,000 4,527,875
-------------------------------------------------------------------------
Herbst Gaming, Inc.-Series B, Sr. Sec. Notes,
10.75%, 09/01/08 4,450,000 4,628,044
-------------------------------------------------------------------------
Hollywood Casino Corp./Shreveport Capital
Corp., Sr. Unsec. Gtd. First Mortgage
Notes, 13.00%, 08/01/06 6,075,000 6,591,375
-------------------------------------------------------------------------
Hollywood Casino Corp.-Class A, Sr. Sec. Gtd.
Notes, 11.25%, 05/01/07 4,630,000 5,000,400
-------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, Sr. Unsec.
Gtd. Sub. Notes, 8.00%, 04/01/12 1,370,000 1,370,000
-------------------------------------------------------------------------
Park Place Entertainment Corp., Sr. Unsec.
Notes, 7.50%, 09/01/09 5,235,000 5,117,212
-------------------------------------------------------------------------
Venetian Casino Resort LLC, 2nd Mortgage
Notes, 11.00%, 06/15/10(a) 3,565,000 3,582,825
=========================================================================
44,612,106
=========================================================================
COMMODITY CHEMICALS-0.62%
ISP Chemo Inc.-Series B, Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 07/01/11 3,590,000 3,482,300
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
COMMODITY CHEMICALS-(CONTINUED)
Methanex Corp. (Canada), Sr. Unsec. Yankee
Notes, 8.75%, 08/15/12 $ 2,225,000 $ 2,306,613
=========================================================================
5,788,913
=========================================================================
COMPUTER STORAGE & PERIPHERALS-0.05%
Seagate Technology LLC, Sr. Notes, 8.00%,
05/15/09(a) 480,000 464,400
=========================================================================
CONSTRUCTION & ENGINEERING-1.04%
Schuff International Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 11,125,000 9,734,375
=========================================================================
CONSTRUCTION MATERIALS-0.73%
Dayton Superior Corp., Sr. Unsec. Gtd. Sub.
Notes, 13.00%, 06/15/09 7,120,000 6,835,200
=========================================================================
CONSTRUCTION, FARM MACHINERY & HEAVY
TRUCKS-0.46%
Terex Corp., Sr. Unsec. Gtd. Sub. Notes,
9.25%, 07/15/11 4,260,000 4,281,300
=========================================================================
DISTILLERS & VINTNERS-0.27%
Constellation Brands, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 8.13%, 01/15/12 2,430,000 2,515,050
=========================================================================
DISTRIBUTORS-0.09%
AmeriGas Partners, L.P., Sr. Unsec. Notes,
8.88%, 05/20/11 810,000 830,250
=========================================================================
DIVERSIFIED CHEMICALS-1.58%
Equistar Chemicals LP/Equistar Funding Corp.,
Sr. Unsec. Gtd. Notes, 10.13%, 09/01/08 4,630,000 4,259,600
-------------------------------------------------------------------------
Huntsman International LLC, Sr. Notes, 9.88%,
03/01/09(a) 5,455,000 5,509,550
-------------------------------------------------------------------------
Millennium America, Inc.,
Sr. Notes, 9.25%, 06/15/08(a) 2,215,000 2,281,450
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 9.25%, 06/15/08 2,720,000 2,801,600
=========================================================================
14,852,200
=========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.81%
Tekni-Plex, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 12.75%, 06/15/10 7,585,000 7,622,925
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-0.56%
LBI Media Inc., Sr. Sub. Notes, 10.13%,
07/15/12(a) 5,340,000 5,259,900
=========================================================================
DIVERSIFIED METALS & MINING-0.04%
Centaur Mining and Exploration Ltd.
(Australia), Sr. Gtd. Yankee Notes, 11.00%,
12/01/07(c) 28,800,000 360,000
=========================================================================
DRUG RETAIL-0.44%
Rite Aid Corp., Sr. Unsec. Unsub. Notes,
7.13%, 01/15/07 6,175,000 4,106,375
=========================================================================
|
FS-3
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRIC UTILITIES-2.08%
AES Corp. (The),
Sr. Unsec. Notes, 8.75%, 06/15/08 $ 6,330,000 $ 2,500,350
-------------------------------------------------------------------------
Sr. Unsec. Notes, 9.50%, 06/01/09 1,505,000 624,559
-------------------------------------------------------------------------
Unsec. Putable Unsub. ROARS Notes, 7.38%,
06/15/03 1,615,000 896,325
-------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Yankee Notes, 8.50%,
05/01/08 9,235,000 4,756,025
-------------------------------------------------------------------------
Calpine Corp., Sr. Unsec. Notes, 8.63%,
08/15/10 4,010,000 1,904,750
-------------------------------------------------------------------------
CMS Energy Corp., Sr. Unsec. Unsub. Notes,
8.90%, 07/15/08 6,280,000 4,301,800
-------------------------------------------------------------------------
Mission Energy Holding Co., Sr. Sec. Notes,
13.50%, 07/15/08 11,150,000 4,515,750
=========================================================================
19,499,559
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.34%
Flextronics International Ltd. (Singapore),
Sr. Unsec. Sub. Yankee Notes, 9.88%,
07/01/10 5,530,000 5,585,300
-------------------------------------------------------------------------
Knowles Electronics Inc., Sr. Unsec. Gtd.
Sub. Notes, 13.13%, 10/15/09 9,860,000 6,951,300
=========================================================================
12,536,600
=========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-0.83%
Fisher Scientific International Inc., Sr.
Unsec. Sub. Notes, 8.13%, 05/01/12 3,835,000 3,815,825
-------------------------------------------------------------------------
Solectron Corp., Sr. Unsec. Notes, 9.63%,
02/15/09 4,410,000 3,946,950
=========================================================================
7,762,775
=========================================================================
EMPLOYMENT SERVICES-0.62%
MSX International, Inc., Sr. Unsec. Gtd. Sub.
Notes, 11.38%, 01/15/08 8,890,000 5,822,950
=========================================================================
ENVIRONMENTAL SERVICES-0.68%
Allied Waste North America Inc.-Series B,
Sr. Gtd. Sub. Notes, 8.50%, 12/01/08 3,465,000 3,135,825
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 10.00%,
08/01/09 3,600,000 3,258,000
=========================================================================
6,393,825
=========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.40%
IMC Global Inc.-Series B, Sr. Unsec. Gtd.
Notes, 11.25%, 06/01/11 3,520,000 3,748,800
=========================================================================
FOOD DISTRIBUTORS-0.82%
Fleming Cos., Inc.-Series D, Sr. Unsec. Gtd.
Sub. Notes, 10.63%, 07/31/07 6,240,000 5,990,400
-------------------------------------------------------------------------
Roundy's Inc., Sr. Sub. Notes, 8.88%,
06/15/12(a) 1,665,000 1,665,000
=========================================================================
7,655,400
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
FOOD RETAIL-0.36%
Pathmark Stores, Inc., Sr. Unsec. Gtd. Sub.
Notes, 8.75%, 02/01/12 $ 3,420,000 $ 3,385,800
=========================================================================
FOREST PRODUCTS-0.81%
Louisiana-Pacific Corp., Sr. Unsec. Sub.
Notes, 10.88%, 11/15/08 2,450,000 2,584,750
-------------------------------------------------------------------------
Millar Western Forest Products Ltd. (Canada),
Sr. Unsec. Yankee Notes, 9.88%, 05/15/08 5,180,000 4,998,700
=========================================================================
7,583,450
=========================================================================
GAS UTILITIES-0.84%
El Paso Energy Partners, L.P.,
Series B, Sr. Unsec. Gtd. Sub. Notes,
8.50%, 06/01/11 2,505,000 2,367,225
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 8.50%,
06/01/11(a) 5,875,000 5,551,875
=========================================================================
7,919,100
=========================================================================
GENERAL MERCHANDISE STORES-0.91%
Pantry, Inc. (The), Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 10/15/07 9,600,000 8,496,000
=========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-0.29%
Vanguard Health Systems, Inc., Sr. Unsec.
Gtd. Sub. Notes, 9.75%, 08/01/11 2,635,000 2,700,875
=========================================================================
HEALTH CARE EQUIPMENT-1.29%
CONMED Corp., Sr. Unsec. Gtd. Sub. Notes,
9.00%, 03/15/08 2,140,000 2,150,700
-------------------------------------------------------------------------
Radiologix, Inc.-Series B, Sr. Unsec. Gtd.
Notes, 10.50%, 12/15/08 6,190,000 6,313,800
-------------------------------------------------------------------------
Vicar Operating, Inc., Sr. Unsec. Gtd. Notes,
9.88%, 12/01/09 3,420,000 3,625,200
=========================================================================
12,089,700
=========================================================================
HEALTH CARE FACILITIES-2.42%
Hanger Orthopedic Group, Inc.,
Sr. Sub. Notes, 11.25%, 06/15/09 4,750,000 4,773,750
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 10.38%,
02/15/09 840,000 869,400
-------------------------------------------------------------------------
InSight Health Services Corp.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 9.88%, 11/01/11 2,215,000 2,226,075
-------------------------------------------------------------------------
Magellan Health Services, Inc., Sr. Notes,
9.38%, 11/15/07(a) 2,620,000 2,109,100
-------------------------------------------------------------------------
Select Medical Corp., Sr. Unsec. Sub. Notes,
9.50%, 06/15/09 5,310,000 5,442,750
-------------------------------------------------------------------------
Triad Hospitals, Inc.-Series B, Sr. Unsec.
Gtd. Notes, 8.75%, 05/01/09 2,665,000 2,784,925
-------------------------------------------------------------------------
United Surgical Partners International, Inc.,
Sr. Unsec. Gtd. Sub. Notes, 10.00%,
12/15/11 4,275,000 4,435,312
=========================================================================
22,641,312
=========================================================================
|
FS-4
PRINCIPAL MARKET
AMOUNT VALUE
HEALTH CARE SUPPLIES-0.79%
DJ Orthopedics LLC, Sr. Unsec. Gtd. Sub.
Notes, 12.63%, 06/15/09 $ 6,775,000 $ 7,452,500
=========================================================================
HOME FURNISHINGS-2.21%
Falcon Products, Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 11.38%, 06/15/09 4,230,000 3,384,000
-------------------------------------------------------------------------
O'Sullivan Industries, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 13.38%, 10/15/09 8,395,000 8,436,975
-------------------------------------------------------------------------
Sealy Mattress Co.-Series B, Sr. Gtd. Sub.
Notes, 9.88%, 12/15/07 8,130,000 6,951,150
-------------------------------------------------------------------------
Winsloew Furniture, Inc.-Series B, Sr. Gtd.
Sub. Notes, 12.75%, 08/15/07 2,025,000 1,954,125
=========================================================================
20,726,250
=========================================================================
HOMEBUILDING-2.96%
Beazer Homes USA, Inc., Sr. Notes, 8.38%,
04/15/12(a) 3,515,000 3,515,000
-------------------------------------------------------------------------
K Hovnanian Enterprises, Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 10/01/07 3,400,000 3,587,000
-------------------------------------------------------------------------
Schuler Homes, Inc.,
Class A, Sr. Unsec. Gtd. Sub. Notes,
10.50%, 07/15/11 3,575,000 3,610,750
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 9.00%, 04/15/08 4,050,000 4,070,250
-------------------------------------------------------------------------
Technical Olympic USA, Inc., Sr. Notes,
9.00%, 07/01/10(a) 6,170,000 5,830,650
-------------------------------------------------------------------------
WCI Communities Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.63%, 02/15/11 7,100,000 7,135,500
=========================================================================
27,749,150
=========================================================================
HOTELS, RESORTS & CRUISE LINES-2.71%
Host Marriott Corp., Sr. Sec. Gtd. Notes,
7.88%, 08/01/08 1,805,000 1,710,237
-------------------------------------------------------------------------
Intrawest Corp. (Canada), Sr. Unsec. Yankee
Notes, 10.50%, 02/01/10 5,990,000 6,199,650
-------------------------------------------------------------------------
John Q Hammons Hotels, 1st Mortgage Notes,
8.88%, 05/15/12(a) 3,510,000 3,360,825
-------------------------------------------------------------------------
Kerzner International Ltd. (Bahamas),
Sr. Sub. Yankee Notes, 8.88%, 08/15/11
(Acquired 05/09/02; Cost $2,884,000)(b) 2,800,000 2,842,000
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Yankee Notes, 8.88%,
08/15/11 1,580,000 1,607,650
-------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., Sr. Unsec.
Unsub. Notes, 8.75%, 02/02/11 6,740,000 6,133,400
-------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.,
Notes, 7.88%, 05/01/12(a) 3,775,000 3,595,687
=========================================================================
25,449,449
=========================================================================
HOUSEHOLD APPLIANCES-0.61%
Salton, Inc., Sr. Unsec. Gtd. Sub. Notes,
10.75%, 12/15/05 5,850,000 5,762,250
=========================================================================
HOUSEWARES & SPECIALTIES-0.29%
Johnsondiversey Inc., Sr. Sub. Notes, 9.63%,
05/15/12(a) 2,625,000 2,730,000
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
INDUSTRIAL MACHINERY-0.39%
Actuant Corp., Sr. Unsec. Gtd. Sub. Notes,
13.00%, 05/01/09 $ 856,000 $ 988,680
-------------------------------------------------------------------------
NMHG Holdings Co., Sr. Unsec. Gtd. Notes,
10.00%, 05/15/09(a) 2,630,000 2,643,150
=========================================================================
3,631,830
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.21%
American Media Operations, Inc.-Series B, Sr.
Unsec. Gtd. Notes, 10.25%, 05/01/09 2,500,000 2,606,250
-------------------------------------------------------------------------
ICG Services, Inc., Sr. Unsec. Disc. Notes,
10.00%, 02/15/08(c)(e) 64,905,000 324,525
-------------------------------------------------------------------------
Madison River Capital LLC/Madison River
Finance Corp., Sr. Unsec. Notes, 13.25%,
03/01/10 10,720,000 7,772,000
-------------------------------------------------------------------------
NTELOS Inc., Sr. Unsec. Notes, 13.00%,
08/15/10 7,860,000 2,161,500
-------------------------------------------------------------------------
PTC International Finance II S.A.
(Luxembourg), Sr. Unsec. Gtd. Sub. Yankee
Notes, 11.25%, 12/01/09 6,400,000 6,432,000
-------------------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec. Gtd. Notes,
6.13%, 11/15/08 2,000,000 1,445,000
=========================================================================
20,741,275
=========================================================================
LEISURE FACILITIES-1.03%
Six Flags, Inc., Sr. Unsec. Notes,
8.88%, 02/01/10 4,750,000 4,655,000
-------------------------------------------------------------------------
9.50%, 02/01/09 2,185,000 2,185,000
-------------------------------------------------------------------------
9.75%, 06/15/07 2,835,000 2,849,175
=========================================================================
9,689,175
=========================================================================
LIFE & HEALTH INSURANCE-0.14%
Conseco, Inc., Sr. Unsec. Gtd. Notes,
8.75%, 08/09/06 (Acquired 07/19/01; Cost
$1,639,950)(b)(c) 1,740,000 478,500
-------------------------------------------------------------------------
10.75%, 06/15/09 (Acquired 06/26/01; Cost
$2,677,914)(b)(c) 2,710,000 799,450
=========================================================================
1,277,950
=========================================================================
METAL & GLASS CONTAINERS-2.00%
Graphic Packaging Corp., Sr. Unsec. Gtd. Sub.
Notes, 8.63%, 02/15/12(a) 3,425,000 3,407,875
-------------------------------------------------------------------------
Greif Bros. Corp.-Class A, Sr. Sub. Notes,
8.88%, 08/01/12(a) 4,445,000 4,433,887
-------------------------------------------------------------------------
Jarden Corp., Sr. Sub. Notes, 9.75%,
05/01/12(a) 6,205,000 5,894,750
-------------------------------------------------------------------------
Plastipak Holdings Inc., Sr. Unsec. Gtd.
Notes, 10.75%, 09/01/11 4,535,000 4,875,125
-------------------------------------------------------------------------
Stone Container Corp., Sr. Notes, 8.38%,
07/01/12(a) 150,000 151,500
=========================================================================
18,763,137
=========================================================================
MOVIES & ENTERTAINMENT-1.52%
AMC Entertainment Inc., Sr. Unsec. Sub.
Notes, 9.50%, 02/01/11 10,320,000 9,855,600
-------------------------------------------------------------------------
|
FS-5
PRINCIPAL MARKET
AMOUNT VALUE
MOVIES & ENTERTAINMENT-(CONTINUED)
Nextmedia Operating Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.75%, 07/01/11 $ 4,515,000 $ 4,424,700
=========================================================================
14,280,300
=========================================================================
OFFICE SERVICES & SUPPLIES-0.34%
Mail Well I Corp., Sr. Unsec. Gtd. Notes,
9.63%, 03/15/12(a) 3,950,000 3,179,750
=========================================================================
OIL & GAS DRILLING-1.00%
Pride International, Inc., Sr. Unsec. Notes,
10.00%, 06/01/09 8,765,000 9,400,463
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-0.98%
Hanover Equipment Trust
2001 A, Sr. Sec. Notes, 8.50%, 09/01/08(a) 2,640,000 2,191,200
-------------------------------------------------------------------------
2001 B, Sr. Sec. Notes, 8.75%, 09/01/11(a) 880,000 734,800
-------------------------------------------------------------------------
SESI, LLC, Sr. Unsec. Gtd. Notes, 8.88%,
05/15/11 6,335,000 6,239,975
=========================================================================
9,165,975
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.36%
Chesapeake Energy Corp., Sr. Unsec. Gtd.
Notes, 8.38%, 11/01/08 2,720,000 2,720,000
-------------------------------------------------------------------------
Comstock Resources, Inc., Sr. Unsec. Gtd.
Notes, 11.25%, 05/01/07 7,820,000 8,015,500
-------------------------------------------------------------------------
Frontier Oil Corp., Sr. Unsec. Notes, 11.75%,
11/15/09 12,785,000 13,360,325
-------------------------------------------------------------------------
Pogo Producing Co.-Series B, Sr. Unsec. Sub.
Notes, 10.38%, 02/15/09 4,880,000 5,270,400
-------------------------------------------------------------------------
Swift Energy Co., Sr. Unsec. Sub. Notes,
9.38%, 05/01/12 2,200,000 2,101,000
=========================================================================
31,467,225
=========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.89%
Texas Petrochemical Corp., Sr. Unsec. Sub.
Notes, 11.13%, 07/01/06 11,895,000 9,218,625
-------------------------------------------------------------------------
Western Gas Resources, Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.00%, 06/15/09 8,000,000 8,520,000
=========================================================================
17,738,625
=========================================================================
PACKAGED FOODS & MEATS-0.28%
Dole Foods Co., Inc., Sr. Unsec. Notes,
7.25%, 05/01/09 2,610,000 2,614,072
=========================================================================
PAPER PRODUCTS-1.03%
Appleton Papers Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 12.50%, 12/15/08 5,390,000 5,430,425
-------------------------------------------------------------------------
Tembec Industries Inc. (Canada), Sr. Unsec.
Gtd. Yankee Notes, 7.75%, 03/15/12 4,255,000 4,201,132
=========================================================================
9,631,557
=========================================================================
PERSONAL PRODUCTS-2.70%
Armkel LLC, Sr. Sub. Notes, 9.50%, 08/15/09 3,160,000 3,294,300
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
PERSONAL PRODUCTS-(CONTINUED)
Elizabeth Arden, Inc.,
Sr. Notes, 10.38%, 05/15/07 $ 3,190,000 $ 2,982,650
-------------------------------------------------------------------------
Sr. Sec. Notes, 11.75%, 02/01/11 9,565,000 9,708,475
-------------------------------------------------------------------------
Herbalife International, Inc., Sr. Sub.
Notes, 11.75%, 07/15/10(a) 3,560,000 3,542,200
-------------------------------------------------------------------------
Playtex Products, Inc., Sr. Unsec. Gtd. Sub.
Notes, 9.38%, 06/01/11 5,420,000 5,772,300
=========================================================================
25,299,925
=========================================================================
PHARMACEUTICALS-1.66%
aaiPharma Inc., Sr. Sub. Notes, 11.00%,
04/01/10(a) 10,240,000 9,574,400
-------------------------------------------------------------------------
Biovail Corp. (Canada), Sr. Sub. Yankee
Notes, 7.88%, 04/01/10 6,120,000 5,945,702
=========================================================================
15,520,102
=========================================================================
RAILROADS-2.95%
Kansas City Southern Railway, Sr. Unsec. Gtd.
Notes, 9.50%, 10/01/08 5,739,000 6,198,120
-------------------------------------------------------------------------
Railamerica Transportation Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.88%, 08/15/10 13,705,000 14,218,938
-------------------------------------------------------------------------
TFM S.A. de C.V. (Mexico), Sr. Unsec. Gtd.
Disc. Yankee Deb., 11.75%, 06/15/09 7,563,000 7,260,480
=========================================================================
27,677,538
=========================================================================
REAL ESTATE INVESTMENT TRUSTS-1.17%
Host Marriott LP
Series E, Sr. Sec. Gtd. Notes,
8.38%, 02/15/06 300,000 292,500
-------------------------------------------------------------------------
Series I, Unsec. Gtd. Notes, 9.50%,
01/15/07 4,900,000 4,900,000
-------------------------------------------------------------------------
iStar Financial Inc., Sr. Unsec. Notes,
8.75%, 08/15/08 570,000 589,950
-------------------------------------------------------------------------
MeriStar Hospitality Corp., Sr. Unsec. Gtd.
Notes, 9.13%, 01/15/11 4,430,000 4,208,500
-------------------------------------------------------------------------
RFS Partnership LP, Sr. Unsec. Gtd. Notes,
9.75%, 03/01/12 980,000 984,900
=========================================================================
10,975,850
=========================================================================
RESTAURANTS-0.10%
Perkins Family Restaurants, L.P.-Series B,
Sr. Unsec. Notes, 10.13%, 12/15/07 970,000 955,450
=========================================================================
SEMICONDUCTORS-0.56%
ON Semiconductor Corp., Sr. Sec. Gtd. Notes,
12.00%, 05/15/08(a) 6,215,000 5,251,675
=========================================================================
SPECIALTY CHEMICALS-0.32%
OM Group, Inc., Sr. Unsec. Gtd. Sub. Notes,
9.25%, 12/15/11 3,110,000 3,001,150
=========================================================================
SPECIALTY STORES-2.64%
Cole National Group, Inc., Sr. Sub. Notes,
8.88%, 05/15/12(a) 1,730,000 1,721,350
-------------------------------------------------------------------------
|
FS-6
PRINCIPAL MARKET
AMOUNT VALUE
SPECIALTY STORES-(CONTINUED)
CSK Auto, Inc.,
Series A, Sr. Gtd. Sub. Deb., 11.00%,
11/01/06 $ 7,325,000 $ 7,727,875
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 12.00%, 06/15/06 4,010,000 4,270,650
-------------------------------------------------------------------------
Petco Animal Supplies Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.75%, 11/01/11 4,390,000 4,741,200
-------------------------------------------------------------------------
Petro Stopping Centers LP, Sr. Unsec. Notes,
10.50%, 02/01/07 2,160,000 2,062,800
-------------------------------------------------------------------------
United Rentals, Inc.-Series B, Sr. Unsec.
Gtd. Notes, 10.75%, 04/15/08 4,085,000 4,207,550
=========================================================================
24,731,425
=========================================================================
STEEL-0.29%
AK Steel Corp., Sr. Unsec. Gtd. Notes, 7.75%,
06/15/12(a) 2,690,000 2,703,450
=========================================================================
TELECOMMUNICATIONS EQUIPMENT-2.20%
Filtronic PLC (United Kingdom), Sr. Unsec.
Yankee Notes, 10.00%, 12/01/05 8,440,000 6,688,700
-------------------------------------------------------------------------
SBA Communications Corp., Sr. Unsec. Notes,
10.25%, 02/01/09 6,940,000 3,782,300
-------------------------------------------------------------------------
Spectrasite Holdings, Inc.,
Series B, Sr. Unsec. Sub. Notes, 12.50%,
11/15/10 9,600,000 3,888,000
-------------------------------------------------------------------------
Sr. Disc. Notes, 12.00%, 07/15/08(e) 13,470,000 4,108,350
-------------------------------------------------------------------------
Sr. Unsec. Disc. Notes, 11.25%, 04/15/09(e) 8,660,000 2,165,000
=========================================================================
20,632,350
=========================================================================
TEXTILES-0.87%
Cabot Safety Corp., Sr. Sub. Notes, 12.50%,
07/15/05 8,000,000 8,200,000
=========================================================================
TRUCKING-1.99%
Avis Group Holdings, Inc., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 05/01/09 3,005,000 3,162,763
-------------------------------------------------------------------------
North American Van Lines Inc., Sr. Sub.
Notes, 13.38%, 12/01/09(a) 14,865,000 15,533,925
=========================================================================
18,696,688
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-4.37%
AirGate PCS, Inc., Sr. Sub. Disc. Notes,
13.50%, 10/01/09(e)(f) 8,440,000 2,405,400
-------------------------------------------------------------------------
Alamosa Delaware Inc., Sr. Unsec. Gtd. Notes,
12.50%, 02/01/11 8,630,000 3,279,400
-------------------------------------------------------------------------
13.63%, 08/15/11 1,545,000 618,000
-------------------------------------------------------------------------
Alamosa Holdings, Inc., Sr. Unsec. Gtd. Disc.
Notes, 12.88%, 02/15/10(e) 2,725,000 504,125
-------------------------------------------------------------------------
Crown Castle International Corp.,
Sr. Unsec. Disc. Notes, 10.63%, 11/15/07(e) 8,780,000 6,189,900
-------------------------------------------------------------------------
Sr. Unsec. Notes, 10.75%, 08/01/11 6,585,000 4,543,650
-------------------------------------------------------------------------
Horizon PCS, Inc., Sr. Unsec. Gtd. Disc.
Notes, 14.00%, 10/01/10(e) 16,795,000 2,771,175
-------------------------------------------------------------------------
iPCS, Inc., Sr. Unsec. Disc. Notes, 14.00%,
07/15/10(e) 8,995,000 1,484,175
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
WIRELESS TELECOMMUNICATION SERVICES-(CONTINUED)
IWO Holdings, Inc., Sr. Unsec. Gtd. Notes,
14.00%, 01/15/11 $13,320,000 $ 4,728,600
-------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Notes,
12.00%, 11/01/08 11,465,000 8,312,125
-------------------------------------------------------------------------
Tritel PCS Inc., Sr. Unsec. Gtd. Sub. Notes,
10.38%, 01/15/11 2,679,000 2,270,453
-------------------------------------------------------------------------
Triton PCS Inc., Sr. Unsec. Gtd. Sub. Notes,
9.38%, 02/01/11 1,760,000 1,152,800
-------------------------------------------------------------------------
UbiquiTel Operating Co., Sr. Unsec. Gtd.
Disc. Sub. Notes, 14.00%, 04/15/10(e) 17,190,000 1,418,175
-------------------------------------------------------------------------
US Unwired Inc.-Series B, Sr. Unsec. Gtd.
Sub. Disc. Notes, 13.38%, 11/01/09(e) 4,580,000 1,259,500
=========================================================================
40,937,478
=========================================================================
Total Bonds & Notes (Cost $1,148,761,288) 893,529,737
=========================================================================
SHARES
STOCKS & OTHER EQUITY INTERESTS-1.39%
AEROSPACE & DEFENSE-0.00%
Earthwatch Inc.-Series C,
$0.30 PIK Conv. Pfd. (Acquired 09/15/99-
06/21/02; Cost $65,475)(b) 2,135,750 21,357
-------------------------------------------------------------------------
$1.20, Conv. Pfd. (Acquired 03/14/97-
06/21/02; Cost $208,406)(b) 132,980 2,660
=========================================================================
24,017
=========================================================================
BROADCASTING & CABLE TV-0.37%
CSC Holdings Inc.-Series M, 11.13% Pfd. 69,120 3,386,880
=========================================================================
MARINE PORTS & SERVICES-0.09%
First Wave Marine, Inc.(d)(g) 43,705 885,026
=========================================================================
TELECOMMUNICATIONS EQUIPMENT-0.00%
World Access, Inc.-Series D, $45.00 Conv.
Pfd. (Acquired 03/03/00; Cost
$16,365,448)(b)(d)(g) 16,707 17
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.93%
Celcaribe S.A., Ordinary Trust Ctfs.
(Acquired 05/17/94-01/23/97; Cost
$0)(b)(d)(g) 2,276,400 22,764
-------------------------------------------------------------------------
Dobson Communications Corp.,
12.25% PIK Pfd. 29,036 8,710,829
=========================================================================
8,733,593
=========================================================================
Total Stocks & Other Equity Interests
(Cost $70,826,635) 13,029,533
=========================================================================
WARRANTS-0.12%
BROADCASTING & CABLE TV-0.00%
Knology Inc.-Wts., expiring 10/22/07
(Acquired 03/12/98-02/01/00; Cost
$270)(b)(d)(h) 47,295 473
=========================================================================
|
FS-7
MARKET
SHARES VALUE
CONSTRUCTION MATERIALS-0.01%
Dayton Superior-Wts., expiring 06/15/09
(Acquired 08/07/00-01/30/01; Cost
$10,000)(b)(h) 9,580 $ 98,195
=========================================================================
GENERAL MERCHANDISE STORES-0.02%
Travelcenters of America Inc.-Wts., expiring
05/01/09 (Acquired 01/29/01; Cost $0)(b)(h) 13,500 138,375
=========================================================================
HOME FURNISHINGS-0.00%
O'Sullivan Industries, Inc.-Series B-Pfd.
Wts., expiring 11/15/09 (Acquired 06/13/00;
Cost $0)(b)(h) 20,195 202
-------------------------------------------------------------------------
O'Sullivan Industries, Inc.-Wts., expiring
11/15/09 (Acquired 06/13/00; Cost $0)(b)(h) 20,195 202
-------------------------------------------------------------------------
Winsloew Escrow Corp.-Wts., expiring 08/15/07
(Acquired 12/06/99; Cost $0)(b)(h) 2,025 21,262
=========================================================================
21,666
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.00%
KMC Telecom Holdings, Inc.-Wts., expiring
4/15/08(h) 35 9
-------------------------------------------------------------------------
PF.Net Communications, Inc.-Wts., expiring
05/15/10 (Acquired 07/19/00; Cost $0)(b)(h) 18,200 182
=========================================================================
191
=========================================================================
RAILROADS-0.07%
Railamerica Inc.-Wts., expiring 08/15/10
(Acquired 10/05/00; Cost $0)(b)(h) 14,375 650,469
=========================================================================
|
MARKET
SHARES VALUE
TELECOMMUNICATIONS EQUIPMENT-0.00%
Loral Space & Communications, Ltd.-Wts.,
expiring 12/26/06(h) 68,302 $ 6,830
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.02%
Horizon PCS, Inc.-Wts., expiring 10/01/10
(Acquired 05/02/01; Cost $0)(b)(h) 27,480 275
-------------------------------------------------------------------------
iPCS, Inc.-Wts., expiring 07/15/10 (Acquired
01/29/01; Cost $0)(b)(h) 5,880 1,470
-------------------------------------------------------------------------
IWO Holdings Inc.-Wts., expiring 01/15/11
(Acquired 08/24/01; Cost $0)(b)(h) 13,320 3,330
-------------------------------------------------------------------------
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(b)(h) 15,155 152
-------------------------------------------------------------------------
Ubiquitel Inc.-Wts., expiring 04/15/10
(Acquired 08/10/00; Cost $0)(b)(h) 25,910 210,519
=========================================================================
215,746
=========================================================================
Total Warrants (Cost $778,755) 1,131,945
=========================================================================
MONEY MARKET FUNDS-0.05%
STIC Liquid Assets Portfolio(i) 233,544 233,544
-------------------------------------------------------------------------
STIC Prime Portfolio(i) 233,544 233,544
=========================================================================
Total Money Market Funds (Cost $467,088) 467,088
=========================================================================
TOTAL INVESTMENTS-96.88% (Cost
$1,220,833,766) 908,158,303
=========================================================================
OTHER ASSETS LESS LIABILITIES-3.12% 29,283,983
=========================================================================
NET ASSETS-100.00% $937,442,286
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
Conv. - Convertible Ctfs. - Certificates Deb. - Debentures Dep. - Depositary Disc. - Discounted Gtd. - Guaranteed Pfd. - Preferred PIK - Payment in Kind ROARS - Remarketable or Redeemable Securities Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated Wts. - Warrants |
Notes to Schedule of Investments:
(a) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(b) Restricted securities. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The aggregate market value of these securities at 07/31/02
was $7,129,004, which represented 0.76% of the Fund's net assets.
(c) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(d) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(e) Discounted bond at issue. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(f) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes warrants to purchase
common or preferred shares of the issuer.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-8
JULY 31, 2002
ASSETS:
Investments, at market value (cost
$1,220,833,766) $908,158,303
-----------------------------------------------------------
Receivables for:
Investments sold 13,765,809
-----------------------------------------------------------
Fund shares sold 2,719,847
-----------------------------------------------------------
Dividends and interest 25,482,867
-----------------------------------------------------------
Investment for deferred compensation plan 96,624
-----------------------------------------------------------
Other assets 51,768
===========================================================
Total assets 950,275,218
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 4,290,632
-----------------------------------------------------------
Fund shares reacquired 3,086,384
-----------------------------------------------------------
Dividends 4,307,738
-----------------------------------------------------------
Deferred compensation plan 96,624
-----------------------------------------------------------
Accrued distribution fees 659,857
-----------------------------------------------------------
Accrued trustees' fees 1,335
-----------------------------------------------------------
Accrued transfer agent fees 208,265
-----------------------------------------------------------
Accrued operating expenses 182,097
===========================================================
Total liabilities 12,832,932
===========================================================
Net assets applicable to shares outstanding $937,442,286
___________________________________________________________
===========================================================
NET ASSETS:
Class A $417,973,856
___________________________________________________________
===========================================================
Class B $469,408,225
___________________________________________________________
===========================================================
Class C $ 50,060,205
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 112,940,894
___________________________________________________________
===========================================================
Class B 126,408,481
___________________________________________________________
===========================================================
Class C 13,516,902
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 3.70
-----------------------------------------------------------
Offering price per share:
(Net asset value of $3.70 divided by
95.25%) $ 3.88
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 3.71
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 3.70
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $ 156,230,177
-----------------------------------------------------------
Dividends 3,623,075
-----------------------------------------------------------
Dividends from affiliated money market funds 666,386
===========================================================
Total investment income 160,519,638
===========================================================
EXPENSES:
Advisory fees 6,811,857
-----------------------------------------------------------
Administrative services fees 205,198
-----------------------------------------------------------
Custodian fees 112,427
-----------------------------------------------------------
Distribution fees -- Class A 1,478,678
-----------------------------------------------------------
Distribution fees -- Class B 6,539,461
-----------------------------------------------------------
Distribution fees -- Class C 683,287
-----------------------------------------------------------
Transfer agent fees 3,118,954
-----------------------------------------------------------
Trustees' fees 15,053
-----------------------------------------------------------
Other 576,633
===========================================================
Total expenses 19,541,548
===========================================================
Less: Fees waived (6,338)
-----------------------------------------------------------
Expenses paid indirectly (71,840)
===========================================================
Net expenses 19,463,370
===========================================================
Net investment income 141,056,268
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (486,124,409)
-----------------------------------------------------------
Change in net unrealized appreciation of
investment securities 148,209,888
===========================================================
Net gain (loss) from investment securities (337,914,521)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(196,858,253)
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-9
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
--------------- ---------------
OPERATIONS:
Net investment income $ 141,056,268 $ 214,139,633
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (486,124,409) (521,648,172)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 148,209,888 (132,633,058)
================================================================================================
Net increase (decrease) in net assets resulting from
operations (196,858,253) (440,141,597)
================================================================================================
Distributions to shareholders from net investment income:
Class A (69,550,001) (101,172,746)
------------------------------------------------------------------------------------------------
Class B (71,741,714) (102,753,707)
------------------------------------------------------------------------------------------------
Class C (7,514,536) (10,213,180)
------------------------------------------------------------------------------------------------
Return of Capital:
Class A -- (4,772,897)
------------------------------------------------------------------------------------------------
Class B -- (5,196,404)
------------------------------------------------------------------------------------------------
Class C -- (519,501)
------------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (1,659,640)
------------------------------------------------------------------------------------------------
Class B -- (1,806,903)
------------------------------------------------------------------------------------------------
Class C -- (180,642)
------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (111,693,259) (73,156,301)
------------------------------------------------------------------------------------------------
Class B (114,155,181) (114,095,709)
------------------------------------------------------------------------------------------------
Class C (13,464,843) 4,602,693
================================================================================================
Net increase (decrease) in net assets (584,977,787) (851,066,534)
================================================================================================
NET ASSETS:
Beginning of year 1,522,420,073 2,373,486,607
================================================================================================
End of year $ 937,442,286 $ 1,522,420,073
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,988,969,233 $ 3,228,343,419
------------------------------------------------------------------------------------------------
Undistributed net investment income (12,425,446) (6,179,915)
------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (1,726,426,038) (1,236,619,015)
------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (312,675,463) (463,124,416)
================================================================================================
$ 937,442,286 $ 1,522,420,073
________________________________________________________________________________________________
================================================================================================
|
See Notes to Financial Statements.
FS-10
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM High Yield 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 eight separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge. Matters affecting each portfolio or class will be 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 achieve a high level of current income.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/ event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/ event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
On July 31, 2002, undistributed net investment income was increased by $3,743,517, undistributed net realized gains decreased by $3,682,614 and paid-in capital decreased by $60,903 as a result of bond premium reclassifications, sales of defaulted bonds and other reclassifications. Net assets of the fund were unaffected by the reclassifications.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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.
FS-11
The Fund has a capital loss carryforward of $1,314,524,641 as of July 31, 2002 which expires as follows:
CAPITAL LOSS CARRYFORWARD EXPIRATION ------------ --------------- $ 3,132,878 July 31, 2003 ---------------------------------------- 115,531,161 July 31, 2006 ---------------------------------------- 297,433,797 July 31, 2007 ---------------------------------------- 297,100,942 July 31, 2008 ---------------------------------------- 131,908,743 July 31, 2009 ---------------------------------------- 469,417,120 July 31, 2010 ======================================== $1,314,524,641 ________________________________________ ======================================== |
As of July 31, 2002, the Fund has a post-October capital loss deferral of $383,050,893 which will be recognized in the following tax year.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--CHANGE IN ACCOUNTING PRINCIPLE
As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. Prior to August 1, 2001, the Fund did not amortize premiums on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $2,239,065 reduction in the cost of securities and a corresponding $2,239,065 increase in net unrealized gains and losses, based on securities held by the Fund on August 1, 2001.
The effect of this change in the current period was to decrease net investment income by $917,784, to increase net unrealized gains and losses by $457,513 and to increase net realized gains and losses by $460,271. As a result the net investment income per share remained the same, the net realized and unrealized gains and losses per share remained the same and the ratio of net investment income to average net assets decreased by 0.07%.
NOTE 3--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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.625% on the first $200 million of the Fund's average daily net assets, plus 0.55% on the next $300 million of the Fund's average daily net assets, plus 0.50% on the next $500 million of the Fund's average daily net assets, plus 0.45% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market fund of which the Fund has invested. For the year ended July 31, 2002, AIM waived fees of $6,338.
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, 2002, AIM was paid $205,198 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. During the year ended July 31, 2002, AFS retained $1,773,789 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, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. For the year ended July 31, 2002, the Class A, Class B and Class C shares paid AIM Distributors $1,478,678, $6,539,461 and $683,287, respectively, as compensation under the Plans.
AIM Distributors retained commissions of $163,249 from sales of the Class A shares of the Fund during the year ended July 31, 2002. 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. During the year ended July 31, 2002, AIM Distributors retained $250,168, $9,088 and $28,718 in contingent deferred sales charges imposed on redemptions of Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $6,956 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 4--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $15,499 and reductions in custodian fees of $56,341 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $71,840.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring
FS-12
compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 6--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
------------ ------------
Distributions paid from ordinary income $148,806,251 $217,786,818
---------------------------------------------------------------------------
Return of capital -- 10,488,802
===========================================================================
$148,806,251 $228,275,620
___________________________________________________________________________
===========================================================================
|
As of July 31, 2002, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $ 3,162,374
----------------------------------------------------------------
Capital loss carryforward (1,314,524,641)
----------------------------------------------------------------
Unrealized appreciation (depreciation) (740,164,680)
================================================================
$(2,051,526,947)
________________________________________________________________
================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales, the deferral of capital losses incurred after October 31 and other timing differences.
NOTE 8--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, 2002 was $736,354,344 and $966,982,022, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 11,078,060 ---------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (338,386,101) ========================================================== Net unrealized appreciation (depreciation) of investment securities $(327,308,041) __________________________________________________________ ========================================================== Cost of investments for tax purposes is $1,235,466,344. |
NOTE 9--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ -------------
Sold:
Class A 61,671,459 $ 274,866,210 88,790,617 $ 503,250,413
---------------------------------------------------------------------------------------------------------------------------
Class B 28,855,909 131,251,628 36,141,916 204,218,189
---------------------------------------------------------------------------------------------------------------------------
Class C 7,361,669 32,891,393 10,285,951 58,789,265
===========================================================================================================================
Issued as reinvestment of dividends:
Class A 9,782,026 43,420,316 12,173,551 68,377,402
---------------------------------------------------------------------------------------------------------------------------
Class B 7,389,848 32,867,780 8,839,237 49,784,875
---------------------------------------------------------------------------------------------------------------------------
Class C 918,849 4,077,812 1,176,597 6,579,431
===========================================================================================================================
Reacquired:
Class A (97,447,190) (429,979,785) (112,890,159) (644,784,116)
---------------------------------------------------------------------------------------------------------------------------
Class B (63,245,842) (278,274,589) (63,698,704) (368,098,773)
---------------------------------------------------------------------------------------------------------------------------
Class C (11,408,493) (50,434,048) (10,589,223) (60,766,003)
===========================================================================================================================
(56,121,765) $(239,313,283) (29,770,217) $(182,649,317)
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
FS-13
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------------------------------
YEAR ENDED JULY 31, SEVEN MONTHS ENDED YEAR ENDED DECEMBER 31,
-------------------------- JULY 31, --------------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------------ ---------- ---------- ----------
Net asset value, beginning of period $ 4.92 $ 7.00 $ 8.07 $ 8.77 $ 10.16 $ 9.88
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.49(a) 0.68 0.47 0.85 0.92 0.90
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) (1.19) (2.03) (1.03) (0.66) (1.40) 0.28
=================================================================================================================================
Total from investment operations (0.70) (1.35) (0.56) 0.19 (0.48) 1.18
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.52) (0.69) (0.49) (0.87) (0.91) (0.90)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net
investment income -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.52) (0.73) (0.51) (0.89) (0.91) (0.90)
=================================================================================================================================
Net asset value, end of period $ 3.70 $ 4.92 $ 7.00 $ 8.07 $ 8.77 $ 10.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (15.36)% (19.98)% (7.12)% 2.21% (5.10)% 12.52%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $417,974 $683,845 $1,056,453 $1,364,502 $1,670,863 $1,786,352
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.07%(c) 0.99% 0.93%(d) 0.92% 0.85% 0.90%
=================================================================================================================================
Ratio of net investment income to
average net assets 11.15%(a)(c) 11.98% 10.79%(d) 10.06% 9.45% 9.08%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have remained the same and the ratio of net investment
income to average net assets would have been 11.22%. In accordance with
the AICPA Audit and Accounting Guide for Investment Companies, per share
and ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Does not include sales charges and is not annualized for periods less
than one year.
(c) Ratios are based on average daily net assets of $591,471,201.
(d) Annualized.
FS-14
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------------------------------------------------------------------------------
YEAR ENDED JULY 31, SEVEN MONTHS ENDED YEAR ENDED DECEMBER 31,
-------------------------- JULY 31, --------------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------------ ---------- ---------- ----------
Net asset value, beginning of period $ 4.93 $ 7.01 $ 8.07 $ 8.76 $ 10.16 $ 9.88
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.45(a) 0.64 0.44 0.79 0.84 0.83
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) (1.18) (2.03) (1.03) (0.66) (1.40) 0.28
=================================================================================================================================
Total from investment operations (0.73) (1.39) (0.59) 0.13 (0.56) 1.11
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.49) (0.65) (0.45) (0.80) (0.84) (0.83)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net
investment income -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.49) (0.69) (0.47) (0.82) (0.84) (0.83)
=================================================================================================================================
Net asset value, end of period $ 3.71 $ 4.93 $ 7.01 $ 8.07 $ 8.76 $ 10.16
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (15.99)% (20.60)% (7.49)% 1.46% (5.90)% 11.71%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $469,408 $756,704 $1,206,737 $1,559,864 $1,820,899 $1,647,801
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.82%(c) 1.75% 1.69%(d) 1.68% 1.61% 1.65%
=================================================================================================================================
Ratio of net investment income to
average net assets 10.40%(a)(c) 11.22% 10.03%(d) 9.30% 8.69% 8.33%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.46 and the ratio of net investment income to
average net assets would have been 10.47%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are based on average daily net assets of $653,946,081.
(d) Annualized.
FS-15
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 4, 1997
JULY 31, SEVEN MONTHS ENDED YEAR ENDED DECEMBER 31, (DATE SALES COMMENCED)
------------------------ JULY 31, ----------------------- TO DECEMBER 31,
2002 2001 2000 1999 1998 1997
------- ------- ------------------ -------- ----------- ----------------------
Net asset value, beginning of
period $ 4.92 $ 6.99 $ 8.05 $ 8.74 $ 10.14 $ 10.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.45(a) 0.65 0.44 0.78 0.82(b) 0.35
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) (1.18) (2.03) (1.03) (0.65) (1.38) 0.10
=================================================================================================================================
Total from investment
operations (0.73) (1.38) (0.59) 0.13 (0.56) 0.45
=================================================================================================================================
Less distributions:
Dividends from net investment
income (0.49) (0.65) (0.45) (0.80) (0.84) (0.35)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.03) (0.02) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of
net investment income -- (0.01) -- -- -- --
=================================================================================================================================
Total distributions (0.49) (0.69) (0.47) (0.82) (0.84) (0.35)
=================================================================================================================================
Net asset value, end of period $ 3.70 $ 4.92 $ 6.99 $ 8.05 $ 8.74 $ 10.14
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (16.02)% (20.52)% (7.51)% 1.46% (5.92)% 4.49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $50,060 $81,871 $110,297 $129,675 $113,246 $26,177
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average
net assets 1.82%(d) 1.75% 1.69%(e) 1.68% 1.61% 1.68%(e)
=================================================================================================================================
Ratio of net investment income
to average net assets 10.40%(a)(d) 11.22% 10.03%(e) 9.30% 8.69% 8.30%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 59% 55% 23% 79% 76% 80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.46 and the ratio of net investment income to
average net assets would have been 10.47%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $68,328,710.
(e) Annualized.
FS-16
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Income Fund
And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM Income Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Income Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Houston, Texas
September 10, 2002
|
FS-17
JULY 31, 2002
PRINCIPAL MARKET
AMOUNT VALUE
U.S. DOLLAR DENOMINATED BONDS & NOTES-77.38%
ADVERTISING-0.68%
Interpublic Group of Cos., Inc. (The), Unsec.
Sub. Conv. Disc. Notes, 1.87%, 06/01/06(a) $ 4,900,000 $ 3,662,750
==========================================================================
AEROSPACE & DEFENSE-0.74%
Dunlop Standard Aerospace Holdings PLC
(United Kingdom), Sr. Unsec. Sub. Yankee
Notes, 11.88%, 05/15/09 2,100,000 2,194,500
--------------------------------------------------------------------------
Raytheon Co., Notes, 6.75%, 08/15/07 1,700,000 1,799,875
==========================================================================
3,994,375
==========================================================================
ALUMINUM-0.13%
Jorgensen (Earle M.) Co., Sr. Sec. Notes,
9.75%, 06/01/12(b) 700,000 689,500
==========================================================================
APPAREL RETAIL-0.42%
Big 5 Corp.-Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 1,625,000 1,722,500
--------------------------------------------------------------------------
Gap, Inc. (The), Unsec. Notes, 9.90%,
12/15/05 565,000 556,525
==========================================================================
2,279,025
==========================================================================
AUTO PARTS & EQUIPMENT-0.00%
Key Plastics Holdings, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
03/15/07(c)(d) 1,325,000 132
==========================================================================
AUTOMOBILE MANUFACTURERS-1.03%
Ford Holdings, Inc., Unsec. Gtd. Unsub. Deb.,
9.30%, 03/01/30 1,200,000 1,251,360
--------------------------------------------------------------------------
General Motors Corp., Putable Deb., 8.80%,
03/01/21 4,000,000 4,273,720
==========================================================================
5,525,080
==========================================================================
BANKS-6.48%
African Development Bank (Luxembourg), Sr.
Unsec. Unsub. Yankee Notes, 3.25%, 07/29/05 1,700,000 1,683,816
--------------------------------------------------------------------------
Bank United-Series A, Medium Term Notes,
8.00%, 03/15/09 2,500,000 2,750,325
--------------------------------------------------------------------------
BB&T Corp., RAPS Sub. Notes, 6.38%, 06/30/05 1,930,000 2,050,548
--------------------------------------------------------------------------
Dresdner Funding Trust I, Notes, 8.15%,
06/30/31 (Acquired 05/09/02; Cost
$3,182,910)(e) 3,000,000 3,322,140
--------------------------------------------------------------------------
European Investment Bank (Luxembourg), Yankee
Notes, 4.63%, 03/01/07 2,500,000 2,580,500
--------------------------------------------------------------------------
Huntington National Bank, Sub. Notes, 6.60%,
06/15/18 1,000,000 950,150
--------------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 1,600,000 1,619,312
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
BANKS-(CONTINUED)
Regions Financial Corp., Putable Sub. Notes,
7.75%, 09/15/04 $ 3,650,000 $ 3,918,822
--------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Unsub.
Notes, 7.13%, 02/15/04 1,500,000 1,575,105
--------------------------------------------------------------------------
SunTrust Banks, Inc., Sr. Unsec. Putable Deb.
6.00%, 01/15/08 1,750,000 1,781,167
--------------------------------------------------------------------------
U.S. Bank N.A., Sub. Notes, 6.30%, 02/04/14 3,000,000 3,165,000
--------------------------------------------------------------------------
Wachovia Corp., Unsec. Putable Sub. Deb.,
6.55%, 10/15/05 660,000 709,289
--------------------------------------------------------------------------
7.50%, 04/15/05 5,000,000 5,403,550
--------------------------------------------------------------------------
Washington Mutual, Inc., Jr. Unsec. Sub.
Notes, 8.25%, 04/01/10 2,500,000 2,831,650
--------------------------------------------------------------------------
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12 430,000 419,250
==========================================================================
34,760,624
==========================================================================
BREWERS-0.32%
Anheuser-Busch Cos., Inc., Sr. Unsec. Deb.,
6.50%, 02/01/43 1,705,000 1,744,795
==========================================================================
BROADCASTING & CABLE TV-9.05%
Adelphia Communications Corp., Sr. Unsec.
Notes, 10.88%, 10/01/10(c) 2,350,000 763,750
--------------------------------------------------------------------------
British Sky Broadcasting Group PLC (United
Kingdom),
Sr. Unsec. Gtd. Yankee Notes, 8.20%,
07/15/09 3,000,000 2,831,940
--------------------------------------------------------------------------
Unsec. Gtd. Yankee Notes, 7.30%, 10/15/06 3,000,000 2,894,010
--------------------------------------------------------------------------
Charter Communications Holdings, LLC/ Charter
Communications Holdings Capital Corp., Sr.
Unsec. Sub. Notes,
9.63%, 11/15/09 1,770,000 1,123,950
--------------------------------------------------------------------------
10.75%, 10/01/09 1,965,000 1,267,425
--------------------------------------------------------------------------
11.13%, 01/15/11 1,020,000 678,300
--------------------------------------------------------------------------
Comcast UK Cable Partners Ltd. (Bermuda), Sr.
Unsec. Yankee Disc. Deb., 11.20%, 11/15/07 500,000 442,500
--------------------------------------------------------------------------
Cox Communications, Inc., Sr. Unsec. RAPS
Floating Rate Notes, 2.62%, 11/07/02 2,100,000 2,105,271
--------------------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb.,
7.63%, 07/15/18 3,250,000 2,307,500
--------------------------------------------------------------------------
7.88%, 02/15/18 1,000,000 720,000
--------------------------------------------------------------------------
Sr. Unsec. Notes,
7.25%, 07/15/08 6,230,000 4,952,850
--------------------------------------------------------------------------
7.88%, 12/15/07 6,680,000 5,477,600
--------------------------------------------------------------------------
Fox Family Worldwide, Inc., Sr. Unsec. Disc.
Notes, 10.25%, 11/01/07(a) 565,544 598,062
--------------------------------------------------------------------------
|
FS-18
PRINCIPAL MARKET
AMOUNT VALUE
BROADCASTING & CABLE TV-(CONTINUED)
Knology Holdings, Inc., Sr. Unsub. Disc.
Notes, 11.88%, 10/15/07(a) $ 1,915,000 $ 569,712
--------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec. Sub.
Notes, 8.25%, 02/15/08 5,000,000 4,724,050
--------------------------------------------------------------------------
Shaw Communications Inc. (Canada), Sr. Unsec.
Unsub. Yankee Notes, 8.25%, 04/11/10 1,250,000 1,244,162
--------------------------------------------------------------------------
TCI Communications, Inc., Sr. Unsec. Deb.,
8.75%, 08/01/15 4,750,000 4,047,997
--------------------------------------------------------------------------
7.88%, 02/15/26 1,100,000 868,989
--------------------------------------------------------------------------
Time Warner Inc.,
Sr. Unsec. Gtd. Deb.,
6.88%, 06/15/18 1,200,000 829,440
--------------------------------------------------------------------------
7.57%, 02/01/24 2,000,000 1,464,500
--------------------------------------------------------------------------
Unsec. Deb., 9.15%, 02/01/23 5,800,000 4,993,742
--------------------------------------------------------------------------
Unsec. Notes, 7.75%, 06/15/05 1,200,000 1,072,728
--------------------------------------------------------------------------
Turner Broadcasting System, Inc.-Class A, Sr.
Notes, 8.38%, 07/01/13 3,300,000 2,554,926
==========================================================================
48,533,404
==========================================================================
BUILDING PRODUCTS-0.30%
MMI Products, Inc.-Series B, Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 1,600,000 1,600,000
==========================================================================
CASINOS & GAMBLING-0.96%
Ameristar Casinos, Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.75%, 02/15/09 460,000 494,500
--------------------------------------------------------------------------
Boyd Gaming Corp., Sr. Unsec. Sub. Notes,
8.75%, 04/15/12 1,175,000 1,195,562
--------------------------------------------------------------------------
Hollywood Casino Corp.-Class A, Sr. Sec. Gtd.
Notes, 11.25%, 05/01/07 1,200,000 1,296,000
--------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, Sr. Unsec.
Gtd. Sub. Notes, 8.00%, 04/01/12 1,500,000 1,500,000
--------------------------------------------------------------------------
Park Place Entertainment Corp., Sr. Unsec.
Notes, 7.50%, 09/01/09 665,000 650,037
==========================================================================
5,136,099
==========================================================================
COMPUTER HARDWARE-0.31%
Candescent Technologies Corp., Sr. Conv.
Unsec. Gtd. Sub. Deb., 8.00%, 05/01/03
(Acquired 04/20/98; Cost
$2,000,000)(c)(d)(e) 2,000,000 106,000
--------------------------------------------------------------------------
IBM Corp., Deb., 8.38%, 11/01/19 1,350,000 1,543,792
==========================================================================
1,649,792
==========================================================================
CONSTRUCTION & ENGINEERING-0.66%
Shaw Group Inc. (The), Sr. Unsec. Conv.
Putable LYONS, 3.31%, 05/01/06(f) 6,500,000 3,534,375
==========================================================================
CONSUMER FINANCE-2.71%
CitiFinancial Credit Co.,
Putable Notes, 6.63%, 06/01/15 2,800,000 2,979,284
--------------------------------------------------------------------------
Unsec. Notes, 6.75%, 07/01/07 1,000,000 1,103,850
--------------------------------------------------------------------------
Unsec. Putable Notes, 7.88%, 02/01/05 1,400,000 1,575,420
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
CONSUMER FINANCE-(CONTINUED)
Ford Motor Credit Co.,
Notes, 7.88%, 06/15/10 $ 2,000,000 $ 2,056,300
--------------------------------------------------------------------------
Unsec. Notes,
2.08%, 03/17/03 1,500,000 1,487,723
--------------------------------------------------------------------------
6.50%, 01/25/07 1,000,000 994,610
--------------------------------------------------------------------------
6.88%, 02/01/06 900,000 909,351
--------------------------------------------------------------------------
7.38%, 10/28/09 3,400,000 3,414,994
==========================================================================
14,521,532
==========================================================================
DISTRIBUTORS-0.65%
Ferrellgas Partners, L.P.,-Series B, Sr. Sec.
Gtd. Notes, 9.38%, 06/15/06 3,385,000 3,490,781
==========================================================================
DIVERSIFIED CHEMICALS-0.12%
Equistar Chemicals LP/Equistar Funding Corp.,
Sr. Unsec. Gtd. Notes, 10.13%, 09/01/08 680,000 625,600
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.15%
Tekni-Plex, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 12.75%, 06/15/10 790,000 793,950
==========================================================================
DIVERSIFIED FINANCIAL SERVICES-8.35%
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 2,500,000 3,546,750
--------------------------------------------------------------------------
Bombardier Capital Ltd. (Canada), Yankee
Notes, 7.50%, 08/15/04 (Acquired 06/19/02;
Cost $1,064,650)(e) 1,000,000 1,054,620
--------------------------------------------------------------------------
CIT Group Inc. (The), Sr. Notes, 7.13%,
10/15/04 600,000 603,372
--------------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 1,650,000 1,725,256
--------------------------------------------------------------------------
Citigroup Inc.,
Sr. Unsec. Notes, 4.13%, 06/30/05 1,700,000 1,713,294
--------------------------------------------------------------------------
Unsec. Sub. Notes, 6.63%, 06/15/32 9,000,000 8,653,680
--------------------------------------------------------------------------
Fidelity Investments, Bonds, 7.57%, 06/15/29
(Acquired 04/10/01-05/01/02; Cost
$4,177,488)(e) 3,975,000 4,287,038
--------------------------------------------------------------------------
General Electric Capital Corp.-Series A,
Medium Term Notes, 5.00%, 06/15/07 1,000,000 1,024,180
--------------------------------------------------------------------------
General Motors Acceptance Corp.,
Medium Term Notes, 5.25%, 05/16/05 1,700,000 1,719,533
--------------------------------------------------------------------------
Unsec. Unsub. Notes, 6.13%, 02/01/07 1,000,000 1,009,100
--------------------------------------------------------------------------
Heller Financial, Inc., Unsec. Notes, 7.38%,
11/01/09 1,500,000 1,652,280
--------------------------------------------------------------------------
John Hancock Global Funding II,
Medium Term Notes, 6.50%, 03/01/11
(Acquired 07/24/02; Cost $1,687,104)(e) 1,600,000 1,687,216
--------------------------------------------------------------------------
Notes, 5.00%, 07/27/07 (Acquired 06/12/02;
Cost $1,699,065)(e) 1,700,000 1,737,128
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc.-Series E,
Medium Term Disc. Notes, 9.84%, 02/10/28(f) 8,700,000 1,189,116
--------------------------------------------------------------------------
NiSource Finance Corp., Sr. Unsec. Gtd.
Notes, 5.75%, 04/15/03 9,800,000 9,705,136
--------------------------------------------------------------------------
|
FS-19
PRINCIPAL MARKET
AMOUNT VALUE
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Salomon Smith Barney Holdings Inc., Unsec.
Notes, 7.13%, 10/01/06 $ 3,225,000 $ 3,496,481
==========================================================================
44,804,180
==========================================================================
DIVERSIFIED METALS & MINING-0.69%
Centaur Mining and Exploration Ltd.
(Australia), Sr. Gtd. Yankee Notes, 11.00%,
12/01/07(c) 1,720,000 21,500
--------------------------------------------------------------------------
Rio Algom Ltd. (Canada), Unsec. Yankee Deb.,
7.05%, 11/01/05 3,500,000 3,702,475
==========================================================================
3,723,975
==========================================================================
ELECTRIC UTILITIES-11.17%
AES Corp. (The),
Sr. Unsec. Notes,
8.75%, 12/15/02 5,425,000 3,906,000
--------------------------------------------------------------------------
9.50%, 06/01/09 1,275,000 529,125
--------------------------------------------------------------------------
Unsec. Putable Unsub. ROARS Notes,
7.38%, 06/15/03 1,275,000 707,625
--------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Yankee Notes, 8.50%,
05/01/08 3,800,000 1,957,000
--------------------------------------------------------------------------
CILCORP, Inc., Sr. Unsec. Bonds, 9.38%,
10/15/29 2,100,000 2,100,966
--------------------------------------------------------------------------
Cleveland Electric Illuminating Co. (The),
First Mortgage Bonds, 6.86%, 10/01/08 1,700,000 1,788,400
--------------------------------------------------------------------------
Series D, Sec. Notes, 7.88%, 11/01/17 8,000,000 8,188,080
--------------------------------------------------------------------------
CMS Energy Corp., Sr. Unsec. Unsub. Notes,
8.90%, 07/15/08 2,645,000 1,811,825
--------------------------------------------------------------------------
Cogentrix Energy, Inc., Sr. Unsec. Gtd.
Notes, 8.75%, 10/15/08 3,200,000 2,408,000
--------------------------------------------------------------------------
El Paso Electric Co.
Series D, Sec. First Mortgage Bonds, 8.90%,
02/01/06 3,000,000 3,321,840
--------------------------------------------------------------------------
Series E, Sec. First Mortgage Bonds, 9.40%,
05/01/11 3,000,000 3,274,200
--------------------------------------------------------------------------
Hydro-Quebec (Canada), Gtd. Yankee Bonds,
9.40%, 02/01/21 2,000,000 2,707,400
--------------------------------------------------------------------------
Kincaid Generation LLC, Sec. Bonds, 7.33%,
06/15/20 (Acquired 04/30/98; Cost
$1,887,026)(e) 1,882,377 1,788,070
--------------------------------------------------------------------------
Mission Energy Holding Co., Sr. Sec. Notes,
13.50%, 07/15/08 1,130,000 457,650
--------------------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 7.75%, 05/15/06 4,300,000 4,748,705
--------------------------------------------------------------------------
Series H, Sr. Unsec. Disc. Notes, 8.50%,
07/01/10(a) 7,000,000 7,070,000
--------------------------------------------------------------------------
Public Service Company of New Mexico-
Series A, Sr. Unsec. Notes, 7.10%, 08/01/05 1,200,000 1,260,384
--------------------------------------------------------------------------
RGS (I&M) Funding Corp.-Series F, Sec. Lease
Obligation Bonds, 9.82%, 12/07/22 4,963,703 5,528,622
--------------------------------------------------------------------------
South Carolina Electric & Gas Co., First
Mortgage Bonds, 9.00%, 07/15/06 1,550,000 1,796,977
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRIC UTILITIES-(CONTINUED)
Texas-New Mexico Power Co., Sr. Sec. Notes,
6.25%, 01/15/09 $ 4,800,000 $ 4,551,264
==========================================================================
59,902,133
==========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-0.08%
Fisher Scientific International Inc., Sr.
Unsec. Sub. Notes, 8.13%, 05/01/12 430,000 427,850
==========================================================================
EMPLOYMENT SERVICES-0.10%
MSX International, Inc., Sr. Unsec. Gtd. Sub.
Notes, 11.38%, 01/15/08 800,000 524,000
==========================================================================
ENVIRONMENTAL SERVICES-2.40%
Allied Waste North America Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.00%, 08/01/09 615,000 556,575
--------------------------------------------------------------------------
Browning-Ferris Industries, Inc., Deb.,
9.25%, 05/01/21 2,570,000 2,274,450
--------------------------------------------------------------------------
Waste Management, Inc., Unsec. Putable Notes,
7.10%, 08/01/03 9,800,000 10,061,268
==========================================================================
12,892,293
==========================================================================
GAS UTILITIES-1.89%
El Paso Corp., Medium Term Notes, 8.05%,
10/15/30 1,100,000 796,125
--------------------------------------------------------------------------
Tennessee Gas Pipeline Co., Unsec. Deb.,
7.63%, 04/01/37 5,000,000 4,264,450
--------------------------------------------------------------------------
TransCanada Pipelines Ltd. (Canada), Yankee
Deb., 8.63%, 05/15/12 4,310,000 5,070,025
==========================================================================
10,130,600
==========================================================================
HEALTH CARE FACILITIES-0.35%
Hanger Orthopedic Group, Inc., Sr. Unsec.
Gtd. Sub. Notes, 10.38%, 02/15/09 1,820,000 1,883,700
==========================================================================
HOMEBUILDING-0.55%
K Hovnanian Enterprises, Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 10/01/07 1,750,000 1,846,250
--------------------------------------------------------------------------
WCI Communities, Inc., Sr. Unsec. Gtd. Sub.
Notes, 9.13%, 05/01/12 1,150,000 1,098,250
==========================================================================
2,944,500
==========================================================================
INTEGRATED OIL & GAS-2.69%
El Paso CGP Co., Sr. Unsec. Putable Deb.,
6.70%, 02/15/07 750,000 580,313
--------------------------------------------------------------------------
Husky Oil Ltd. (Canada),
Sr. Unsec. Yankee Notes, 7.13%, 11/15/06 3,000,000 3,264,630
--------------------------------------------------------------------------
Yankee Bonds, 8.90%, 08/15/28 2,645,000 2,902,068
--------------------------------------------------------------------------
Occidental Petroleum Corp.,
Sr. Putable Deb., 9.25%, 08/01/19 4,375,000 5,362,613
--------------------------------------------------------------------------
Sr. Unsec. Notes, 7.38%, 11/15/08 2,100,000 2,346,099
==========================================================================
14,455,723
==========================================================================
|
FS-20
PRINCIPAL MARKET
AMOUNT VALUE
INTEGRATED TELECOMMUNICATION SERVICES-0.85%
Sprint Capital Corp., Sr. Unsec. Gtd. Notes,
6.13%, 11/15/08 $ 2,500,000 $ 1,806,250
--------------------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%, 10/15/19 2,500,000 1,759,375
--------------------------------------------------------------------------
Verizon Global Funding Corp., Sr. Unsec.
Notes, 6.13%, 06/15/07 1,000,000 997,160
==========================================================================
4,562,785
==========================================================================
LIFE & HEALTH INSURANCE-1.44%
American General Corp., Unsec. Notes, 7.50%,
08/11/10 3,000,000 3,375,240
--------------------------------------------------------------------------
American General Institute-Series A, Gtd.
Bonds, 7.57%, 12/01/45 (Acquired 07/18/02;
Cost 1,091,690)(e) 1,000,000 1,059,620
--------------------------------------------------------------------------
Americo Life, Inc., Sr. Sub. Notes, 9.25%,
06/01/05 1,000,000 1,000,000
--------------------------------------------------------------------------
Conseco, Inc., Sr. Unsec. Gtd. Notes, 8.75%,
08/09/06 (Acquired 07/19/01; Cost
$584,350)(e) 620,000 170,500
--------------------------------------------------------------------------
Sun Canada Financial Co., Gtd. Sub. Bonds,
6.63%, 12/15/07 (Acquired 10/14/99; Cost
$654,311)(e) 700,000 758,090
--------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 1,325,000 1,384,824
==========================================================================
7,748,274
==========================================================================
MULTI-LINE INSURANCE-0.29%
AIG SunAmerica Global Financing IX, Bonds,
6.90%, 03/15/32 (Acquired 07/31/02; Cost
$1,567,125)(e) 1,500,000 1,545,662
==========================================================================
OIL & GAS-0.61%
Canadian Oil Sands Ltd., (Canada) Sr. Yankee
Notes, 7.90%, 09/01/21 (Acquired
08/17/01-07/31/02; Cost $3,220,956)(e) 3,200,000 3,286,112
==========================================================================
OIL & GAS DRILLING-0.87%
Transocean Sedco Forex Inc., Unsec. Notes,
6.95%, 04/15/08 4,300,000 4,646,580
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.42%
Kinder Morgan Energy Partners, LP, Sr. Unsec.
Notes, 7.13%, 03/15/12 1,500,000 1,591,397
--------------------------------------------------------------------------
National-Oilwell, Inc., Sr. Unsec. Notes,
6.50%, 03/15/11 4,000,000 4,018,800
--------------------------------------------------------------------------
Smith International, Inc., Notes, 6.75%,
02/15/11 2,000,000 2,013,300
==========================================================================
7,623,497
==========================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.41%
Anadarko Petroleum Corp., Unsec. Putable
Deb., 7.73%, 09/15/26 1,200,000 1,301,844
--------------------------------------------------------------------------
Anderson Exploration Ltd. (Canada), Unsec.
Sub. Yankee Notes, 6.75%, 03/15/11 2,400,000 2,450,424
--------------------------------------------------------------------------
Chesapeake Energy Corp., Sr. Unsec. Gtd.
Notes, 8.38%, 11/01/08 1,250,000 1,250,000
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
OIL & GAS EXPLORATION &
PRODUCTION-(CONTINUED)
Colorado Interstate Gas Co., Sr. Unsec. Deb.,
10.00%, 06/15/05 $ 2,300,000 $ 2,554,702
--------------------------------------------------------------------------
Devon Energy Corp., Sr. Unsec. Deb., 7.95%,
04/15/32 795,000 864,674
--------------------------------------------------------------------------
Devon Financing Corp. ULC, Sr. Unsec. Gtd.
Unsub. Deb., 7.88%, 09/30/31 2,155,000 2,315,332
--------------------------------------------------------------------------
Louis Dreyfus Natural Gas Corp., Unsec.
Notes, 6.88%, 12/01/07 3,500,000 3,804,010
--------------------------------------------------------------------------
Newfield Exploration Co., Sr. Unsec. Unsub.
Notes, 7.63%, 03/01/11 5,500,000 5,610,000
--------------------------------------------------------------------------
Nexen Inc. (Canada), Unsec. Yankee Notes,
7.40%, 05/01/28 2,000,000 1,971,980
--------------------------------------------------------------------------
Noble Energy, Inc., Sr. Unsec. Deb., 7.25%,
08/01/97 6,000,000 5,094,960
--------------------------------------------------------------------------
Union Pacific Resources Group Inc., Unsec.
Notes, 6.75%, 05/15/08 1,700,000 1,832,685
==========================================================================
29,050,611
==========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-2.52%
Pennzoil-Quaker State Co., Unsec. Deb.,
7.38%, 04/01/29 6,855,000 7,400,589
--------------------------------------------------------------------------
Petroleos Mexicanos (Mexico),
Sr. Unsec. Gtd. Putable Yankee Bonds,
9.38%, 12/02/08 2,500,000 2,668,750
--------------------------------------------------------------------------
Series P, Sr. Unsec. Gtd. Putable Unsub.
Yankee Bonds, 9.50%, 03/15/06 3,100,000 3,426,492
==========================================================================
13,495,831
==========================================================================
PAPER PRODUCTS-0.17%
Appleton Papers Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 12.50%, 12/15/08 900,000 906,750
==========================================================================
PHARMACEUTICALS-0.47%
Johnson & Johnson, Unsec. Debs., 8.72%,
11/01/24 2,200,000 2,515,172
==========================================================================
PROPERTY & CASUALTY INSURANCE-1.79%
Allstate Financial Global Funding, Notes,
6.50%, 06/14/11 (Acquired 06/07/01; Cost
$2,246,558)(e) 2,250,000 2,375,663
--------------------------------------------------------------------------
American Re Corp.-Series B, Sr. Unsec. Notes,
7.45%, 12/15/26 2,900,000 3,079,133
--------------------------------------------------------------------------
Markel Corp.,
Unsec. Gtd. Notes, 7.20%, 08/15/07 2,200,000 2,202,948
--------------------------------------------------------------------------
Unsec. Notes, 7.00%, 05/15/08 2,000,000 1,944,880
==========================================================================
9,602,624
==========================================================================
PUBLISHING-2.39%
News America Holdings, Inc.,
Putable Notes, 8.45%, 08/01/06 5,000,000 5,317,550
--------------------------------------------------------------------------
Sr. Gtd. Deb., 9.25%, 02/01/13 4,950,000 5,427,329
--------------------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds, 7.43%,
10/01/06 2,000,000 2,058,200
==========================================================================
12,803,079
==========================================================================
|
FS-21
PRINCIPAL MARKET
AMOUNT VALUE
RAILROADS-1.72%
CSX Corp., Sr. Unsec. Putable Deb., 7.25%,
05/01/05 $ 7,250,000 $ 7,898,005
--------------------------------------------------------------------------
Railamerica Transportation Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.88%, 08/15/10 1,300,000 1,348,750
==========================================================================
9,246,755
==========================================================================
REAL ESTATE INVESTMENT TRUSTS-1.99%
EOP Operating L.P.,
Sr. Unsec. Notes, 7.25%, 02/15/18 600,000 640,068
--------------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 600,000 622,998
--------------------------------------------------------------------------
HealthCare REIT, Inc., Sr. Unsec. Notes,
7.50%, 08/15/07 3,500,000 3,631,635
--------------------------------------------------------------------------
Host Marriott LP,
Series E, Sr. Sec. Gtd. Notes, 8.38%,
02/15/06 920,000 897,000
--------------------------------------------------------------------------
Series I, Unsec. Gtd. Notes, 9.50%,
01/15/07 1,500,000 1,500,000
--------------------------------------------------------------------------
iStar Financial Inc., Sr. Unsec. Notes,
8.75%, 08/15/08 755,000 781,425
--------------------------------------------------------------------------
RFS Partnership LP, Sr. Unsec. Gtd. Notes,
9.75%, 03/01/12 465,000 467,325
--------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub. Deb.,
7.35%, 12/01/17 2,000,000 2,151,480
==========================================================================
10,691,931
==========================================================================
SOVEREIGN DEBT-0.47%
Export Development Canada (Canada), Yankee
Bonds, 4.00%, 08/01/07 1,100,000 1,098,031
--------------------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Notes, 7.38%,
06/15/17 1,300,000 1,436,539
==========================================================================
2,534,570
==========================================================================
SPECIALTY CHEMICALS-0.06%
OM Group, Inc., Sr. Unsec. Gtd. Sub. Notes,
9.25%, 12/15/11 310,000 299,150
==========================================================================
SPECIALTY STORES-0.61%
CSK Auto, Inc., Sr. Unsec. Gtd. Notes,
12.00%, 06/15/06 1,550,000 1,650,750
--------------------------------------------------------------------------
United Rentals, Inc.-Series B, Sr. Unsec.
Gtd. Notes, 10.75%, 04/15/08 1,550,000 1,596,500
==========================================================================
3,247,250
==========================================================================
TELECOMMUNICATIONS EQUIPMENT-0.20%
SBA Communications Corp., Sr. Unsec. Notes,
10.25%, 02/01/09 2,000,000 1,090,000
==========================================================================
TRUCKING-0.27%
North American Van Lines Inc., Sr. Sub.
Notes, 13.38%, 12/01/09(b) 1,365,000 1,426,425
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.85%
Crown Castle International Corp., Sr. Unsec.
Notes, 10.75%, 08/01/11 1,850,000 1,276,500
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
WIRELESS TELECOMMUNICATION
SERVICES-(CONTINUED)
Nextel Communications, Inc.,
Sr. Notes, 12.00%, 11/01/08 $ 1,550,000 $ 1,123,750
--------------------------------------------------------------------------
Sr. Unsec. Notes, 9.50%, 02/01/11 2,100,000 1,365,000
--------------------------------------------------------------------------
Triton PCS Inc., Sr. Unsec. Gtd. Sub. Notes,
8.75%, 11/15/11 1,270,000 793,750
==========================================================================
4,559,000
==========================================================================
Total U.S. Dollar Denominated Bonds &
Notes (Cost $438,796,085) 415,112,826
==========================================================================
PRINCIPAL
AMOUNT(g)
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES-6.53%
CANADA-1.62%
AT&T Canada Inc. (Integrated
Telecommunication Services),
Sr. Unsec. Unsub. Notes,
7.15%, 09/23/04 CAD 500,000 35,534
--------------------------------------------------------------------------
Bell Mobility Cellular Inc.
(Wireless Telecommunication
Services), Unsec. Deb.,
6.55%, 06/02/08 CAD 2,250,000 1,421,451
--------------------------------------------------------------------------
Canadian Government
(Sovereign Debt), Bonds,
6.63%, 10/03/07 NZD 7,400,000 3,461,062
--------------------------------------------------------------------------
Ontario (Province of)
(Sovereign Debt), Unsec. Unsub.
Notes, 6.25%, 12/03/08 NZD 2,500,000 1,131,571
--------------------------------------------------------------------------
Rogers Cablesystems Ltd.
(Broadcasting & Cable TV), Sr.
Sec. Second Priority Deb.,
9.65%, 01/15/14 CAD 3,300,000 1,985,629
--------------------------------------------------------------------------
Westcoast Energy Inc.
(Gas Utilities)-Series V,
Unsec. Deb., 6.45%, 12/18/06 CAD 1,000,000 653,746
==========================================================================
8,688,993
==========================================================================
GERMANY-2.65%
Bundesrepublik Deutschland
(Sovereign Debt), Bonds,
6.50%, 10/14/05 EUR 650,000 682,125
--------------------------------------------------------------------------
Germany (Federal Republic of)
(Sovereign Debt), Bonds,
5.25%, 01/04/11 EUR 10,125,000 10,277,288
--------------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau
(Banks), Sr. Unsec. Unsub. Deb.,
5.25%, 07/04/12 EUR 3,250,000 3,249,249
==========================================================================
14,208,662
==========================================================================
NETHERLANDS-0.37%
Olivetti International Finance N.V.
(Integrated Telecommunication
Services)-Series E, Gtd.
Medium Term Euro Notes,
6.13%, 07/30/09 EUR 2,050,000 1,974,802
==========================================================================
UNITED KINGDOM-1.89%
British Sky Broadcasting Group PLC
(Broadcasting & Cable TV),
Sr. Unsec. Gtd. Unsub. Euro Bonds,
7.75%, 07/09/09 GBP 1,750,000 2,551,826
--------------------------------------------------------------------------
Sutton Bridge Financing Ltd.
(Electric Utilities), Gtd. Notes,
8.63%, 06/30/22(b) GBP 1,942,890 3,267,373
--------------------------------------------------------------------------
|
FS-22
PRINCIPAL MARKET
AMOUNT(g) VALUE
UNITED KINGDOM-(CONTINUED)
United Kingdom (Treasury of) (Sovereign
Debt), Bonds, 7.25%, 12/07/07 GBP 2,475,000 $ 4,328,794
==========================================================================
10,147,993
==========================================================================
Total Non-U.S. Dollar Denominated Bonds &
Notes (Cost $34,189,334) 35,020,450
==========================================================================
SHARES
DOMESTIC STOCKS & OTHER EQUITY
INTERESTS-1.12%
BROADCASTING & CABLE TV-0.00%
Knology Inc.-Wts., expiring 10/22/07
(Acquired 03/12/98; Cost $0)(d)(e)(h) 4,100 41
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.27%
Cendant Corp.(i) 105,409 1,456,752
==========================================================================
HOME FURNISHINGS-0.00%
O'Sullivan Industries, Inc.-Series B, Pfd.
Wts., expiring 11/15/09 (Acquired 06/13/00;
Cost $0)(e)(h) 2,885 29
--------------------------------------------------------------------------
O'Sullivan Industries, Inc.-Wts., expiring
11/15/09 (Acquired 06/13/00; Cost $0)(e)(h) 2,885 29
==========================================================================
58
==========================================================================
RAILROADS-0.01%
Railamerica Inc.-Wts., expiring 08/15/10
(Acquired 10/05/00; Cost $0)(e)(h) 1,300 58,825
==========================================================================
REAL ESTATE INVESTMENT TRUSTS-0.66%
First Republic Capital Corp.-Series A, Pfd.
(Acquired 05/26/99; Cost $3,500,000)(e) 3,500 3,500,000
==========================================================================
SYSTEMS SOFTWARE-0.18%
Microsoft Corp.(i) 20,291 973,562
==========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.00%
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(d)(e)(h) 1,775 18
==========================================================================
Total Domestic Stocks & Other Equity
Interests (Cost $8,370,114) 5,989,256
==========================================================================
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AGENCY SECURITIES-4.36%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-0.52%
Jr. Unsec. Sub. Notes,
5.88%, 03/21/11 $ 1,000,000 1,058,680
--------------------------------------------------------------------------
Pass Through Ctfs.,
6.00%, 04/01/17 to 06/01/17 696,639 717,219
--------------------------------------------------------------------------
6.50%, 04/01/17 99,249 103,483
--------------------------------------------------------------------------
7.50%, 06/01/30 150,000 158,242
--------------------------------------------------------------------------
7.00%, 06/01/32 199,198 207,423
--------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)-(CONTINUED)
Pass Through Ctfs., TBA,
6.00%, 09/01/32 $ 150,000 $ 151,453
--------------------------------------------------------------------------
6.50%, 09/01/32 400,000 411,625
==========================================================================
2,808,125
==========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-3.38%
Pass Through Ctfs.,
7.50%, 11/01/15 to 05/01/32 559,692 591,446
--------------------------------------------------------------------------
7.00%, 02/01/16 to 03/01/32 1,297,525 1,353,662
--------------------------------------------------------------------------
6.50%, 09/01/16 257,746 268,833
--------------------------------------------------------------------------
8.00%, 10/01/30 82,461 87,940
--------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.00%, 09/01/32 1,150,000 1,159,703
--------------------------------------------------------------------------
6.50%, 09/01/32 2,224,000 2,286,550
--------------------------------------------------------------------------
Unsec. Notes,
6.20%, 06/13/17 2,500,000 2,562,375
--------------------------------------------------------------------------
Unsec. Sub. Notes,
5.50%, 05/02/06 1,450,000 1,561,113
--------------------------------------------------------------------------
4.75%, 01/02/07 1,500,000 1,556,625
--------------------------------------------------------------------------
6.25%, 02/01/11 3,950,000 4,221,444
--------------------------------------------------------------------------
5.25%, 08/01/12 2,500,000 2,471,450
==========================================================================
18,121,141
==========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-0.46%
Pass Through Ctfs.,
8.50%, 11/15/24 543,371 590,421
--------------------------------------------------------------------------
6.50%, 03/15/31 to 07/15/32 635,207 656,068
--------------------------------------------------------------------------
7.00%, 04/15/31 to 08/15/31 567,580 593,858
--------------------------------------------------------------------------
6.00%, 12/15/31 to 01/15/32 248,824 252,385
--------------------------------------------------------------------------
7.50%, 01/15/32 360,338 381,755
==========================================================================
2,474,487
==========================================================================
Total U.S. Government Agency Securities
(Cost $22,709,437) 23,403,753
==========================================================================
ASSET-BACKED SECURITIES-5.75%
AIRLINES-3.42%
Air 2 US-Series C, Equipment Trust Ctfs.,
10.13%, 10/01/20 (Acquired 10/28/99; Cost
$3,000,000)(e) 3,000,000 2,390,340
--------------------------------------------------------------------------
American Airlines, Inc.- Class A-1-Series
2001-1, Pass Through Ctfs. 6.98%, 05/23/21 4,523,618 4,444,003
--------------------------------------------------------------------------
Continental Airlines, Inc.,-Series 974A, Pass
Through Ctfs., 6.90%, 01/02/18 2,960,923 2,813,706
--------------------------------------------------------------------------
Delta Air Lines, Inc., Equipment Trust Ctfs.,
10.50%, 04/30/16 5,000,000 4,951,250
--------------------------------------------------------------------------
United Air Lines, Inc.-Class A-2, Pass
Through Ctfs., 7.73%, 07/01/10 4,100,000 3,765,645
==========================================================================
18,364,944
==========================================================================
|
FS-23
PRINCIPAL MARKET
AMOUNT VALUE
DIVERSIFIED FINANCIAL SERVICES-2.01%
Citicorp Lease-Class A1, Series 1999-1, Pass
Through Ctfs., 7.22%, 06/15/05 (Acquired
05/08/02-06/19/02; Cost $2,768,495)(e) $ 2,617,217 $ 2,806,311
--------------------------------------------------------------------------
Citicorp Lease-Class A2, Series 1999-1, Pass
Through Ctfs., 8.04%, 12/15/19 (Acquired
06/01/00-01/25/01; Cost $3,603,676)(e) 3,600,000 3,893,508
--------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp., Sr. Notes, 6.00%, 05/15/06 1,800,000 1,888,290
--------------------------------------------------------------------------
Premium Asset Trust-Series 2001-6, Sec.
Notes, 5.25%, 07/19/04 (Acquired 07/11/01;
Cost $2,097,228)(e) 2,100,000 2,190,770
==========================================================================
10,778,879
==========================================================================
ELECTRIC UTILITIES-0.32%
Beaver Valley II Funding Corp., Sec. Lease
Obligation Bonds, 9.00%, 06/01/17 1,500,000 1,704,855
==========================================================================
Total Asset-Backed Securities (Cost
$30,908,620) 30,848,678
==========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY SECURITIES-1.14%
U.S. TREASURY NOTES-1.14%
6.13%, 08/15/07 $ 4,100,000 $ 4,578,921
--------------------------------------------------------------------------
6.50%, 02/15/10 750,000 860,783
--------------------------------------------------------------------------
5.75%, 08/15/10 300,000 329,820
--------------------------------------------------------------------------
5.00%, 08/15/11 350,000 365,137
==========================================================================
Total U.S. Treasury Securities (Cost
$5,814,181) 6,134,661
==========================================================================
SHARES
MONEY MARKET FUNDS-0.80%
STIC Liquid Assets Portfolio(j) 2,139,047 2,139,047
--------------------------------------------------------------------------
STIC Prime Portfolio(j) 2,139,047 2,139,047
==========================================================================
Total Money Market Funds (Cost
$4,278,094) 4,278,094
==========================================================================
TOTAL INVESTMENTS-97.08% (Cost $545,065,865) 520,787,718
==========================================================================
OTHER ASSETS LESS LIABILITIES-2.92% 15,666,823
==========================================================================
NET ASSETS-100.00% $536,454,541
__________________________________________________________________________
==========================================================================
|
Investment Abbreviations:
CAD - Canadian Dollar Conv. - Convertible Ctfs. - Certificates Deb. - Debentures Disc. - Discounted EUR - Euro GBP - British Pound Sterling Gtd. - Guaranteed Jr. - Junior LYONS - Liquid Yield Option Notes NZD - New Zealand Dollar Pfd. - Preferred RAPS - Redeemable and Putable Securities REIT - Real Estate Investment Trust ROARS - Redeemable and Remarketable Securities Sec. - Secured Sr. - Senior Sub. - Subordinated TBA - To Be Announced Unsec. - Unsecured Unsub. - Unsubordinated Wts. - Warrants |
Notes to Schedule of Investments:
(a) Discounted bond at issue. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(b) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(c) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(d) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(e) Restricted securities. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The aggregate market value of these securities at 07/31/02
was $38,017,730, which represented 7.09% of the Fund's net assets.
(f) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(g) Foreign denominated security. Par value is denominated in currency
indicated.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i) Non-income producing security.
(j) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-24
JULY 31, 2002
ASSETS:
Investments, at market value (cost
$545,065,865) $520,787,718
-----------------------------------------------------------
Foreign currencies, at value (cost $346,907) 353,141
-----------------------------------------------------------
Receivables for:
Investments sold 16,813,623
-----------------------------------------------------------
Fund shares sold 2,461,226
-----------------------------------------------------------
Dividends and interest 10,755,503
-----------------------------------------------------------
Foreign currency contracts outstanding 23,106
-----------------------------------------------------------
Investment for deferred compensation plan 70,105
-----------------------------------------------------------
Other assets 46,577
===========================================================
Total assets 551,310,999
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 12,012,292
-----------------------------------------------------------
Fund shares reacquired 1,616,258
-----------------------------------------------------------
Dividends 674,827
-----------------------------------------------------------
Deferred compensation plan 70,105
-----------------------------------------------------------
Accrued distribution fees 326,938
-----------------------------------------------------------
Accrued trustees' fees 771
-----------------------------------------------------------
Accrued transfer agent fees 85,641
-----------------------------------------------------------
Accrued operating expenses 69,626
===========================================================
Total liabilities 14,856,458
===========================================================
Net assets applicable to shares outstanding $536,454,541
___________________________________________________________
===========================================================
NET ASSETS:
Class A $281,966,398
___________________________________________________________
===========================================================
Class B $216,709,807
___________________________________________________________
===========================================================
Class C $ 37,768,735
___________________________________________________________
===========================================================
Class R $ 9,601
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 45,470,402
___________________________________________________________
===========================================================
Class B 34,900,924
___________________________________________________________
===========================================================
Class C 6,096,836
___________________________________________________________
===========================================================
Class R 1,548
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 6.20
-----------------------------------------------------------
Offering price per share:
(Net asset value of $6.20 divided by
95.25%) $ 6.51
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 6.21
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 6.19
___________________________________________________________
===========================================================
Class R
Net asset value and offering price per
share $ 6.20
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $ 44,577,359
-----------------------------------------------------------
Dividends 367,555
-----------------------------------------------------------
Dividends from affiliated money market funds 149,725
===========================================================
Total investment income 45,094,639
===========================================================
EXPENSES:
Advisory fees 2,544,570
-----------------------------------------------------------
Administrative services fees 131,802
-----------------------------------------------------------
Custodian fees 78,789
-----------------------------------------------------------
Distribution fees -- Class A 797,679
-----------------------------------------------------------
Distribution fees -- Class B 2,361,879
-----------------------------------------------------------
Distribution fees -- Class C 431,875
-----------------------------------------------------------
Distribution fees -- Class R 8
-----------------------------------------------------------
Transfer agent fees 1,287,975
-----------------------------------------------------------
Trustees' fees 10,712
-----------------------------------------------------------
Other 220,152
===========================================================
Total expenses 7,865,441
===========================================================
Less: Fees waived (1,176)
-----------------------------------------------------------
Expenses paid indirectly (11,705)
===========================================================
Net expenses 7,852,560
===========================================================
Net investment income 37,242,079
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (54,395,886)
-----------------------------------------------------------
Foreign currencies 1,337
-----------------------------------------------------------
Foreign currency contracts (1,150,421)
===========================================================
(55,544,970)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (7,324,078)
-----------------------------------------------------------
Foreign currencies 28,219
-----------------------------------------------------------
Foreign currency contracts 195,089
===========================================================
(7,100,770)
===========================================================
Net gain (loss) from investment securities,
foreign currencies and foreign currency
contracts (62,645,740)
===========================================================
Net increase (decrease) in net assets
resulting from operations $(25,403,661)
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-25
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
------------- ------------
OPERATIONS:
Net investment income $ 37,242,079 $ 43,500,196
-------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts (55,544,970) (42,785,523)
-------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and foreign
currency contracts (7,100,770) 23,348,156
===========================================================================================
Net increase (decrease) in net assets resulting from
operations (25,403,661) 24,062,829
===========================================================================================
Distributions to shareholders from net investment income: .
Class A (20,406,662) (25,411,789)
-------------------------------------------------------------------------------------------
Class B (13,291,002) (14,235,384)
-------------------------------------------------------------------------------------------
Class C (2,453,982) (2,147,191)
-------------------------------------------------------------------------------------------
Class R (74) --
-------------------------------------------------------------------------------------------
Return of Capital:
Class A (994,212) (937,652)
-------------------------------------------------------------------------------------------
Class B (736,149) (595,428)
-------------------------------------------------------------------------------------------
Class C (134,853) (90,938)
-------------------------------------------------------------------------------------------
Class R (32) --
-------------------------------------------------------------------------------------------
Share transactions-net:
Class A (31,273,225) 11,935,605
-------------------------------------------------------------------------------------------
Class B 4,755,275 30,091,490
-------------------------------------------------------------------------------------------
Class C (1,919,177) 18,401,373
-------------------------------------------------------------------------------------------
Class R 10,118 --
===========================================================================================
Net increase (decrease) in net assets (91,847,636) 41,072,915
===========================================================================================
NET ASSETS:
Beginning of year 628,302,177 587,229,262
===========================================================================================
End of year $ 536,454,541 $628,302,177
___________________________________________________________________________________________
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 699,747,585 $730,247,353
-------------------------------------------------------------------------------------------
Undistributed net investment income (1,534,587) (296,959)
-------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and foreign currency
contracts (137,540,332) (83,285,278)
-------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts (24,218,125) (18,362,939)
===========================================================================================
$ 536,454,541 $628,302,177
___________________________________________________________________________________________
===========================================================================================
|
See Notes to Financial Statements.
FS-26
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Income 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 nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C shares and Class R shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge. Class R shares are sold at net asset value. Matters affecting each portfolio or class will be 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 achieve a high level of current income consistent with reasonable concern for safety of principal.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
On July 31, 2002, undistributed net investment income was increased by $782,843, undistributed net realized gains increased by $1,289,916 and paid in capital decreased by $2,072,759 as a result of book/tax differences due to foreign currency transactions, defaulted bonds adjustments, bond premium amortization, return of capital and other reclassifications. Net assets of the fund were unaffected by the reclassifications.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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
FS-27
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's capital loss carryforward of $93,080,969 as of July 31, 2002 expires as follows:
CAPITAL LOSS CARRYFORWARD EXPIRATION ------------ ---------- $ 1,419,489 July 31, 2006 ---------------------------- 13,740,010 July 31, 2007 ---------------------------- 26,912,929 July 31, 2008 ---------------------------- 2,702,340 July 31, 2009 ---------------------------- 48,306,201 July 31, 2010 ============================ $93,080,969 ____________________________ ============================ |
As of July 31, 2002 the Fund has a post-October capital loss deferral of $42,757,374, which will be recognized in the following tax year.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
Outstanding foreign currency contracts at year were as follows:
CONTRACT TO
SETTLEMENT ---------------------- UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
---------- -------- --------- ---------- ---------- ------------
10/09/02 EUR 3,500,000 $3,433,500 $3,410,394 $23,106
_________________________________________________________________________
=========================================================================
|
G. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--CHANGE IN ACCOUNTING PRINCIPLE
As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities and began recording paydown gains and losses on mortgage and asset-backed securities as adjustments to interest income. Prior to August 1, 2001, the Fund did not amortize premiums on debt securities and recorded paydown gains and losses on mortgage and asset-backed securities as realized gains and losses. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $1,245,584 reduction in the cost of securities and a corresponding $1,245,584 increase in net unrealized gains and losses, based on securities held by the Fund on August 1, 2001.
The effect of this change in the current period was to decrease net investment income by $1,122,887, to increase net unrealized gains and losses by $709,675 and to increase net realized gains and losses by $413,212. As a result the net investment income per share was decreased by $0.01, the net realized and unrealized gains and losses per share increased by $0.01, and the ratio of net investment income to average net assets decreased by 0.19%.
NOTE 3--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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market fund of which the Fund has invested. For the year ended July 31, 2002, AIM waived fees of $1,176.
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, 2002, AIM was paid $131,802 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. During the year ended July 31, 2002, AFS retained $697,042 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, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R
FS-28
shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. For the year ended July 31, 2002, the Class A, Class B, Class C and Class R shares paid AIM Distributors $797,679, $2,361,879, $431,875 and $8, respectively, as compensation under the Plans.
AIM Distributors retained commissions of $130,523 from sales of the Class A shares of the Fund during the year ended July 31, 2002. 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. During the year ended July 31, 2002, AIM Distributors retained $41,125, $7,536, $24,489 and $0 in contingent deferred sales charges imposed on redemptions of Class A, Class B, Class C and Class R shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $5,414 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 4--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $6,995 and reductions in custodian fees of $4,710 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $11,705.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 6--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
----------- -----------
Distributions paid from ordinary
income $36,151,720 $41,794,364
-------------------------------------------------------------
Return of capital 1,865,246 1,624,018
=============================================================
$38,016,966 $43,418,382
_____________________________________________________________
=============================================================
|
As of July 31, 2002, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Capital loss carryforward $ (93,080,969)
-----------------------------------------------------------
Unrealized appreciation (depreciation) (70,212,075)
===========================================================
$(163,293,044)
___________________________________________________________
===========================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales, the deferral of capital losses incurred after October 31, the realization for tax purposes of unrealized gains on certain forward foreign currency contracts, the treatment of bond premium amortization, the treatment of defaulted bonds and other deferrals.
NOTE 8--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, 2002 was $410,360,027 and $443,357,783, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 13,049,250 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (40,479,224) =========================================================== Net unrealized appreciation (depreciation) of investment securities $(27,429,974) ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $548,217,692. |
FS-29
NOTE 9--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 19,535,050 $ 129,985,397 19,948,772 $ 139,192,236
--------------------------------------------------------------------------------------------------------------------------
Class B 10,824,126 72,286,011 11,714,579 81,887,558
--------------------------------------------------------------------------------------------------------------------------
Class C 2,329,978 15,549,708 4,180,883 29,145,850
--------------------------------------------------------------------------------------------------------------------------
Class R* 1,531 10,012 -- --
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 2,547,835 16,937,345 3,099,848 21,590,593
--------------------------------------------------------------------------------------------------------------------------
Class B 1,516,843 10,088,147 1,543,513 10,761,821
--------------------------------------------------------------------------------------------------------------------------
Class C 294,792 1,957,101 250,632 1,741,447
--------------------------------------------------------------------------------------------------------------------------
Class R* 17 106 -- --
==========================================================================================================================
Reacquired:
Class A (26,805,775) (178,195,967) (21,394,116) (148,847,224)
--------------------------------------------------------------------------------------------------------------------------
Class B (11,702,242) (77,618,883) (8,963,733) (62,557,889)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,930,754) (19,425,986) (1,792,733) (12,485,924)
==========================================================================================================================
(4,388,599) $ (28,427,009) 8,587,645 $ 60,428,468
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------- JULY 31, --------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------ -------- -------- --------
Net asset value, beginning of period $ 6.91 $ 7.14 $ 7.59 $ 8.38 $ 8.57 $ 8.24
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.44(a)(b) 0.53 0.34 0.57 0.57 0.55
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.70) (0.23) (0.47) (0.81) (0.16) 0.39
=================================================================================================================================
Total from investment operations (0.26) 0.30 (0.13) (0.24) 0.41 0.94
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.43) (0.51) (0.25) (0.55) (0.55) (0.52)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.05) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital (0.02) (0.02) (0.07) -- -- --
=================================================================================================================================
Total distributions (0.45) (0.53) (0.32) (0.55) (0.60) (0.61)
=================================================================================================================================
Net asset value, end of period $ 6.20 $ 6.91 $ 7.14 $ 7.59 $ 8.38 $ 8.57
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (4.05)% 4.42% (1.70)% (2.92)% 4.94% 11.92%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $281,966 $346,967 $346,482 $393,414 $399,701 $340,608
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.96%(d) 0.95% 0.97%(e) 0.91% 0.91% 0.94%
=================================================================================================================================
Ratio of net investment income to average net
assets 6.57%(a)(d) 7.57% 8.03%(e) 7.11% 6.69% 6.55%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 70% 83% 43% 78% 41% 54%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.45 and the ratio of net investment income to average
net assets would have been 6.76%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less
than one year.
(d) Ratios are based on average daily net assets of $319,071,550.
(e) Annualized.
FS-30
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------- JULY 31, --------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------ -------- -------- --------
Net asset value, beginning of period $ 6.92 $ 7.14 $ 7.58 $ 8.37 $ 8.55 $ 8.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.39(a)(b) 0.48 0.31 0.50 0.50 0.48
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (0.70) (0.23) (0.47) (0.80) (0.15) 0.38
=================================================================================================================================
Total from investment operations (0.31) 0.25 (0.16) (0.30) 0.35 0.86
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.38) (0.45) (0.21) (0.49) (0.48) (0.45)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.05) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital (0.02) (0.02) (0.07) -- -- --
=================================================================================================================================
Total distributions (0.40) (0.47) (0.28) (0.49) (0.53) (0.54)
=================================================================================================================================
Net asset value, end of period $ 6.21 $ 6.92 $ 7.14 $ 7.58 $ 8.37 $ 8.55
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) (4.76)% 3.67% (2.09)% (3.72)% 4.20% 10.89%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $216,710 $237,118 $213,926 $244,713 $219,033 $125,871
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.71%(d) 1.71% 1.73%(e) 1.66% 1.66% 1.69%
=================================================================================================================================
Ratio of net investment income to average net
assets 5.82%(a)(d) 6.81% 7.28%(e) 6.36% 5.94% 5.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 70% 83% 43% 78% 41% 54%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.40 and the ratio of net investment income to average
net assets would have been 6.01%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $236,187,889.
(e) Annualized.
FS-31
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------------
AUGUST 4, 1997
SEVEN MONTHS YEAR ENDED (DATE SALES
YEAR ENDED JULY 31, ENDED DECEMBER 31, COMMENCED) TO
----------------------- JULY 31, ------------------ DECEMBER 31,
2002 2001 2000 1999 1998 1997
------- ------- ------------ ------- ------- --------------
Net asset value, beginning of period $ 6.91 $ 7.13 $ 7.57 $ 8.36 $ 8.54 $ 8.38
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.39(a)(b) 0.48 0.31 0.50 0.50 0.19
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.71) (0.23) (0.47) (0.80) (0.15) 0.22
================================================================================================================================
Total from investment operations (0.32) 0.25 (0.16) (0.30) 0.35 0.41
================================================================================================================================
Less distributions:
Dividends from net investment income (0.38) (0.45) (0.21) (0.49) (0.48) (0.16)
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.05) (0.09)
--------------------------------------------------------------------------------------------------------------------------------
Return of capital (0.02) (0.02) (0.07) -- -- --
================================================================================================================================
Total distributions (0.40) (0.47) (0.28) (0.49) (0.53) (0.25)
================================================================================================================================
Net asset value, end of period $ 6.19 $ 6.91 $ 7.13 $ 7.57 $ 8.36 $ 8.54
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) (4.92)% 3.68% (2.09)% (3.71)% 4.21% 4.96%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $37,769 $44,216 $26,821 $28,202 $19,332 $2,552
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets 1.71%(d) 1.71% 1.73%(e) 1.66% 1.66% 1.69%(e)
================================================================================================================================
Ratio of net investment income to average net
assets 5.82%(a)(d) 6.81% 7.28%(e) 6.36% 5.94% 5.80%(e)
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 70% 83% 43% 78% 41% 54%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.40 and the ratio of net investment income to average
net assets would have been 6.01%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $43,187,491.
(e) Annualized.
FS-32
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
JULY 31,
2002
-------------
Net asset value, beginning of period $ 6.53
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06(a)(b)
-----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.32)
=============================================================================
Total from investment operations (0.26)
=============================================================================
Less distributions:
Dividends from net investment income (0.05)
-----------------------------------------------------------------------------
Return of capital (0.02)
=============================================================================
Total distributions (0.07)
=============================================================================
Net asset value, end of period $ 6.20
_____________________________________________________________________________
=============================================================================
Total return(c) (4.01)%
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets 1.21%(d)
=============================================================================
Ratio of net investment income to average net assets 6.32%(a)(d)
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate 70%
_____________________________________________________________________________
=============================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.07 and the ratio of net investment income to average
net assets would have been 6.51%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(b) Calculated using average shares outstanding.
(c) Not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $9,857.
FS-33
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Intermediate Government Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM Intermediate Government Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Intermediate Government Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Houston, Texas
September 10, 2002
|
FS-34
JULY 31, 2002
PRINCIPAL MARKET
AMOUNT VALUE
U.S. GOVERNMENT AGENCY SECURITIES-84.20%
FEDERAL FARM CREDIT BANK-3.77%
Bonds,
3.88%, 12/15/04 $ 7,410,000 $ 7,510,331
-----------------------------------------------------------------------------
4.38%, 04/15/05 7,670,000 7,956,475
-----------------------------------------------------------------------------
6.00%, 06/11/08 to 03/07/11 19,000,000 20,535,460
-----------------------------------------------------------------------------
Medium Term Notes,
5.75%, 12/07/28 10,000,000 9,713,300
=============================================================================
45,715,566
=============================================================================
FEDERAL HOME LOAN BANK-12.04%
Bonds,
7.36%, 07/01/04 2,800,000 3,053,932
-----------------------------------------------------------------------------
Medium Term Notes,
4.15%, 02/28/05 40,800,000 40,867,320
-----------------------------------------------------------------------------
Unsec. Bonds,
4.63%, 04/15/05 23,330,000 24,351,621
-----------------------------------------------------------------------------
6.50%, 11/15/05 2,000,000 2,202,380
-----------------------------------------------------------------------------
7.25%, 02/15/07 5,500,000 6,266,645
-----------------------------------------------------------------------------
5.48%, 01/08/09 1,000,000 1,055,510
-----------------------------------------------------------------------------
5.75%, 05/15/12 65,210,000 68,370,076
=============================================================================
146,167,484
=============================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-28.58%
Pass Through Certificates,
9.00%, 12/01/05 to 04/01/25 1,388,632 1,505,426
-----------------------------------------------------------------------------
8.00%, 07/01/06 to 10/01/23 5,220,288 5,628,155
-----------------------------------------------------------------------------
8.50%, 07/01/07 to 10/01/29 9,925,171 10,674,325
-----------------------------------------------------------------------------
7.00%, 11/01/10 to 06/01/32 78,745,078 82,076,854
-----------------------------------------------------------------------------
6.50%, 02/01/11 to 10/01/31 34,152,741 35,432,254
-----------------------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 3,198,026 3,683,810
-----------------------------------------------------------------------------
12.00%, 02/01/13 6,974 8,086
-----------------------------------------------------------------------------
10.50%, 08/01/19 to 01/01/21 549,580 629,066
-----------------------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 2,840,965 3,157,989
-----------------------------------------------------------------------------
7.50%, 09/01/30 2,868,244 3,025,853
-----------------------------------------------------------------------------
Pass Through Certificates TBA,(a)
6.00%, 08/01/32 24,000,000 24,269,250
-----------------------------------------------------------------------------
6.50%, 08/01/32 50.000,000 51,498,438
-----------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-(CONTINUED)
Unsec. Medium Term Notes,
3.88%, 12/20/04 $ 21,090,000 $ 21,235,521
-----------------------------------------------------------------------------
4.38%, 08/19/05 9,750,000 9,763,163
-----------------------------------------------------------------------------
4.50%, 02/27/06 30,000,000 30,386,400
-----------------------------------------------------------------------------
5.50%, 04/11/06 4,900,000 4,931,556
-----------------------------------------------------------------------------
Unsec. Notes,
4.88%, 03/15/07 30,000,000 31,223,700
-----------------------------------------------------------------------------
5.13%, 10/15/08 to 07/15/12 27,000,000 27,662,060
=============================================================================
346,791,906
=============================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-31.72%
Pass Through Certificates,
8.50%, 01/01/07 to 04/01/30 28,664,593 31,180,403
-----------------------------------------------------------------------------
7.50%, 06/01/10 to 07/01/31 26,139,030 27,635,188
-----------------------------------------------------------------------------
7.00%, 05/01/11 to 05/01/32 17,280,390 18,015,494
-----------------------------------------------------------------------------
8.00%, 02/01/12 to 07/01/31 6,944,788 7,428,424
-----------------------------------------------------------------------------
6.50%, 05/01/13 to 11/01/31 19,298,716 20,116,419
-----------------------------------------------------------------------------
6.00%, 10/01/13 to 04/01/24 15,903,424 16,369,742
-----------------------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 591,715 657,629
-----------------------------------------------------------------------------
10.00%, 12/20/19 to 12/20/21 3,421,065 3,891,052
-----------------------------------------------------------------------------
10.30%, 04/20/25 1,061,506 1,198,382
-----------------------------------------------------------------------------
Pass Through Certificates, TBA,(a)
6.00%, 08/01/32 44,000,000 44,433,125
-----------------------------------------------------------------------------
6.50%, 08/01/32 88,500,000 91,119,047
-----------------------------------------------------------------------------
8.50%, 09/01/32 3,500,000 3,831,406
-----------------------------------------------------------------------------
Series B, Unsec. Medium Term Notes,
6.88%, 09/10/12 to 09/24/12 24,765,000 26,871,941
-----------------------------------------------------------------------------
6.47%, 09/25/12 10,550,000 11,670,726
-----------------------------------------------------------------------------
Unsec. Notes,
5.35%, 09/19/06 8,000,000 8,034,320
-----------------------------------------------------------------------------
5.25%, 04/15/07 16,000,000 16,904,320
-----------------------------------------------------------------------------
4.25%, 07/15/07 23,000,000 23,275,540
-----------------------------------------------------------------------------
6.13%, 03/15/12 30,000,000 32,281,500
=============================================================================
384,914,658
=============================================================================
|
FS-35
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-2.81%
Pass Through Certificates,
6.00%, 10/15/08 to 11/15/08 $ 245,318 $ 256,236
-----------------------------------------------------------------------------
6.50%, 10/15/08 196,345 206,927
-----------------------------------------------------------------------------
7.00%, 10/15/08 to 07/15/28 8,963,946 9,385,855
-----------------------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 515,649 567,646
-----------------------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 1,901,714 2,131,444
-----------------------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 4,205,083 4,793,064
-----------------------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 37,324 43,303
-----------------------------------------------------------------------------
12.50%, 11/15/10 45,366 53,596
-----------------------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 159,406 192,766
-----------------------------------------------------------------------------
13.50%, 04/15/11 to 04/15/15 145,524 175,780
-----------------------------------------------------------------------------
12.00%, 02/15/13 to 07/15/15 203,121 244,076
-----------------------------------------------------------------------------
10.50%, 02/15/16 22,713 26,588
-----------------------------------------------------------------------------
8.00%, 01/15/22 to 06/15/27 11,787,482 12,647,104
-----------------------------------------------------------------------------
7.50%, 03/15/26 to 08/15/28 3,155,888 3,345,012
=============================================================================
34,069,397
=============================================================================
PRIVATE EXPORT FUNDING COMPANY-1.39%
Series J, Sec. Gtd. Notes,
7.65%, 05/15/06 7,000,000 8,003,100
-----------------------------------------------------------------------------
Series UU, Sec. Gtd. Notes,
7.95%, 11/01/06 8,000,000 8,864,480
=============================================================================
16,867,580
=============================================================================
TENNESSEE VALLEY AUTHORITY-3.89%
Bonds, 4.88%, 12/15/16 10,000,000 10,338,400
-----------------------------------------------------------------------------
Series A, Bonds, 5.63%, 01/18/11 28,517,000 29,881,253
-----------------------------------------------------------------------------
Series G, Bonds, 5.38%, 11/13/08 6,600,000 7,010,058
=============================================================================
47,229,711
=============================================================================
Total U.S. Government Agency Securities
(Cost $1,004,015,856) 1,021,756,302
=============================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY SECURITIES-16.75%
U.S. TREASURY NOTES-12.64%
6.75%, 05/15/05 $ 29,500,000 $ 32,694,850
-----------------------------------------------------------------------------
4.63%, 05/15/06 29,800,000 31,384,764
-----------------------------------------------------------------------------
4.38%, 05/15/07(b) 66,000,000 68,670,360
-----------------------------------------------------------------------------
4.88%, 02/15/12(b) 20,000,000 20,637,200
=============================================================================
153,387,174
=============================================================================
U.S. TREASURY BONDS-3.28%
7.50%, 11/15/16 to 11/15/24 14,950,000 18,739,609
-----------------------------------------------------------------------------
6.25%, 05/15/30 18,890,000 21,037,226
=============================================================================
39,776,835
=============================================================================
U.S. TREASURY STRIPS-0.83%(c)
5.38%, 05/15/06 8,000,000 7,092,800
-----------------------------------------------------------------------------
6.79%, 11/15/18 7,750,000 3,053,423
=============================================================================
10,146,223
=============================================================================
Total U.S. Treasury Securities (Cost
$197,840,943) 203,310,232
=============================================================================
SHARES
MONEY MARKET FUNDS-23.35%
STIT Government & Agency Portfolio (Cost
$283,406,073)(d) 283,406,073 283,406,073
=============================================================================
TOTAL INVESTMENTS-124.30% (Cost
$1,485,262,872) 1,508,472,607
=============================================================================
OTHER ASSETS LESS LIABILITIES-(24.30%) (294,915,053)
=============================================================================
NET ASSETS-100.00% $1,213,557,554
_____________________________________________________________________________
=============================================================================
|
Investment Abbreviations:
Gtd. - Guaranteed Sec. - Secured STRIPS - Separately Traded Registered Interest and Principal Security TBA - To Be Announced Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Security purchased on forward commitment basis. These securities are subject
to dollar roll transactions. See Note 1 Section B.
(b) Principal amount has been deposited in escrow with broker as collateral for
reverse repurchase agreements outstanding at 07/31/02.
(c) STRIPS are traded on a discount basis. In such cases, the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-36
JULY 31, 2002
ASSETS:
Investments, at market value (cost
$1,485,262,872) $1,508,472,607
-----------------------------------------------------------
Receivables for:
Fund shares sold 12,780,810
-----------------------------------------------------------
Dividends and interest 11,713,196
-----------------------------------------------------------
Principal paydowns 332,135
-----------------------------------------------------------
Investment for deferred compensation plan 56,200
-----------------------------------------------------------
Other assets 139,110
===========================================================
Total assets 1,533,494,058
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 214,344,543
-----------------------------------------------------------
Fund shares reacquired 13,886,549
-----------------------------------------------------------
Dividends 702,769
-----------------------------------------------------------
Reverse repurchase agreements 89,705,000
-----------------------------------------------------------
Deferred compensation plan 56,200
-----------------------------------------------------------
Accrued interest expense 3,920
-----------------------------------------------------------
Accrued distribution fees 777,774
-----------------------------------------------------------
Accrued trustees' fees 1,283
-----------------------------------------------------------
Accrued transfer agent fees 114,106
-----------------------------------------------------------
Accrued operating expenses 344,360
===========================================================
Total liabilities 319,936,504
===========================================================
Net assets applicable to shares
outstanding $1,213,557,554
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 473,103,542
___________________________________________________________
===========================================================
Class B $ 613,306,204
___________________________________________________________
===========================================================
Class C $ 127,114,212
___________________________________________________________
===========================================================
Class R $ 33,596
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 50,991,897
___________________________________________________________
===========================================================
Class B 65,901,089
___________________________________________________________
===========================================================
Class C 13,706,567
___________________________________________________________
===========================================================
Class R 3,625
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 9.28
-----------------------------------------------------------
Offering price per share:
(Net asset value of $9.28 divided by
95.25%) $ 9.74
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 9.31
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 9.27
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 9.27
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $41,389,986
-----------------------------------------------------------
Dividends from affiliated money market funds 3,934,282
===========================================================
Total investment income 45,324,268
===========================================================
EXPENSES:
Advisory fees 3,328,024
-----------------------------------------------------------
Administrative services fees 158,838
-----------------------------------------------------------
Custodian fees 104,840
-----------------------------------------------------------
Distribution fees -- Class A 913,667
-----------------------------------------------------------
Distribution fees -- Class B 3,744,307
-----------------------------------------------------------
Distribution fees -- Class C 823,922
-----------------------------------------------------------
Distribution fees -- Class R 14
-----------------------------------------------------------
Interest 350,670
-----------------------------------------------------------
Transfer agent fees 1,413,898
-----------------------------------------------------------
Trustees' fees 12,034
-----------------------------------------------------------
Other 305,503
===========================================================
Total expenses 11,155,717
===========================================================
Less: Fees waived (28,397)
-----------------------------------------------------------
Expenses paid indirectly (10,009)
===========================================================
Net expenses 11,117,311
===========================================================
Net investment income 34,206,957
===========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 7,060,161
===========================================================
Change in net unrealized appreciation of
investment securities 13,327,043
===========================================================
Net gain from investment securities 20,387,204
===========================================================
Net increase in net assets resulting from
operations $54,594,161
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-37
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
-------------- ------------
OPERATIONS:
Net investment income $ 34,206,957 $ 26,811,062
--------------------------------------------------------------------------------------------
Net realized gain from investment securities 7,060,161 3,212,879
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 13,327,043 14,303,931
============================================================================================
Net increase in net assets resulting from operations 54,594,161 44,327,872
============================================================================================
Distributions to shareholders from net investment income:
Class A (18,042,169) (14,773,132)
--------------------------------------------------------------------------------------------
Class B (15,743,394) (11,061,094)
--------------------------------------------------------------------------------------------
Class C (3,470,538) (2,309,804)
--------------------------------------------------------------------------------------------
Class R (135) --
--------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (128,142)
--------------------------------------------------------------------------------------------
Class B -- (110,507)
--------------------------------------------------------------------------------------------
Class C -- (23,140)
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A 162,667,870 72,844,994
--------------------------------------------------------------------------------------------
Class B 336,030,816 85,911,151
--------------------------------------------------------------------------------------------
Class C 65,503,763 24,431,473
--------------------------------------------------------------------------------------------
Class R 33,308 --
============================================================================================
Net increase in net assets 581,573,682 199,109,671
============================================================================================
NET ASSETS:
Beginning of year 631,983,872 432,874,201
============================================================================================
End of year $1,213,557,554 $631,983,872
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,228,796,118 $664,652,890
--------------------------------------------------------------------------------------------
Undistributed net investment income (133,395) (63,726)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (38,314,904) (41,850,663)
--------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 23,209,735 9,245,371
============================================================================================
$1,213,557,554 $631,983,872
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-38
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government 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 eight separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C shares and Class R shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge. Class R shares are sold at net asset value. Matters affecting each portfolio or class will be 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 achieve a high level of current income consistent with reasonable concern for safety of principal.
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, maturity and seasoning differential. 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 at 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. The Fund may engage in dollar roll transactions with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities.
Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts excluding mortgage-backed securities, are amortized and/or accreted for financial reporting purposes.
On July 31, 2002, undistributed net investment income was increased by $3,616,931, undistributed net realized gains decreased by $3,524,402 and shares of beneficial interest decreased by $92,529 as a result of book/tax differences due to paydown reclassifications, distributions, bond premium amortization, and other reclassifications. Net assets of the Fund were unaffected by the reclassification discussed above.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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.
FS-39
The Fund has a capital loss carryforward of $38,314,903 which expires as follows:
CAPITAL LOSS
CARRYFORWARD EXPIRATION
------------ ----------
$ 219,350 July 31, 2003
----------------------------
3,466,244 July 31, 2004
----------------------------
4,686 July 31, 2005
----------------------------
25,224,263 July 31, 2007
----------------------------
9,400,360 July 31, 2008
============================
$38,314,903
____________________________
============================
|
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--CHANGE IN ACCOUNTING PRINCIPLE
As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities and recording paydowns gains and losses or an asset-backed securities as adjustments to net investment income. Prior to August 1, 2001, the Fund did not amortize premiums on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $637,321 reduction in the cost of securities and a corresponding $637,321 increase in net unrealized gains and losses, based on securities held by the Fund on August 1, 2001.
The effect of this change in the current period was to decrease net investment income by $1,129,244, to increase net unrealized gains and losses by $760,102 and to increase net realized gains and losses by $369,142. As a result the net investment income per share decreased $0.04, the net realized and unrealized gains and losses per share increased by $0.04 and the ratio of net investment income to average net assets decreased by 0.51%.
NOTE 3--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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market fund of which the Fund has invested. For the year ended July 31, 2002, AIM waived fees of $28,397.
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, 2002, AIM was paid $158,838 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. During the year ended July 31, 2002, AFS retained $666,962 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, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. For the year ended July 31, 2002, the Class A, Class B, Class C and Class R shares paid AIM Distributors $913,667, $3,744,307, $823,922 and $14, respectively, as compensation under the Plans.
AIM Distributors retained commissions of $300,212 from sales of the Class A shares of the Fund during the year ended July 31, 2002. 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. During the year ended July 31, 2002, AIM Distributors retained $214,155, $14,615, $54,801 and $0 in contingent deferred sales charges imposed on redemptions of Class A, Class B, Class C and Class R shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $5,649 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 4--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $9,365 and reductions in custodian fees of $644 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $10,009.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
FS-40
NOTE 6--BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund, with an agreement that the Fund will repurchase such securities at an agreed upon price and date. The Fund will use the proceeds of a reverse repurchase agreement (which are considered to be borrowings under the 1940 Act) to purchase other permitted securities either maturing, or under an agreement to resell, at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. The agreements are collateralized by the underlying securities and are carried at the amount at which the securities will subsequently be repurchased as specified in the agreements.
The maximum amount of repurchase agreements outstanding during the year ended July 31, 2002 was $90,425,000, and averaged $24,797,711 per day with a weighted average interest rate of 1.41%.
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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
----------- -----------
Distributions paid from
ordinary income $37,256,236 $28,405,819
_____________________________________________________________
=============================================================
|
As of July 31, 2002, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Capital loss
carryforward $(38,314,903)
--------------------------------------
Unrealized appreciation 23,076,339
======================================
$(15,238,564)
______________________________________
======================================
|
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of bond premium amortization and other deferrals.
NOTE 8--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, 2002 was $1,432,206,187 and $966,770,487, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $24,307,748 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (1,162,277) =========================================================== Net unrealized appreciation of investment securities $23,145,471 ___________________________________________________________ =========================================================== Cost of investment for tax purposes is $1,485,327,136. |
FS-41
NOTE 9--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- -------------
Sold:
Class A 141,358,670 $ 1,293,194,070 70,420,358 $ 634,206,122
-----------------------------------------------------------------------------------------------------------------------------
Class B 54,984,125 507,221,308 21,411,964 193,273,518
-----------------------------------------------------------------------------------------------------------------------------
Class C 17,930,155 164,422,350 7,928,891 71,408,489
-----------------------------------------------------------------------------------------------------------------------------
Class R* 4,773 43,973 -- --
=============================================================================================================================
Issued as reinvestment of dividends:
Class A 1,556,614 14,273,598 1,352,466 12,138,035
-----------------------------------------------------------------------------------------------------------------------------
Class B 1,318,829 12,129,999 904,111 8,138,588
-----------------------------------------------------------------------------------------------------------------------------
Class C 303,088 2,777,727 211,013 1,893,881
-----------------------------------------------------------------------------------------------------------------------------
Class R* 15 135 -- --
=============================================================================================================================
Reacquired:
Class A (125,208,629) (1,144,799,798) (63,746,143) (573,499,163)
-----------------------------------------------------------------------------------------------------------------------------
Class B (20,005,120) (183,320,491) (12,844,788) (115,500,955)
-----------------------------------------------------------------------------------------------------------------------------
Class C (11,125,287) (101,696,314) (5,443,297) (48,870,897)
-----------------------------------------------------------------------------------------------------------------------------
Class R* (1,163) (10,800) -- --
=============================================================================================================================
61,116,070 $ 564,235,757 20,194,575 $ 183,187,618
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
FS-42
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------ JULY 31, --------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- -------------- -------- -------- --------
Net asset value, beginning of period $ 9.08 $ 8.77 $ 8.80 $ 9.58 $ 9.46 $ 9.28
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.43(a) 0.50(b) 0.34 0.60 0.62 0.63
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.23 0.35 (0.03) (0.78) 0.13 0.18
=================================================================================================================================
Total from investment operations 0.66 0.85 0.31 (0.18) 0.75 0.81
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.46) (0.54) (0.34) (0.60) (0.63) (0.61)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (0.02)
=================================================================================================================================
Total distributions (0.46) (0.54) (0.34) (0.60) (0.63) (0.63)
=================================================================================================================================
Net asset value, end of period $ 9.28 $ 9.08 $ 8.77 $ 8.80 $ 9.58 $ 9.46
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.39% 9.91% 3.55% (1.87)% 8.17% 9.07%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $473,104 $302,391 $221,636 $238,957 $245,613 $167,427
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 0.94%(d) 1.32% 1.25%(e) 1.08% 1.20% 1.11%
=================================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 0.90%(d) 0.93% 0.98%(e) 0.89% 0.96% 1.00%
=================================================================================================================================
Ratio of net investment income to average net
assets 4.58%(a)(d) 5.61% 6.61%(e) 6.60% 6.43% 6.77%
=================================================================================================================================
Ratio of interest expense to average net assets 0.04%(d) 0.39% 0.27%(e) 0.19% 0.24% 0.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 146% 194% 65% 141% 147% 99%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 31, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydown gains and losses adjustment to investment income, the
investment income per share would have been $0.47 and the ratio of net
investment income to average net assets would have been 5.09%. In
accordance with the AICPA Audit and Accounting Guide for investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include sales charges and is not annualized for periods less
than one year.
(d) Ratios are based on average daily net assets of $365,466,933.
(e) Annualized.
FS-43
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------ JULY 31, -------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------ -------- -------- -------
Net asset value, beginning of period $ 9.11 $ 8.79 $ 8.82 $ 9.59 $ 9.46 $ 9.28
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.37(a) 0.44(b) 0.30 0.53 0.55 0.56
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.22 0.35 (0.04) (0.77) 0.13 0.17
===============================================================================================================================
Total from investment operations 0.59 0.79 0.26 (0.24) 0.68 0.73
===============================================================================================================================
Less distributions:
Dividends from net investment income (0.39) (0.47) (0.29) (0.53) (0.55) (0.53)
-------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (0.02)
===============================================================================================================================
Total distributions (0.39) (0.47) (0.29) (0.53) (0.55) (0.55)
===============================================================================================================================
Net asset value, end of period $ 9.31 $ 9.11 $ 8.79 $ 8.82 $ 9.59 $ 9.46
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 6.58% 9.17% 3.05% (2.56)% 7.40% 8.16%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $613,306 $269,677 $177,032 $228,832 $237,919 $89,265
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 1.69%(d) 2.08% 2.01%(e) 1.85% 1.96% 1.87%
===============================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 1.65%(d) 1.69% 1.74%(e) 1.66% 1.72% 1.76%
===============================================================================================================================
Ratio of net investment income to average net
assets 3.83%(a)(d) 4.85% 5.85%(e) 5.83% 5.68% 6.01%
===============================================================================================================================
Ratio of interest expense to average net assets 0.04%(d) 0.39% 0.27%(e) 0.19% 0.24% 0.11%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 146% 194% 65% 141% 147% 99%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydowns gains and losses adjustments to net investment income,
the net investment income per share would have been $0.40 and the ratio
of net investment income to average net assets would have been 4.35%. In
accordance with the AICPA Audit and Accounting Guide for Investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect the change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $374,430,725.
(e) Annualized.
FS-44
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------------
AUGUST 4, 1997
SEVEN MONTHS YEAR ENDED (DATE SALES
YEAR ENDED JULY 31, ENDED DECEMBER 31, COMMENCED) TO
----------------------- JULY 31, ------------------ DECEMBER 31,
2002 2001 2000 1999 1998 1997
-------- ------- ------------ ------- ------- --------------
Net asset value, beginning of period $ 9.08 $ 8.77 $ 8.79 $ 9.56 $ 9.44 $ 9.33
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.37(a) 0.44(b) 0.30 0.53 0.56 0.24
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.21 0.34 (0.03) (0.77) 0.11 0.10
===============================================================================================================================
Total from investment operations 0.58 0.78 0.27 (0.24) 0.67 0.34
===============================================================================================================================
Less distributions:
Dividends from net investment income (0.39) (0.47) (0.29) (0.53) (0.55) (0.22)
-------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- -- -- (0.01)
===============================================================================================================================
Total distributions (0.39) (0.47) (0.29) (0.53) (0.55) (0.23)
===============================================================================================================================
Net asset value, end of period $ 9.27 $ 9.08 $ 8.77 $ 8.79 $ 9.56 $ 9.44
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 6.48% 9.08% 3.18% (2.57)% 7.31% 3.64%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $127,114 $59,915 $34,206 $39,011 $38,026 $1,851
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 1.69%(d) 2.08% 2.01%(e) 1.85% 1.96% 1.87%(e)
===============================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 1.65%(d) 1.69% 1.74%(e) 1.66% 1.72% 1.76%(e)
===============================================================================================================================
Ratio of net investment income to average
net assets 3.83%(a)(d) 4.85% 5.85%(e) 5.83% 5.68% 6.01%(e)
===============================================================================================================================
Ratio of interest expense to average net
assets 0.04%(d) 0.39% 0.27%(e) 0.19% 0.24% 0.11%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 146% 194% 65% 141% 147% 99%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized premiums on debt
securities or recorded paydowns gains and losses adjustments to net
investment income, the net investment income per share would have been
$0.40 and the ratio of net investment income to average net assets would
have been 4.35%. In accordance with the AICPA Audit and Accounting Guide
for Investment Companies, per share and ratios for periods prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(b) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $82,392,196.
(e) Annualized.
FS-45
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
JULY 31,
2002
-------------
Net asset value, beginning of period $ 9.13
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07(a)
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.14
=============================================================================
Total from investment operations 0.21
=============================================================================
Less distributions from net investment income (0.07)
=============================================================================
Net asset value, end of period $ 9.27
_____________________________________________________________________________
=============================================================================
Total return(b) 2.34%
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 34
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets (including interest
expense) 1.19%(c)
=============================================================================
Ratio of expenses to average net assets (excluding interest
expense 1.15%(c)
=============================================================================
Ratio of net investment income to average net assets 4.33%(a)(c)
=============================================================================
Ratio of interest expense to average net assets 0.04%(c)
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate 146%
_____________________________________________________________________________
=============================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized premiums on debt
securities or recorded paydowns gains and losses adjustments to net
investment income, the net investment income per share would have
remained the same and the ratio of net investment to average net assets
would have been 4.85%. In accordance with the AICPA Audit and Accounting
Guide for Investment Companies, per share and ratios for periods prior
to August 1, 2001 have not been restated to reflect this change in
presentation.
(b) Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $17,017.
FS-46
To the Shareholders of AIM Limited Maturity Treasury Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM Limited Maturity Treasury Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the three years in the period ended July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Limited Maturity Treasury Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Houston, Texas
September 10, 2002
|
FS-47
JULY 31, 2002
PAR MARKET
MATURITY (000S) VALUE
U.S. TREASURY NOTES--99.03%
3.63% 08/31/03 to 03/31/04 $113,300 $115,952,634
---------------------------------------------------------------------------------
2.75% 09/30/03 to 10/31/03 113,100 114,483,803
---------------------------------------------------------------------------------
3.00% 11/30/03 to 02/29/04 170,800 173,487,794
---------------------------------------------------------------------------------
3.25% 12/31/03 to 05/31/04 113,800 116,080,418
---------------------------------------------------------------------------------
3.38% 04/30/04 56,800 58,077,432
---------------------------------------------------------------------------------
2.88% 06/30/04 56,800 57,559,416
---------------------------------------------------------------------------------
2.25% 07/31/04 56,800 56,831,240
=================================================================================
Total U.S. Treasury Notes (Cost
$681,956,936) 692,472,737
_________________________________________________________________________________
=================================================================================
TOTAL INVESTMENTS--99.03% 692,472,737
_________________________________________________________________________________
=================================================================================
OTHER ASSETS LESS
LIABILITIES--0.97% 6,755,426
_________________________________________________________________________________
=================================================================================
NET ASSETS--100.00% $699,228,163
_________________________________________________________________________________
=================================================================================
|
See Notes to Financial Statements.
FS-48
ASSETS:
Investments, at market value (cost
$681,956,936) $692,472,737
-----------------------------------------------------------
Receivables for:
Fund shares sold 6,964,556
-----------------------------------------------------------
Interest 4,575,706
-----------------------------------------------------------
Investment for deferred compensation plan 51,395
-----------------------------------------------------------
Other assets 55,650
===========================================================
Total assets 704,120,044
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 4,411,765
-----------------------------------------------------------
Amount due custodian 27,710
-----------------------------------------------------------
Dividends 231,849
-----------------------------------------------------------
Deferred compensation plan 51,395
-----------------------------------------------------------
Accrued distribution fees 130,212
-----------------------------------------------------------
Accrued trustees' fees 784
-----------------------------------------------------------
Accrued transfer agent fees 3,409
-----------------------------------------------------------
Accrued operating expenses 34,757
===========================================================
Total liabilities 4,891,881
===========================================================
Net assets applicable to shares outstanding $699,228,163
___________________________________________________________
===========================================================
NET ASSETS:
Class A $696,258,551
___________________________________________________________
===========================================================
Institutional Class $ 2,969,612
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 66,096,475
___________________________________________________________
===========================================================
Institutional Class 281,956
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.53
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.53 divided by
99.00%) $ 10.64
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 10.53
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $22,206,649
===========================================================
EXPENSES:
Advisory fees 1,200,432
-----------------------------------------------------------
Administrative services fees 122,783
-----------------------------------------------------------
Custodian fees 29,855
-----------------------------------------------------------
Distribution fees -- Class A 921,799
-----------------------------------------------------------
Transfer agent fees -- Class A 513,161
-----------------------------------------------------------
Transfer agent fees -- Institutional Class 2,097
-----------------------------------------------------------
Trustees' fees 11,040
-----------------------------------------------------------
Other 168,902
===========================================================
Total expenses 2,970,069
===========================================================
Less: Expenses paid indirectly (7,145)
===========================================================
Net expenses 2,962,924
===========================================================
Net investment income 19,243,725
===========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 12,398,048
-----------------------------------------------------------
Change in net unrealized appreciation of
investment securities 4,356,374
===========================================================
Net gain from investment securities 16,754,422
===========================================================
Net increase in net assets resulting from
operations $35,998,147
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-49
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
------------ ------------
OPERATIONS:
Net investment income $ 19,243,725 $ 18,352,135
------------------------------------------------------------------------------------------
Net realized gain from investment securities 12,398,048 3,891,256
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 4,356,374 6,182,255
==========================================================================================
Net increase in net assets resulting from operations 35,998,147 28,425,646
==========================================================================================
Distributions to shareholders from net investment income:
Class A (19,170,139) (18,285,550)
------------------------------------------------------------------------------------------
Institutional Class (70,078) (99,845)
------------------------------------------------------------------------------------------
Share transactions-net:
Class A 171,767,941 197,751,141
------------------------------------------------------------------------------------------
Institutional Class 1,091,152 (693,669)
==========================================================================================
Net increase in net assets 189,617,023 207,097,723
==========================================================================================
NET ASSETS:
Beginning of year 509,611,140 302,513,417
==========================================================================================
End of year $699,228,163 $509,611,140
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $681,588,473 $508,729,380
------------------------------------------------------------------------------------------
Undistributed net investment income -- (3,506)
------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities 7,123,889 (5,023,381)
------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 10,515,801 5,908,647
==========================================================================================
$699,228,163 $509,611,140
__________________________________________________________________________________________
==========================================================================================
|
JULY 31, 2002
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 eight 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. Class A shares are sold with a front-end sales charge. 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 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 at 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
FS-50
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
On July 31, 2002, undistributed net investment income was increased and undistributed net realized gains was decreased by $250,778 as a result of differing book/tax treatments of bond premium amortization. Net assets of the Fund were unaffected by the reclassification discussed above.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--CHANGE IN ACCOUNTING PRINCIPLE
As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Prior to August 1, 2001, the Fund did not amortize premiums on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $250,780 reduction in the cost of securities and a corresponding $250,780 increase in net unrealized gains and losses, based on securities held by the Fund on August 1, 2001.
The effect of this change in the current period was to decrease net investment income by $1,026,779, to increase net unrealized gains and losses by $627,423 and to increase net realized gains and losses by $399,356. As a result the net investment income per share was decreased by $0.01, and the ratio of net investment income to average net assets was decreased by 0.17%.
NOTE 3--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, 2002, AIM was paid $122,783 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. During the year ended July 31, 2002, AFS retained $258,614 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 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 Plan, pays AIM Distributors compensation at the annual rate of 0.15% of the Fund's average daily net assets of Class A shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of Class A shares 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, 2002, the Fund paid AIM Distributors $921,799 as compensation under the Plan.
AIM Distributors retained commissions of $262,205 from sales of the Class A shares of the Fund during the year ended July 31, 2002. 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. During the year ended July 31, 2002, AIM Distributors received $82,921 and $0 in contingent deferred sales charges imposed on redemptions of Class A and Institutional Class shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS, and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $5,300 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 4--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $7,145 under an expense offset arrangement which resulted in a reduction of the Fund's net expenses of $7,145.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
FS-51
NOTE 6--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
----------- -----------
Distributions paid from ordinary
income $19,240,217 $18,385,395
_____________________________________________________________
=============================================================
|
As of July 31, 2002, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income $ 7,487,787
-----------------------------------------------------------
Unrealized appreciation 10,151,903
===========================================================
$17,639,690
___________________________________________________________
===========================================================
|
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and timing differences.
NOTE 8--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, 2002 was $1,091,795,482 and $906,163,340, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 was as follows:
Aggregate unrealized appreciation of investment securities $10,219,199 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities -- ========================================================================= Net unrealized appreciation of investment securities $10,219,199 _________________________________________________________________________ ========================================================================= Cost of investments for tax purposes is $682,253,538. |
NOTE 9--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 75,803,443 $ 786,911,782 53,134,054 $ 540,139,806
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 184,259 1,912,257 40,446 411,876
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,557,231 16,184,908 1,557,471 15,770,377
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 238 2,477 184 1,869
==========================================================================================================================
Reacquired:
Class A (60,767,295) (631,328,749) (35,304,325) (358,159,042)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (79,249) (823,582) (110,347) (1,107,414)
==========================================================================================================================
16,698,627 $ 172,859,093 19,317,483 $ 197,057,472
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
FS-52
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------
YEAR ENDED JULY 31,
--------------------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 10.26 $ 9.96 $ 10.03 $ 10.07 $ 10.07
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.33(a) 0.52(b) 0.51 0.47 0.53
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 0.31 (0.07) (0.04) --
============================================================================================================================
Total from investment operations 0.60 0.83 0.44 0.43 0.53
============================================================================================================================
Less distributions from net investment income (0.33) (0.53) (0.51) (0.47) (0.53)
============================================================================================================================
Net asset value, end of period $ 10.53 $ 10.26 $ 9.96 $ 10.03 $ 10.07
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(c) 5.89% 8.53% 4.50% 4.32% 5.42%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $696,259 $507,799 $300,058 $390,018 $345,355
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 0.48%(d) 0.56% 0.54% 0.54% 0.54%
============================================================================================================================
Ratio of net investment income to average net assets 3.12%(a)(d) 5.15% 5.07% 4.61% 5.29%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate 149% 137% 122% 184% 133%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.34 and the ratio of net investment income to
average net assets would have been 3.29%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include sales charges.
(d) Ratios are based on average daily net assets of $614,532,639.
INSTITUTIONAL CLASS
-----------------------------------------------------------
YEAR ENDED JULY 31,
-----------------------------------------------------------
2002 2001 2000 1999 1998
------ ----------- ------ ------- -------
Net asset value, beginning of period $10.26 $ 9.96 $10.03 $ 10.07 $ 10.07
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.34(a) 0.54(b) 0.54 0.49 0.56
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.27 0.31 (0.07) (0.04) --
=========================================================================================================================
Total from investment operations 0.61 0.85 0.47 0.45 0.56
=========================================================================================================================
Less distributions from net investment income (0.34) (0.55) (0.54) (0.49) (0.56)
=========================================================================================================================
Net asset value, end of period $10.53 $10.26 $ 9.96 $ 10.03 $ 10.07
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return 6.05% 8.80% 4.78% 4.55% 5.66%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,970 $1,812 $2,455 $17,131 $50,609
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 0.34%(c) 0.33%(d) 0.29% 0.31% 0.32%
=========================================================================================================================
Ratio of net investment income to average net assets 3.26%(a)(c) 5.38% 5.31% 4.84% 5.51%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 149% 137% 122% 184% 133%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and the Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premium on debt securities, the net investment income per
share would have been $0.35 and the ratio of net investment income to
average assets would have been 3.43%. In accordance with the AICPA Audit
and Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Ratios are based on average daily net assets of $2,165,576.
(d) Including expense reimbursement. Ratio of expenses to average net assets
excluding reimbursement is 0.41%.
FS-53
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Money Market Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM Money Market Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Money Market Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Houston, Texas
September 10, 2002
|
FS-54
JULY 31, 2002
PAR
MATURITY (000) VALUE
COMMERCIAL PAPER-32.28%(a)
ASSET-BACKED SECURITIES-COMMERCIAL
LOANS/LEASES-9.09%
Atlantis One Funding Corp.(b)
1.98% 08/01/02 $ 35,000 $ 35,000,000
--------------------------------------------------------------------------------
1.90% 09/16/02 47,200 47,085,409
--------------------------------------------------------------------------------
Fountain Square Commercial Funding
Corp.(b)
1.80% 09/18/02 15,124 15,087,702
--------------------------------------------------------------------------------
Stellar Funding Group, Inc.(b)
1.79% 08/09/02 22,712 22,702,966
--------------------------------------------------------------------------------
1.80% 08/14/02 10,000 9,993,500
--------------------------------------------------------------------------------
2.02% 08/20/02 3,001 2,997,801
--------------------------------------------------------------------------------
1.80% 08/21/02 15,000 14,985,000
--------------------------------------------------------------------------------
2.02% 08/23/02 4,286 4,280,709
--------------------------------------------------------------------------------
1.79% 09/20/02 14,000 13,965,194
--------------------------------------------------------------------------------
1.80% 09/30/02 11,974 11,938,078
================================================================================
178,036,359
================================================================================
ASSET-BACKED SECURITIES-CONSUMER
FINANCE-4.79%
Thunder Bay Funding Inc.(b)
1.80% 08/15/02 14,000 13,990,200
--------------------------------------------------------------------------------
1.78% 09/16/02 80,000 79,818,044
================================================================================
93,808,244
================================================================================
ASSET-BACKED SECURITIES-FULLY BACKED-2.06%
Enterprise Funding Corp. (LOC-Bank of
America N.A.)(b)
1.84% 08/26/02 10,500 10,486,583
--------------------------------------------------------------------------------
Newport Funding Corp.(b)(c)
1.85% 11/19/02 30,000 29,830,875
================================================================================
40,317,458
================================================================================
ASSET-BACKED SECURITIES-
MULTI-PURPOSE-4.11%
Charta Corp.(b)(c)
1.81% 08/12/02 47,000 46,974,006
--------------------------------------------------------------------------------
Jupiter Securitization Corp.(b)
1.79% 08/06/02 14,268 14,264,453
--------------------------------------------------------------------------------
1.78% 09/18/02 19,290 19,244,219
================================================================================
80,482,678
================================================================================
ASSET-BACKED SECURITIES-TRADE
RECEIVABLES-3.56%
FCAR Owner Trust-Series II
1.90% 10/07/02 30,000 29,893,917
--------------------------------------------------------------------------------
1.80% 10/23/02 20,000 19,917,000
--------------------------------------------------------------------------------
1.80% 11/14/02 20,000 19,895,000
================================================================================
69,705,917
================================================================================
|
PAR
MATURITY (000) VALUE
BANKS-1.27%
Dresdner U.S. Finance, Inc. (Germany)
1.98% 11/12/02 $ 25,000 $ 24,858,375
================================================================================
DIVERSIFIED FINANCIAL SERVICES-6.34%
CIT Group Inc. (The)
1.85%(b) 09/23/02 10,000 9,972,764
--------------------------------------------------------------------------------
1.88% 10/31/02 50,000 49,762,389
--------------------------------------------------------------------------------
1.86%(b) 11/01/02 40,000 39,809,867
--------------------------------------------------------------------------------
National Australia Funding
2.09% 02/07/03 25,000 24,724,236
================================================================================
124,269,256
================================================================================
DIVERSIFIED METALS & MINING-1.06%
Rio Tinto America, Inc.(b)
1.80% 08/16/02 20,759 20,743,431
================================================================================
Total Commercial Paper (Cost
$632,221,718) 632,221,718
================================================================================
SHORT-TERM OBLIGATIONS-15.09%
CONSUMER FINANCE-1.09%
World Omni Auto Receivables Trust-Series
2002-A
1.87% 07/15/03 21,300 21,300,000
================================================================================
DIVERSIFIED FINANCIAL SERVICES-4.24%
Credit Suisse First Boston (Switzerland),
Gtd. Medium Term Floating Rate Notes,
1.92%(d)(e) 08/20/02 33,000 33,000,000
--------------------------------------------------------------------------------
M-Market Trust Lilly-Series 2002A,
Floating Rate Notes,
1.89%(b) 06/03/03 50,000 50,000,000
================================================================================
83,000,000
================================================================================
U.S. GOVERNMENT AGENCIES-9.76%
Federal Home Loan Bank,
Unsec. Floating Rate Bonds,
1.68%(e) 08/13/02 25,000 24,999,724
--------------------------------------------------------------------------------
Unsec. Bonds,
2.11% 08/12/03 30,000 30,000,000
--------------------------------------------------------------------------------
2.25% 08/14/03 40,000 40,000,000
--------------------------------------------------------------------------------
Overseas Private Investment, Gtd. Floating
Rate Participation Ctfs.,
1.76%(f) 07/15/03 18,000 18,000,000
--------------------------------------------------------------------------------
1.76%(f) 12/15/14 15,900 15,900,000
--------------------------------------------------------------------------------
1.76%(f) 01/15/15 8,450 8,450,000
--------------------------------------------------------------------------------
1.76%(f) 05/15/15 53,900 53,900,000
================================================================================
191,249,724
================================================================================
|
FS-55
PAR
MATURITY (000) VALUE
U.S. GOVERNMENT AGENCIES-(CONTINUED)
Total Short-Term Obligations (Cost
$295,549,724) $ 295,549,724
================================================================================
VARIABLE RATE DEMAND NOTES-8.64%
BANKS-LETTER OF CREDIT-6.34%
Capital One Funding Corp.-Series 00-D,
Floating Rate Notes (LOC-Bank One,
Texas, N.A.),
1.92%(f) 05/01/26 $ 8,500 8,500,000
--------------------------------------------------------------------------------
Series 97-E, Floating Rate Notes
(LOC-Bank One, Texas, N.A.),
1.92%(f) 08/01/12 9,649 9,649,000
--------------------------------------------------------------------------------
Colorado (State of) Health Facilities
Authority (National Benevolent
Association); Series E RB (LOC-KBC Bank
N.V.),
1.90%(f) 03/01/30 9,650 9,650,000
--------------------------------------------------------------------------------
Family Express Corp., LLC-Series A, Loan
Program Notes (LOC-First of America Bank
N.A.),
1.92%(f) 04/01/28 9,070 9,070,000
--------------------------------------------------------------------------------
Health Midwest Ventures-Series 94-A,
Floating Rate Notes (LOC-Bank of America
N.A.),
2.62%(f) 08/01/19 16,860 16,860,000
--------------------------------------------------------------------------------
KBL Capital Fund Inc.-Series A, Loan
Program Notes (LOC-National City Bank),
1.92%(f) 05/01/27 16,730 16,730,000
--------------------------------------------------------------------------------
Miami-Dade (County of) Industrial
Development Authority (Dolphins
Stadium); IDR (LOC-Societe Generale),
1.90%(f) 07/01/22 100 100,000
--------------------------------------------------------------------------------
Mississippi Business Finance Corp.
(Telepak Inc. Project); IDR (LOC-First
Union National Bank),
1.84%(f) 09/01/15 20,000 20,000,000
--------------------------------------------------------------------------------
Mississippi Business Finance Corp.
(Viking Range Corp. Project);
IDR (LOC-Bank of
America N.A.),
1.89%(f) 06/01/15 15,230 15,230,000
--------------------------------------------------------------------------------
Missouri (State of) Development Finance
Board (Historic Restoration Inc.);
Series A RAN (LOC-Firstar Bank),
2.05%(f) 12/01/05 11,000 11,000,000
--------------------------------------------------------------------------------
Port Blakely Communities; Series C RB
(LOC-Bank of America N.A.),
1.75%(f) 02/15/21 7,500 7,500,000
================================================================================
124,289,000
================================================================================
INSURED-1.79%
Illinois (State of) Health Facilities
Authority (Loyola University Health
Systems); Series C RB,
1.80%(c)(f) 07/01/24 12,420 12,420,000
--------------------------------------------------------------------------------
|
PAR
MATURITY (000) VALUE
INSURED-(CONTINUED)
Michigan (State of) Housing Development
Authority; Series C RB,
1.85%(c)(f) 12/01/20 $ 6,405 $ 6,405,000
--------------------------------------------------------------------------------
SSM Health Care (SSMC Obligated Group);
Montana Health Facilities, Series E RB,
1.85%(c)(f) 06/01/25 16,200 16,200,000
================================================================================
35,025,000
================================================================================
NON-BANKS GUARANTEED-0.51%
Mississippi Business Finance Corp. (GE
Plastics Project); IDR,
1.82%(f) 02/01/23 10,000 10,000,000
================================================================================
Total Variable Rate Demand Notes (Cost
$169,314,000) 169,314,000
================================================================================
CERTIFICATES OF DEPOSIT-7.55%
BANKS-7.55%
Banque Nationale de Paris (France)
2.00% 09/27/02 25,000 25,000,000
--------------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom)
1.97% 09/24/02 30,000 30,000,223
--------------------------------------------------------------------------------
Danske Bank A/S (Denmark)
2.00% 08/01/03 11,000 11,000,000
--------------------------------------------------------------------------------
Lloyds TSB Bank PLC (United Kingdom)
2.15% 02/10/03 32,000 32,000,000
--------------------------------------------------------------------------------
Royal Bank of Scotland PLC (United
Kingdom)
1.82% 10/16/02 25,000 24,995,047
--------------------------------------------------------------------------------
UBS A.G. (Switzerland)
2.10% 08/28/02 25,000 25,000,000
================================================================================
Total Certificates Of Deposit (Cost
$147,995,270) 147,995,270
================================================================================
BANK NOTES-1.02%
La Salle Bank N.A.
2.40% (Cost $20,000,000) 12/10/02 20,000 20,000,000
================================================================================
PROMISSORY NOTES-3.83%
DIVERSIFIED FINANCIAL SERVICES-3.83%
Goldman Sachs Group, Inc. (The)
1.95% 03/21/03 50,000 50,000,000
--------------------------------------------------------------------------------
2.14% 08/29/02 25,000 25,000,000
================================================================================
Total Promissory Notes (Cost
$75,000,000) 75,000,000
================================================================================
MASTER NOTE AGREEMENTS-7.66%(g)
DIVERSIFIED FINANCIAL SERVICES-7.66%
Merrill Lynch Mortgage Capital, Inc.
1.97%(h) 08/19/02 70,000 70,000,000
--------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
1.88%(i) 09/17/02 80,000 80,000,000
================================================================================
Total Master Note Agreements (Cost
$150,000,000) 150,000,000
================================================================================
|
FS-56
PAR
MATURITY (000) VALUE
TIME DEPOSITS-8.17%
Deutsche Bank-Cayman (Germany)
1.81% 08/01/02 $ 80,000 $ 80,000,000
--------------------------------------------------------------------------------
Westdeutsche Landesbank-Cayman (Germany)
1.81% 08/01/02 80,000 80,000,000
================================================================================
Total Time Deposits (Cost
$160,000,000) 160,000,000
================================================================================
Total Investments (excluding
Repurchase Agreements) (Cost
$1,650,080,712) 1,650,080,712
================================================================================
|
PAR
MATURITY (000) VALUE
REPURCHASE AGREEMENTS-23.03%(j)
Credit Suisse First Boston (Switzerland)
1.84%(k) 08/01/02 $250,000 $ 250,000,000
--------------------------------------------------------------------------------
Morgan Stanley Dean Witter Inc.
1.84%(l) 08/01/02 201,124 201,124,278
================================================================================
Total Repurchase Agreements (Cost
$451,124,278) 451,124,278
================================================================================
TOTAL INVESTMENTS-107.27% 2,101,204,990(m)
================================================================================
OTHER ASSETS LESS LIABILITIES-(7.27%) (142,401,548)
================================================================================
NET ASSETS-100.00% $1,958,803,442
________________________________________________________________________________
================================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Gtd. - Guaranteed IDR - Industrial Development Revenue Bonds LOC - Letter of Credit RAN - Revenue Anticipation Notes RB - Revenue Bonds Sr. - Senior Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(b) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(c) Secured by bond insurance provided by Ambac Assurance Corp. or MBIA
Insurance Co.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The market value of this security at 07/31/02 represented
1.68% of the Fund's net assets.
(e) Interest rates are redetermined periodically. Rate shown is the rate in
effect on 07/31/02.
(f) Demand securities; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rates shown are rates in effect on 07/31/02.
(g) The investments in master note agreements are through participation in joint
accounts with other mutual funds, private accounts, and certain
non-registered investment companies managed by the investment advisor or its
affiliates.
(h) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon one business days notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
07/31/02.
(i) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven business days notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
07/31/02.
(j) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(k) Repurchase agreement entered into 07/31/02 with a maturing value of
$250,012,778. Collateralized by $857,174,000 par value of U.S. Government
obligations, 0% to 8.88%, due 04/15/17 to 04/15/30, with an aggregate market
value at 07/31/02 of $255,001,093.
(l) Joint repurchase agreement entered into 07/31/02 with a maturing value of
$250,012,778. Collateralized by $322,449,306 par value of U.S. Government
obligations, 0% to 14%, due 08/01/02 to 12/15/43, with an aggregate market
value at 07/31/02 of $255,000,465.
(m) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-57
ASSETS:
Investments, excluding repurchase
agreements at value (amortized cost) $1,650,080,712
-----------------------------------------------------------
Repurchase agreements 451,124,278
-----------------------------------------------------------
Receivables for:
Investments sold 207,000
-----------------------------------------------------------
Fund shares sold 23,525,409
-----------------------------------------------------------
Interest 2,699,645
-----------------------------------------------------------
Investment for deferred compensation plan 90,560
-----------------------------------------------------------
Other assets 141,672
===========================================================
Total assets 2,127,869,276
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 81,000,000
-----------------------------------------------------------
Fund shares reacquired 86,401,109
-----------------------------------------------------------
Dividends 95,997
-----------------------------------------------------------
Deferred compensation plan 90,560
-----------------------------------------------------------
Accrued distribution fees 1,059,206
-----------------------------------------------------------
Accrued trustees' fees 1,356
-----------------------------------------------------------
Accrued transfer agent fees 294,039
-----------------------------------------------------------
Accrued operating expenses 123,567
===========================================================
Total liabilities 169,065,834
===========================================================
Net assets applicable to shares outstanding $1,958,803,442
___________________________________________________________
===========================================================
NET ASSETS:
AIM Cash Reserve Shares $1,121,878,913
___________________________________________________________
===========================================================
Class B $ 717,967,208
___________________________________________________________
===========================================================
Class C $ 118,947,311
___________________________________________________________
===========================================================
Class R $ 10,010
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
AIM Cash Reserve Shares 1,121,852,681
___________________________________________________________
===========================================================
Class B 717,949,975
___________________________________________________________
===========================================================
Class C 118,944,860
___________________________________________________________
===========================================================
Class R 10,010
___________________________________________________________
===========================================================
AIM Cash Reserve Shares
Net asset value and offering price per
share $ 1.00
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 1.00
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 1.00
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 1.00
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $41,358,409
===========================================================
EXPENSES:
Advisory fees 9,087,854
-----------------------------------------------------------
Administrative services fees 251,839
-----------------------------------------------------------
Custodian fees 65,381
-----------------------------------------------------------
Distribution fees -- AIM Cash Reserve Shares 2,735,865
-----------------------------------------------------------
Distribution fees -- Class B 5,230,124
-----------------------------------------------------------
Distribution fees -- Class C 1,002,104
-----------------------------------------------------------
Distribution fees -- Class R 9
-----------------------------------------------------------
Transfer agent fees 2,989,417
-----------------------------------------------------------
Trustees' fees 16,137
-----------------------------------------------------------
Other 580,154
===========================================================
Total expenses 21,958,884
===========================================================
Less: Expenses paid indirectly (19,763)
-----------------------------------------------------------
Net expenses 21,939,121
===========================================================
Net investment income 19,419,288
===========================================================
Net realized gain from investment securities 1,145
===========================================================
Net increase in net assets resulting from
operations $19,420,433
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-58
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
-------------- --------------
OPERATIONS:
Net investment income $ 19,419,288 $ 58,593,065
----------------------------------------------------------------------------------------------
Net realized gain from investment securities 1,145 26,400
==============================================================================================
Net increase in net assets resulting from operations 19,420,433 58,619,465
==============================================================================================
Distributions to shareholders from net investment income:
AIM Cash Reserve Shares (15,341,349) (42,494,569)
----------------------------------------------------------------------------------------------
Class B (3,410,961) (13,662,655)
----------------------------------------------------------------------------------------------
Class C (666,967) (2,435,841)
----------------------------------------------------------------------------------------------
Class R (11) --
----------------------------------------------------------------------------------------------
Share transactions-net:
AIM Cash Reserve Shares 184,349,260 25,475,028
----------------------------------------------------------------------------------------------
Class B 278,519,026 150,107,943
----------------------------------------------------------------------------------------------
Class C 32,062,975 41,425,293
----------------------------------------------------------------------------------------------
Class R 10,010 --
==============================================================================================
Net increase in net assets 494,942,416 217,034,664
==============================================================================================
NET ASSETS:
Beginning of year 1,463,861,026 1,246,826,362
==============================================================================================
End of year $1,958,803,442 $1,463,861,026
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,958,738,706 $1,463,797,435
----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 64,736 63,591
==============================================================================================
$1,958,803,442 $1,463,861,026
______________________________________________________________________________________________
==============================================================================================
|
See Notes to Financial Statements.
FS-59
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Money Market 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 eight separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers four different classes of shares: AIM Cash Reserve Shares, Class B shares, Class C shares and Class R shares. AIM Cash Reserve Shares and Class R shares are sold at net asset value. Class B shares and Class C shares are sold with a contingent deferred sales charge. Matters affecting each portfolio or class will be 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 provide as high a level of current income as is consistent with the preservation of capital and liquidity.
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 -- The Fund's securities are valued on the basis of amortized cost which approximates market value as permitted under Rule 2a-7 of the 1940 Act. This method values a security at its cost on the date of purchase and thereafter, assumes a constant amortization to maturity of any discount or premiums.
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 premiums and discounts on investments, is recorded on the accrual basis from settlement date.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date.
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.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.55% on the first $1 billion of the Fund's average daily net assets, plus 0.50% on the Fund's average daily net assets in excess of $1 billion.
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, 2002, AIM was paid $251,839 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. During the year ended July 31, 2002, AFS retained $1,726,313 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 AIM Cash Reserve Shares, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's AIM Cash Reserve Shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of AIM Cash Reserve shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% on average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the AIM Cash Reserve Shares, Class B, Class C or Class R shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. For the year ended July 31, 2002, the AIM Cash Reserve Shares, Class B, Class C and Class R shares paid AIM Distributors $2,735,865, $5,230,124, $1,002,104 and $9, respectively, as compensation under the Plans.
During the year ended July 31, 2002, AIM Distributors retained $5,458,855, $91,747, $406,871 and $0 in contingent deferred sales charges imposed on redemptions of AIM Cash Reserve Shares, Class B, Class C and Class R shares, respectively.
FS-60
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $7,346 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $19,763 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $19,763.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
----------- -----------
Distributions paid from ordinary
income $19,419,288 $58,593,065
_____________________________________________________________
=============================================================
|
As of July 31, 2002, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income $273,800
----------------------------------------------------------
Unrealized appreciation (depreciation) (97,839)
==========================================================
$175,961
__________________________________________________________
==========================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of certain expenses and other timing differences.
NOTE 7--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
Sold:
AIM Cash Reserve Class 7,239,176,762 $ 7,239,176,762 5,502,283,046 $ 5,502,283,046
---------------------------------------------------------------------------------------------------------------------------------
Class B 920,671,959 920,671,959 805,015,989 805,015,989
---------------------------------------------------------------------------------------------------------------------------------
Class C 492,311,444 492,311,444 362,537,320 362,537,320
---------------------------------------------------------------------------------------------------------------------------------
Class R* 14,201 14,201 -- --
=================================================================================================================================
Issued as reinvestment of dividends:
AIM Cash Reserve Class 12,953,250 12,953,250 37,043,906 37,043,906
---------------------------------------------------------------------------------------------------------------------------------
Class B 3,021,507 3,021,507 11,949,832 11,949,832
---------------------------------------------------------------------------------------------------------------------------------
Class C 550,550 550,550 2,121,575 2,121,575
---------------------------------------------------------------------------------------------------------------------------------
Class R* 5 5 -- --
=================================================================================================================================
Reacquired:
AIM Cash Reserve Class (7,067,780,752) (7,067,780,752) (5,513,851,924) (5,513,851,924)
---------------------------------------------------------------------------------------------------------------------------------
Class B (645,174,440) (645,174,440) (666,857,878) (666,857,878)
---------------------------------------------------------------------------------------------------------------------------------
Class C (460,799,019) (460,799,019) (323,233,602) (323,233,602)
---------------------------------------------------------------------------------------------------------------------------------
Class R* (4,196) (4,196) -- --
=================================================================================================================================
494,941,271 $ 494,941,271 217,008,264 $ 217,008,264
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
FS-61
NOTE 8--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CASH RESERVE
-------------------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
---------------------- JULY 31, ---------------------------------------
2002 2001 2000 1999 1998 1997
---------- -------- ------------ -------- ---------- ---------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0141 0.0467 0.0300(a) 0.0414 0.0453 0.0456
=================================================================================================================================
Less distributions from net investment
income (0.0141) (0.0467) (0.0300) (0.0414) (0.0453) (0.0456)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.42% 4.77% 3.03% 4.22% 4.62% 4.66%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,121,879 $937,532 $912,042 $989,478 $1,179,072 $344,117
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.01%(c) 1.06% 1.07%(d) 1.04% 0.99% 1.05%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to
average net assets 1.40%(c) 4.61% 5.15%(d) 4.16% 4.53% 4.55%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,094,346,112.
(d) Annualized.
CLASS B
-------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- JULY 31, --------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------ -------- -------- --------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0065 0.0392 0.0256(a) 0.0339 0.0371 0.0378
============================================================================================================================
Less distributions from net investment income (0.0065) (0.0392) (0.0256) (0.0339) (0.0371) (0.0378)
============================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 0.66% 3.99% 2.59% 3.45% 3.78% 3.84%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $717,967 $439,445 $289,327 $404,911 $310,534 $116,058
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 1.76%(c) 1.81% 1.82%(d) 1.79% 1.81% 1.80%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of net investment income to average net
assets 0.65%(c) 3.86% 4.40%(d) 3.41% 3.71% 3.80%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are based on average net assets of $523,012,438.
(d) Annualized.
FS-62
NOTE 8--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------------------------
AUGUST 4, 1997
SEVEN MONTHS YEAR ENDED (DATE SALES
YEAR ENDED JULY 31, ENDED DECEMBER 31, COMMENCED) TO
------------------------- JULY 31, ---------------------- DECEMBER 31,
2002 2001 2000 1999 1998 1997
-------- ---------- ------------ -------- -------- --------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0065 0.0393 0.0256(a) 0.0339 0.0371 0.0158
=================================================================================================================================
Less distributions from net
investment income (0.0065) (0.0393) (0.0256) (0.0339) (0.0371) (0.0158)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.66% 4.00% 2.59% 3.44% 3.78% 3.92%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $118,947 $ 86,884 $ 45,457 $ 56,636 $ 27,391 $ 8,287
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.76%(c) 1.81% 1.82%(d) 1.79% 1.81% 1.80%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to
average net assets 0.65%(c) 3.86% 4.40%(d) 3.41% 3.71% 3.80%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are based on average net assets of $100,210,415.
(d) Annualized.
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
JULY 31,
2002
-------------
Net asset value, beginning of period $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0010
=================================================================================================================================
Less distributions from net investment income (0.0010)
=================================================================================================================================
Net asset value, end of period $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 0.10%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.26%(b)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to average net assets 1.15%(b)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $11,008.
FS-63
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Municipal Bond Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of AIM Municipal Bond Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations for the year then ended, and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the periods presented through July 31, 2000 were audited by other auditors whose report dated September 1, 2000, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM Municipal Bond Fund as of July 31, 2002, the results of its operations for the year then ended, and the changes in its net assets and financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Houston, Texas
September 10, 2002
|
FS-64
JULY 31, 2002
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
ALABAMA-1.36%
Alabama (State of) Public School &
College Authority; Capital Improvement
Series 1999 C RB
5.75%, 07/01/17 AA Aa3 $1,400 $ 1,526,994
--------------------------------------------------------------------------------
Birmingham (City of) Special Care
Facilities Financing Authority
(Children's Hospital of Alabama);
Health Care Facility Series 2002 RB
5.38%, 06/01/23(b) AAA Aaa 1,500 1,539,615
--------------------------------------------------------------------------------
Courtland (City of) Industrial
Development Board (Champion
International Corp. Project); Refunding
Environmental Improvement Series 1996
RB
6.40%, 11/01/26(c) -- Baa2 2,315 2,392,691
--------------------------------------------------------------------------------
Jefferson (County of); Capital
Improvement Sewer Series 2001 A RB Wts.
5.00%, 02/01/41(b) AAA Aaa 1,000 954,100
================================================================================
6,413,400
================================================================================
ALASKA-0.28%
Alaska (State of) Housing Finance Corp.;
Collateralized First Veterans' Home
Mortgage Series 1992 A-2 RB
6.75%, 12/01/24(c) AAA Aaa 1,320 1,347,192
================================================================================
AMERICAN SAMOA-0.30%
American Samoa (Territory of); Refunding
Unlimited Tax Series 2000 GO
6.00%, 09/01/08(b) A -- 1,280 1,426,970
================================================================================
ARIZONA-1.38%
Arizona (State of) Educational Loan
Marketing Corp.; Sr. Educational Loan
Series 1992 RB
6.13%, 09/01/02(c) -- Aa2 1,900 1,905,320
--------------------------------------------------------------------------------
Pima (County of) Industrial Development
Authority (Radisson City Center
Project); Refunding Development Series
2002 RB
6.50%, 12/01/09(d) -- -- 365 368,066
--------------------------------------------------------------------------------
6.70%, 12/01/10(d) -- -- 390 393,666
--------------------------------------------------------------------------------
6.70%, 12/01/11(d) -- -- 415 419,333
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
ARIZONA-(CONTINUED)
Pima (County of) Unified School District
No. 10; Unlimited Tax School
Improvement Series 1992 E GO
6.50%, 07/01/05 A+ A3 $3,100 $ 3,447,541
================================================================================
6,533,926
================================================================================
ARKANSAS-0.33%
Jefferson (County of) (Regional Medical
Center Project); Refunding &
Improvement Hospital Series 2001 RB
5.85%, 06/01/26 A -- 500 513,465
--------------------------------------------------------------------------------
Van Buren (County of); Refunding &
Construction Sales & Use Tax Series
2000 RB
5.60%, 12/01/25(b) AAA Aaa 1,000 1,050,780
================================================================================
1,564,245
================================================================================
CALIFORNIA-1.69%
Abag Financing Authority for Non-Profit
Corps. (Lincoln Glen Manor for Sr.
Citizens); Series 2000 COP
6.10%, 02/15/25 A+ -- 1,000 1,069,640
--------------------------------------------------------------------------------
Abag Financing Authority for Non-Profit
Corps. (Lytton Gardens Inc.);
Series 1999 COP
6.00%, 02/15/19 A+ -- 2,085 2,186,039
--------------------------------------------------------------------------------
Abag Financing Authority for Non-Profit
Corps. (Odd Fellow Home of California);
Series 1999 COP
6.00%, 08/15/24 A+ -- 1,000 1,067,830
--------------------------------------------------------------------------------
California (State of) Educational
Facilities Authority (Fresno Pacific
University); Series 2000 A RB
6.05%, 03/01/11 -- Baa3 1,350 1,515,699
--------------------------------------------------------------------------------
Foothill/Eastern Corridor Agency
(California Toll Road Project); Sr.
Lien Series 1995 A RB
6.00%, 01/01/10(e)(f) AAA Aaa 400 470,716
--------------------------------------------------------------------------------
Los Angeles (County of); Series 2001 RB
5.15%, 02/12/06(d) -- -- 377 392,658
--------------------------------------------------------------------------------
|
FS-65
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
CALIFORNIA-(CONTINUED)
Sacramento (City of) Cogeneration
Authority (Proctor & Gamble Project);
Series 1995 RB
7.00%, 07/01/04 BBB -- $ 500 $ 544,045
--------------------------------------------------------------------------------
Sacramento City Financing Authority
(Convention Center Hotel); Sr. Series
1999 A RB
6.25%, 01/01/30(d) -- -- 750 750,555
================================================================================
7,997,182
================================================================================
COLORADO-3.50%
Adams (County of) School District No. 1;
Unlimited Tax Series 1992 GO
6.63%, 12/01/02(e)(f) AAA Aaa 500 513,550
--------------------------------------------------------------------------------
Aurora (City of); Public Improvement
Series 2000 COP
5.50%, 12/01/30(b)(f) AAA Aaa 3,230 3,363,141
--------------------------------------------------------------------------------
Broomfield (City of); Refunding &
Improvement Sale & Use Tax Series 2002
A RB
5.00%, 12/01/31(b) AAA Aaa 1,000 990,810
--------------------------------------------------------------------------------
Colorado (State of) E-470 Public Highway
Authority; Sr. Series 2000 A RB
5.75%, 09/01/35(b) AAA Aaa 1,000 1,087,800
--------------------------------------------------------------------------------
Colorado (State of) Educational &
Cultural Facilities Authority (Student
Housing-University of Colorado
Foundation Project); Series 2002 RB
5.00%, 07/01/22(b) AAA Aaa 1,000 1,013,850
--------------------------------------------------------------------------------
Colorado (State of) Health Facilities
Authority (Exempla Inc.); Series 2002 A
RB
5.50%, 01/01/23 A A1 3,500 3,486,805
--------------------------------------------------------------------------------
5.63%, 01/01/33 A A1 2,000 1,986,780
--------------------------------------------------------------------------------
El Paso (County of) School District No. 2
(Harrison); Unlimited Tax Series 2001
GO
5.25%, 12/01/26(b) AAA Aaa 1,435 1,461,361
--------------------------------------------------------------------------------
Highlands Ranch (City of) Metro District
No. 1; Refunding & Improvement
Unlimited Tax Series 1992 A GO
7.30%, 09/01/02(e)(f) NRR NRR 500 517,415
--------------------------------------------------------------------------------
Meridian (City of) Metro District;
Refunding & Improvement Unlimited Tax
Series 2001 B GO
5.00%, 12/01/25 AA -- 1,000 977,040
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
COLORADO-(CONTINUED)
Mountain Village (City of) Metro District
(San Miguel County); Prerefunded
Unlimited Tax Series 1992 GO
7.95%, 12/01/02(e)(f) NRR NRR $ 50 $ 51,573
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1992 GO
7.95%, 12/01/03(d) -- -- 105 107,511
--------------------------------------------------------------------------------
Northwest Parkway Public Highway
Authority; Sr. Series 2001 A RB
5.25%, 06/15/41(b) AAA Aaa 1,000 999,930
================================================================================
16,557,566
================================================================================
CONNECTICUT-5.66%
Brooklyn (City of); Unlimited Tax Series
1995 GO
5.50%, 05/01/06(b) AAA Aaa 250 274,395
--------------------------------------------------------------------------------
5.70%, 05/01/08(b) AAA Aaa 250 274,377
--------------------------------------------------------------------------------
Chester (City of); Unlimited Tax Series
1989 GO
7.00%, 10/01/05 -- A2 190 191,510
--------------------------------------------------------------------------------
Connecticut (State of) (Bradley
International Airport); Special
Obligation Parking Series 2000 A RB
6.60%, 07/01/24(b)(c) A A 1,250 1,302,800
--------------------------------------------------------------------------------
Connecticut (State of)
(Transportation Infrastructure);
Special Obligation Tax Series 1991 A RB
6.80%, 06/01/03(e)(f) AA- Aa3 1,000 1,044,640
--------------------------------------------------------------------------------
Special Obligation Tax Series 1991 B RB
6.50%, 10/01/10 AA- Aa3 530 634,447
--------------------------------------------------------------------------------
6.50%, 10/01/12 AA- Aa3 1,500 1,824,360
--------------------------------------------------------------------------------
Connecticut (State of) Area Cooperative
Educational Services (Staff
Development/Administration Facilities);
Unlimited Tax; Series 1999 GO
5.63%, 07/15/19(b) A A 1,060 1,119,424
--------------------------------------------------------------------------------
Connecticut (State of) Clean Water Fund;
Series 1991 RB
7.00%, 01/01/11(e)(f) AAA Aaa 25 25,410
--------------------------------------------------------------------------------
Connecticut (State of) Development
Authority (Bridgeport Hydraulic Co.
Project); Refunding Water Facilities
Series 1990 RB
7.25%, 06/01/20 A -- 800 807,488
--------------------------------------------------------------------------------
Connecticut (State of) Development
Authority (Pfizer Inc. Project); Series
1982 PCR
6.55%, 02/15/13 AAA Aaa 250 260,987
--------------------------------------------------------------------------------
|
FS-66
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
CONNECTICUT-(CONTINUED)
Connecticut (State of) Health & Education
Facilities Authority (Bridgeport
Hospital); Series 1992 A RB
6.63%, 07/01/18(b) AAA Aaa $ 500 $ 510,570
--------------------------------------------------------------------------------
Connecticut (State of) Health & Education
Facilities Authority (Danbury
Hospital);
Series 1999 G RB
5.63%, 07/01/25(b) AAA Aaa 250 262,887
--------------------------------------------------------------------------------
Unrefunded Series 1991 E RB
6.50%, 07/01/14(b) AAA Aaa 110 111,913
--------------------------------------------------------------------------------
Connecticut (State of) Health & Education
Facilities Authority (Loomis Chaffee
School); Series 2001 D RB
5.25%, 07/01/31(f) -- A2 1,500 1,521,915
--------------------------------------------------------------------------------
Connecticut (State of) Health & Education
Facilities Authority (Stamford
Hospital); Series 1996 F RB
5.40%, 07/01/09(b) AAA Aaa 1,000 1,090,840
--------------------------------------------------------------------------------
Connecticut (State of) Health & Education
Facilities Authority (William W. Backus
Hospital); Series 1997 D RB
5.75%, 07/01/27(b) AAA Aaa 1,000 1,055,230
--------------------------------------------------------------------------------
Connecticut (State of) Health & Education
Facilities Authority (Windham Community
Memorial Hospital); Series 1996 C RB
5.75%, 07/01/11(b) A A 740 790,823
--------------------------------------------------------------------------------
Connecticut (State of) Housing Finance
Authority (Group Home Mortgage);
Special Obligation Series 2000 GH-5 RB
5.85%, 06/15/30(b) AAA Aaa 500 523,140
--------------------------------------------------------------------------------
Connecticut (State of) Housing Finance
Authority (Housing Mortgage Finance
Program);
Refunding Sub-Series 1996 E-1 RB
5.95%, 05/15/17 AAA Aaa 500 525,005
--------------------------------------------------------------------------------
Series 1991 C-3 RB
6.55%, 11/15/13 AAA Aaa 225 230,650
--------------------------------------------------------------------------------
Series 1993 E-1 RB
6.00%, 05/15/17 AAA Aaa 675 697,484
--------------------------------------------------------------------------------
Series 1996 C-1 RB
6.30%, 11/15/17 AAA Aaa 1,270 1,350,772
--------------------------------------------------------------------------------
Series 1996 C-2 RB
6.25%, 11/15/18 AAA Aaa 750 795,622
--------------------------------------------------------------------------------
Series 1996 G RB
6.00%, 11/15/27(c) AAA Aaa 1,000 1,035,260
--------------------------------------------------------------------------------
Series 1998 C RB
5.50%, 11/15/35(c) AAA Aaa 1,775 1,805,157
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
CONNECTICUT-(CONTINUED)
Series 1998 D-2 RB
5.45%, 11/15/24(c) AAA Aaa $ 250 $ 254,575
--------------------------------------------------------------------------------
Series 2001 A-1 RB
5.25%, 11/15/28 AAA Aaa 550 551,556
--------------------------------------------------------------------------------
Sub-Series 1997 C-2 RB
5.85%, 11/15/28(c) AAA Aaa 440 452,012
--------------------------------------------------------------------------------
Sub-Series 1998 E-1 RB
5.13%, 05/15/21 AAA Aaa 445 448,324
--------------------------------------------------------------------------------
Sub-Series 2000 B-2 RB
5.85%, 05/15/31(c) AAA Aaa 955 978,178
--------------------------------------------------------------------------------
Manchester (City of) Eighth Utilities
District; Unlimited Tax Series 1991 GO
6.75%, 08/15/06 -- Aa3 180 208,613
--------------------------------------------------------------------------------
Mansfield (City of); Unlimited Tax Series
1990 GO
6.00%, 06/15/07 -- Aa3 100 114,201
--------------------------------------------------------------------------------
6.00%, 06/15/08 -- Aa3 100 114,909
--------------------------------------------------------------------------------
6.00%, 06/15/09 -- Aa3 100 115,853
--------------------------------------------------------------------------------
New Britain (City of); Unlimited Tax
Series 1992 GO
6.00%, 02/01/11(b) AAA Aaa 400 465,864
--------------------------------------------------------------------------------
North Canaan (City of); Unlimited Tax
Series 1991 GO
6.50%, 01/15/08 -- A3 125 145,187
--------------------------------------------------------------------------------
6.50%, 01/15/09 -- A3 125 146,780
--------------------------------------------------------------------------------
6.50%, 01/15/10 -- A3 125 147,947
--------------------------------------------------------------------------------
6.50%, 01/15/11 -- A3 125 150,182
--------------------------------------------------------------------------------
Somers (City of); Unlimited Tax Series
1990 GO
6.00%, 12/01/10 -- A1 190 221,935
--------------------------------------------------------------------------------
University of Connecticut (Student Fee);
Series 2000 A RB
6.00%, 11/15/10(e)(f) AA- Aa3 1,325 1,559,631
--------------------------------------------------------------------------------
Waterbury (City of) Housing Authority
(Connecticut Associates II Limited
Partnership); Refunding Mortgage Series
1998 C RB
5.45%, 07/01/23(b) AAA Aaa 150 150,177
--------------------------------------------------------------------------------
Westbrook (City of); Unlimited Tax Series
1992 GO
6.40%, 03/15/10(b) AAA Aaa 380 449,160
================================================================================
26,742,190
================================================================================
DELAWARE-0.34%
Delaware (State of) Economic Development
Authority (Osteopathic Hospital
Association); Series 1993 A RB
6.75%, 01/01/13(e)(f) NRR Aaa 250 303,637
--------------------------------------------------------------------------------
|
FS-67
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
DELAWARE-(CONTINUED)
Wilmington (City of) Parking Authority;
Gtd. Parking Series 2002 RB
2.50%, 09/15/03(b) AAA Aaa $1,300 $ 1,314,261
================================================================================
1,617,898
================================================================================
DISTRICT OF COLUMBIA-0.44%
District of Columbia (George Washington
University); Series 2001 A RB
5.13%, 09/15/31(b) AAA Aaa 1,000 991,720
--------------------------------------------------------------------------------
District of Columbia (Gonzaga College
High School); Series 1999 RB
5.38%, 07/01/19(b) AAA Aaa 1,055 1,109,280
================================================================================
2,101,000
================================================================================
FLORIDA-1.66%
Crossings at Fleming Island Community
Development District; Refunding Special
Assessment Series 2000 B RB
5.80%, 05/01/16(b) AAA Aaa 1,000 1,121,110
--------------------------------------------------------------------------------
Escambia (County of) (Champion
International Corp. Project); Series
1994 PCR
6.90%, 08/01/22(c) BBB Baa2 1,125 1,173,397
--------------------------------------------------------------------------------
Escambia (County of) Health Facilities
Authority (Health Care Facility
Loan-Veterans Hospital Project); Series
2000 RB
5.95%, 07/01/20(b) AAA Aaa 1,000 1,137,060
--------------------------------------------------------------------------------
Jacksonville (City of) Electric
Authority; Series 2000 A RB
5.30%, 10/01/30 A+ Aa3 1,000 1,001,650
--------------------------------------------------------------------------------
Miami-Dade (County of) (Miami
International Airport); Series 2000 B
RB
5.75%, 10/01/29(b) AAA Aaa 2,000 2,136,240
--------------------------------------------------------------------------------
Plantation (City of) Health Facilities
Authority (Covenant Retirement
Communities Inc.); Series 1992 RB
7.75%, 12/01/02(e)(f) NRR NRR 250 260,140
--------------------------------------------------------------------------------
Sunrise (City of) Utility System;
Refunding Series 1998 RB
5.00%, 10/01/28(b) AAA Aaa 1,000 998,480
================================================================================
7,828,077
================================================================================
GEORGIA-0.51%
Athens-Clarke (County of) Unified
Government Development Authority
(Catholic Health East); Series 2002 RB
5.50%, 11/15/32 A A2 500 494,860
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
GEORGIA-(CONTINUED)
Floyd (County of) Hospital Authority
(Floyd Medical Center Project); Series
2002 RAC
5.25%, 07/01/29(b) AAA Aaa $1,510 $ 1,536,697
--------------------------------------------------------------------------------
Georgia (State of) Housing & Finance
Authority (Home Ownership Opportunity
Program); Series 1992 C RB
6.50%, 12/01/11 AA+ Aa2 390 400,128
================================================================================
2,431,685
================================================================================
GUAM-0.03%
Guam (Territory of) Power Authority;
Series 1993 A RB
5.25%, 10/01/23 BBB -- 125 125,459
================================================================================
ILLINOIS-8.52%
Bellwood (City of); Unlimited Tax Series
2002 GO
5.25%, 12/01/25(b) AAA Aaa 1,000 1,012,650
--------------------------------------------------------------------------------
Chicago (City of); Project & Refunding
Unlimited Tax Series 2000 C GO
5.50%, 01/01/40(b) AAA Aaa 1,750 1,793,225
--------------------------------------------------------------------------------
Project & Refunding
Unlimited Tax Series 2001 A GO
5.25%, 01/01/33(b) AAA Aaa 3,940 3,957,218
--------------------------------------------------------------------------------
Special Transportation Series 2001 RB
5.25%, 01/01/31(b) AAA Aaa 1,000 1,005,110
--------------------------------------------------------------------------------
Chicago (City of) (Cottage View Terrace
Apartments); FHA/ GNMA Collateralized
Multi-Family Housing Series 2000 A RB
6.13%, 02/20/42(c) AAA -- 1,580 1,630,544
--------------------------------------------------------------------------------
Chicago (City of) Parks District;
Unlimited Tax Series 2001 D GO
5.00%, 01/01/29(b) AAA Aaa 3,000 2,935,290
--------------------------------------------------------------------------------
Cook (County of); Unlimited Tax Series
1992 B GO
5.75%, 11/15/02(e)(f) AAA Aaa 2,000 2,064,680
--------------------------------------------------------------------------------
Freeport (City of); Unlimited Tax Series
2000 RB
6.00%, 12/01/29(b) AAA Aaa 1,000 1,095,400
--------------------------------------------------------------------------------
Illinois (State of) Development Finance
Authority (Adventist Health Systems
Project); Series 1997 A RB
6.00%, 11/15/11(b) AAA Aaa 2,500 2,886,350
--------------------------------------------------------------------------------
Illinois (State of) Development Finance
Authority (CPC International Inc.
Project); Refunding Series 1992 PCR
6.75%, 05/01/16 -- A1 2,000 2,048,400
--------------------------------------------------------------------------------
|
FS-68
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
ILLINOIS-(CONTINUED)
Illinois (State of) Development Finance
Authority (Evanston Northwestern
Healthcare Corp.); VRD Series 2001 C RB
1.45%, 05/01/31(g) AA+ Aa2 $7,245 $ 7,245,000
--------------------------------------------------------------------------------
Illinois (State of) Educational
Facilities Authority (Northwestern
University); Adjustable Rate Medium
Term Series 1997 RB
5.25%, 11/01/14(f) AA+ Aa1 1,000 1,107,700
--------------------------------------------------------------------------------
Illinois (State of) Educational
Facilities Authority (Robert Morris
College); Series 2000 RB
5.80%, 06/01/30(b) AAA Aaa 1,000 1,055,520
--------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Blessing Hospital); Series
1999 A RB
6.00%, 11/15/19(b) AAA Aaa 1,000 1,090,840
--------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Evangelical Hospital Corp.);
Refunding Series 1992 A RB
6.25%, 04/15/22(e)(f) AA- Aaa 1,000 1,183,300
--------------------------------------------------------------------------------
Series 1992 C RB
6.25%, 04/15/22(e)(f) NRR NRR 1,150 1,355,919
--------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Franciscan Sisters Health
Care); Series 1992 RB
6.40%, 09/01/04(e)(f) AAA Aaa 2,000 2,190,140
--------------------------------------------------------------------------------
Illinois State University Auxiliary
Facilities System; Series 1993 RB
5.75%, 04/01/14(b) AAA Aaa 1,000 1,044,220
--------------------------------------------------------------------------------
Metropolitan Pier & Exposition Authority
(McCormick Place Expansion); Dedicated
State Tax Series 2002 A RB
5.25%, 06/15/42(b) AAA Aaa 1,000 996,610
--------------------------------------------------------------------------------
5.92%, 12/15/29(b)(h) AAA Aaa 1,500 318,885
--------------------------------------------------------------------------------
5.94%, 06/15/30(b)(h) AAA Aaa 1,000 206,100
--------------------------------------------------------------------------------
Rockford (City of) School District No.
205; Unlimited Tax Series 2001 GO
5.00%, 02/01/17(b) AAA Aaa 500 533,550
--------------------------------------------------------------------------------
Tazewell (County of) Community High
School District No. 303 (Pekin);
Unlimited Tax Series 1996 GO
5.63%, 01/01/14(b) AAA Aaa 1,435 1,517,584
================================================================================
40,274,235
================================================================================
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
INDIANA-3.15%
Carmel (City of) Retirement Rental
Housing (Beverly Enterprises Inc.
Project); Refunding Series 1992 RB
8.75%, 12/01/08(d) -- -- $ 80 $ 82,789
--------------------------------------------------------------------------------
East Allen (City of) Multi-School
Building Corp.; First Mortgage Series
2000 RB
5.75%, 01/15/10(e)(f) AAA Aaa 735 835,320
--------------------------------------------------------------------------------
Indiana (State of) Bond Bank; Series 2000
A RB
5.90%, 02/01/14(b) AAA Aaa 1,000 1,125,880
--------------------------------------------------------------------------------
Indiana (State of) Bond Bank (Hendricks
Project); Series 2002 D RB
5.25%, 04/01/30(b) AAA Aaa 500 502,975
--------------------------------------------------------------------------------
Indiana (State of) Housing Finance
Authority; Single Family Mortgage
Series 1995 B-1 RB
6.15%, 07/01/17 -- Aaa 115 119,670
--------------------------------------------------------------------------------
Indiana (State of) Transportation Finance
Authority;
Highway Series 2000 RB
5.38%, 12/01/25 AA Aa2 2,000 2,040,840
--------------------------------------------------------------------------------
Prerefunded Airport Facilities Lease
Series 1992 A RB
6.25%, 11/01/02(e)(f) NRR Aaa 395 407,561
--------------------------------------------------------------------------------
Unrefunded Airport Facilities Lease
Series 1992 A RB
6.25%, 11/01/16 AA A1 105 108,090
--------------------------------------------------------------------------------
Indianapolis (City of) (Lake Nora & Fox
Club Project); Multifamily Series 1999
A RB
5.90%, 10/01/19(b) AAA Aaa 1,795 1,901,569
--------------------------------------------------------------------------------
Indianapolis (City of) Local Public
Improvement Bond Bank (Waterworks
Project); Series 2002 A RB
5.25%, 07/01/33(b) AAA Aaa 1,700 1,718,241
--------------------------------------------------------------------------------
Indianapolis (City of) Thermal Energy
System; Series 2001 A RB
5.00%, 10/01/11(b) AAA Aaa 1,500 1,629,555
--------------------------------------------------------------------------------
Lafayette (City of); Sewer Series 2002 RB
5.15%, 07/01/24(b) AAA Aaa 1,000 1,006,150
--------------------------------------------------------------------------------
Petersburg (City of) (Indiana Power &
Lighting Project); Refunding
Convertible Series 1991 PCR 5.75%,
08/01/21 BBB- A3 2,500 2,354,200
--------------------------------------------------------------------------------
Wa-Nee Middle School Building Corp.;
Unlimited Tax First Mortgage Series
2001 GO
5.50%, 01/15/20(b) AAA Aaa 1,000 1,085,760
================================================================================
14,918,600
================================================================================
|
FS-69
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
KANSAS-0.31%
Newton (City of) (Newton Healthcare
Corp.); Hospital Series 1994 A RB
7.38%, 11/15/04(e)(f) NRR NRR $ 250 $ 284,550
--------------------------------------------------------------------------------
Overland Park (City of) Development Corp.
(Overland Park Project); First Tier
Series 2001 A RB
7.38%, 01/01/32(d) -- -- 1,135 1,167,597
================================================================================
1,452,147
================================================================================
KENTUCKY-0.79%
Jefferson (County of) (Beverly
Enterprises Project); Refunding Health
Facilities Series 1999 RB
5.88%, 05/01/08(d) -- -- 595 584,772
--------------------------------------------------------------------------------
Mount Sterling (City of) (Kentucky League
Cities); Lease Funding Series 1993 A RB
6.15%, 03/01/13 -- Aa3 3,000 3,129,600
================================================================================
3,714,372
================================================================================
LOUISIANA-5.00%
Lafayette (City of); Public Improvement
Sales Tax Series 2000 A RB
5.50%, 03/01/23(b) AAA Aaa 1,360 1,430,489
--------------------------------------------------------------------------------
Louisiana (State of) Local Government
Environmental Facilities & Community
Development Authority
(Capital Projects & Equipment
Acquisitions); Series 2000 RB
6.55%, 09/01/25(b) A A 6,000 6,633,300
--------------------------------------------------------------------------------
Series 2000 A RB
6.30%, 07/01/30(b) AAA Aaa 3,000 3,478,050
--------------------------------------------------------------------------------
Louisiana (State of) Local Government
Environmental Facilities & Community
Development Authority (Parking
Facilities Corp. Garage Project);
Series 2001 A RB
5.20%, 10/01/20(b) AAA Aaa 1,000 1,033,030
--------------------------------------------------------------------------------
Louisiana (State of) Public Facilities
Authority (Medical Center at New
Orleans Project); Series 1992 RB
6.13%, 10/15/07(b) AAA -- 2,775 2,797,228
--------------------------------------------------------------------------------
Louisiana (State of) Public Facilities
Authority (Tulane University);
Series 1996 RB
6.00%, 10/01/16(b) AAA Aaa 2,500 2,808,825
--------------------------------------------------------------------------------
Series 2002 A RB
5.13%, 07/01/27(b) AAA Aaa 2,100 2,112,054
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
LOUISIANA-(CONTINUED)
Ouachita (Parish of) Hospital Service
District No. 1 (Glenwood Regional
Medical Center); Refunding Series 1996
RB
5.70%, 05/15/16(b) AAA Aaa $1,000 $ 1,089,580
--------------------------------------------------------------------------------
St. John Baptist (Parish of) Sales Tax
District; Series 1987 RB
7.60%, 01/01/08(e)(f) NRR NRR 500 606,795
--------------------------------------------------------------------------------
7.60%, 01/01/09(e)(f) NRR NRR 500 616,400
--------------------------------------------------------------------------------
West Feliciana (Parish of) (Gulf States
Utilities); Series 1992 A PCR
7.50%, 05/01/15 BB+ Ba1 1,000 1,030,080
================================================================================
23,635,831
================================================================================
MAINE-0.47%
Maine (State of) Educational Loan
Authority (Supplemental Education Loan
Program); Series 1992 A-2 RB
6.95%, 12/01/07(c)(d) -- -- 640 656,896
--------------------------------------------------------------------------------
Maine (State of) Housing Authority;
Mortgage Series 1999 E-1 RB
5.85%, 11/15/20 AA+ Aa1 1,500 1,566,630
================================================================================
2,223,526
================================================================================
MARYLAND-1.04%
Maryland (State of) Health & Higher
Education Facilities Authority (Johns
Hopkins University); Refunding Series
2001 B RB
5.00%, 07/01/41 AA Aa2 1,000 969,950
--------------------------------------------------------------------------------
Maryland (State of) Health & Higher
Education Facilities Authority
(University of Maryland Medical
System); Series 2001 RB
5.25%, 07/01/28 A Baa1 2,000 1,994,280
--------------------------------------------------------------------------------
5.25%, 07/01/34 A Baa1 2,000 1,975,480
================================================================================
4,939,710
================================================================================
MASSACHUSETTS-1.39%
Massachusetts (State of) Development
Financing Agency (Briarwood Project);
Series 2001 B RB
7.88%, 12/01/15(d) -- -- 1,000 1,049,250
--------------------------------------------------------------------------------
Massachusetts (State of) Health &
Educational Facilities Authority
(Winchester Hospital); Series 1994 D RB
5.80%, 07/01/09(b) AAA -- 1,000 1,081,650
--------------------------------------------------------------------------------
Massachusetts (State of) Housing Finance
Agency; Single Family Housing Series
1994 RB
6.60%, 12/01/26(c) AA Aa3 1,385 1,436,841
--------------------------------------------------------------------------------
|
FS-70
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
MASSACHUSETTS-(CONTINUED)
Massachusetts (State of) Port Authority;
Series 1997 A RB
5.00%, 07/01/27(b) AAA Aaa $1,000 $ 991,510
--------------------------------------------------------------------------------
Massachusetts (State of) Water Resources
Authority; Series 2002 B RB
5.13%, 08/01/27(b) AAA Aaa 2,000 2,005,820
================================================================================
6,565,071
================================================================================
MICHIGAN-7.58%
Anchor Bay School District; Refunding
Unlimited Tax Series 2001 GO
5.00%, 05/01/29 AAA Aaa 1,000 981,120
--------------------------------------------------------------------------------
Bullock Creek School District; Unlimited
Tax Series 2000 GO
5.50%, 05/01/22 AAA Aaa 1,000 1,039,480
--------------------------------------------------------------------------------
Chippewa Valley Schools; Refunding
Unlimited Tax Series 2002 GO
5.13%, 05/01/27 AAA Aaa 1,000 1,003,340
--------------------------------------------------------------------------------
Dearborn Heights (City of) Finance
Authority; Limited Tax Series 2001 A GO
5.00%, 10/01/30(b) AAA Aaa 1,000 983,610
--------------------------------------------------------------------------------
Detroit (City of) School District;
Unlimited Tax Series 2001 A GO
5.13%, 05/01/31(b) AAA Aaa 2,000 2,000,600
--------------------------------------------------------------------------------
Detroit (City of) Water Supply System;
Sr. Lien Series 2001 A RB
5.00%, 07/01/30(b) AAA Aaa 8,500 8,348,955
--------------------------------------------------------------------------------
5.25%, 07/01/33(b) AAA Aaa 3,500 3,532,025
--------------------------------------------------------------------------------
Garden City Hospital Finance Authority
(Garden City Hospital); Refunding
Hospital Series 1998 A RB
5.63%, 09/01/10 -- B1 850 693,056
--------------------------------------------------------------------------------
Grand Rapids (City of) Building
Authority; Series 2002 A RB
5.00%, 10/01/22(b) AAA Aaa 1,660 1,671,720
--------------------------------------------------------------------------------
Lake Orion Community School District;
Refunding Unlimited Tax Series 1994 GO
7.00%, 05/01/05(e)(f) AAA Aaa 2,500 2,847,175
--------------------------------------------------------------------------------
Lincoln Park (City of) School District;
Unlimited Tax Series 1996 GO
6.00%, 05/01/06(e)(f) AAA Aaa 1,210 1,372,636
--------------------------------------------------------------------------------
Michigan (State of) Housing Development
Authority; Rental Housing Series 1992 A
RB
6.60%, 10/01/02(e)(f) AA- NRR 945 968,616
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
MICHIGAN-(CONTINUED)
Michigan (State of) Municipal Bond
Authority (Drinking Water Revolving
Fund); Series 2000 RB
5.50%, 10/01/22 AAA Aaa $1,000 $ 1,051,300
--------------------------------------------------------------------------------
Michigan (State of) Public Water Agency
(Combustion Turbine No. 1); Series 2001
A RB
5.25%, 01/01/24(b) AAA Aaa 2,500 2,540,700
--------------------------------------------------------------------------------
Michigan (State of) Trunk Line; Refunding
Series 1998 A RB
5.00%, 11/01/26(b) AAA Aaa 1,000 990,220
--------------------------------------------------------------------------------
West Ottawa (City of) Public School
District; Unlimited Tax Series 2002 A
GO
5.00%, 05/01/27 AAA Aaa 1,000 988,730
--------------------------------------------------------------------------------
Ypsilanti (City of) School District;
Refunding Unlimited Tax Series 1996 GO
5.75%, 05/01/07(e)(f) AAA Aaa 4,275 4,820,704
================================================================================
35,833,987
================================================================================
MINNESOTA-0.41%
Minneapolis (City of) (Parking Ramp);
Unlimited Tax Series 2000 A GO
5.90%, 12/01/20 AAA Aa1 1,000 1,099,130
--------------------------------------------------------------------------------
Minneapolis & St. Paul (Cities of)
Metropolitan Airports Commission
(Northwest Airlines Inc.); Special
Facilities Series 2001 A RB
7.00%, 04/01/25(c)(d) -- -- 1,000 857,200
================================================================================
1,956,330
================================================================================
MISSISSIPPI-1.11%
Mississippi (State of) Higher Education
Assistance Corp.; Sub-Series 1994 C RB
7.50%, 09/01/09(c) -- A2 5,000 5,228,900
================================================================================
MISSOURI-0.94%
Kansas City Industrial Development
Authority (General Motors Corp.
Project); Series 1984 PCR 6.05%,
04/01/06 BBB+ A3 170 170,624
--------------------------------------------------------------------------------
Missouri (State of) Environmental
Improvement & Energy Resources
Authority (State Revolving Fund);
Prerefunded Water Pollution Series 1995
C RB
5.85%, 01/01/05(e)(f) NRR Aaa 730 807,577
--------------------------------------------------------------------------------
Unrefunded Water Pollution Series 1995
C RB
5.85%, 01/01/10 -- Aaa 270 292,270
--------------------------------------------------------------------------------
|
FS-71
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
MISSOURI-(CONTINUED)
Missouri (State of) Health & Educational
Facilities Authority (Washington
University Project); Educational
Facilities Series 2001 A RB
5.13%, 06/15/41 AA+ Aa1 $3,250 $ 3,198,617
================================================================================
4,469,088
================================================================================
NEBRASKA-0.22%
Omaha (City of) Public Power District;
Electric Series 2002 A RB
5.20%, 02/01/22 AA Aa2 1,000 1,017,980
================================================================================
NEVADA-3.20%
Boulder (City of) (Boulder City Hospital
Inc. Project); Refunding Hospital
Series 1998 RB
5.85%, 01/01/22(d) -- -- 500 423,505
--------------------------------------------------------------------------------
Clark (County of); Airport Lien
Sub-Series 2001 B RB
5.25%, 07/01/34(b) AAA Aaa 3,000 3,027,450
--------------------------------------------------------------------------------
Clark (County of) (Nevada Power Company
Project); Series 1992 C IDR 7.20%,
10/01/22 BB Ba2 1,500 1,482,210
--------------------------------------------------------------------------------
Clark (County of) Bond Bank; Limited Tax
Series 2001 GO
5.00%, 06/01/31(b) AAA Aaa 5,000 4,873,000
--------------------------------------------------------------------------------
Humboldt (County of) (Sierra Pacific
Project); Refunding Series 1987 PCR
6.55%, 10/01/13(b) AAA Aaa 3,000 3,073,740
--------------------------------------------------------------------------------
Reno (City of) Redevelopment Agency;
Refunding Sub-Series 1995 A TAN
6.00%, 06/01/10 -- Baa3 1,185 1,235,481
--------------------------------------------------------------------------------
Truckee Meadows Water Authority; Water
Series 2001 A RB
5.13%, 07/01/30(b) AAA Aaa 1,000 993,340
================================================================================
15,108,726
================================================================================
NEW JERSEY-2.02%
New Jersey (State of) Economic
Development Authority (Continental
Airlines, Inc.
Project); Special Facility
Series 1999 RB
6.25%, 09/15/29(c)(f) B+ B3 6,300 4,970,511
--------------------------------------------------------------------------------
6.40%, 09/15/23(c)(f) B+ B3 1,000 820,570
--------------------------------------------------------------------------------
Special Facility Series 2000 RB
7.00%, 11/15/30(c)(f) B+ B3 4,000 3,525,520
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
NEW JERSEY-(CONTINUED)
New Jersey (State of) Health Care
Facilities Financing Authority (Raritan
Bay Medical Center); Series 1994 RB
7.25%, 07/01/27(d) -- -- $ 250 $ 250,903
================================================================================
9,567,504
================================================================================
NEW MEXICO-1.07%
Las Cruces (City of) South Central Solid
Waste Authority; Environmental Services
Series 1995 RB
5.65%, 06/01/09 -- A3 575 604,124
--------------------------------------------------------------------------------
Los Alamos (County of); Refunding Utility
System Series 1994 A RB
6.00%, 07/01/15(b) AAA Aaa 2,000 2,178,200
--------------------------------------------------------------------------------
Santa Fe (City of); Series 1994 RB
6.25%, 06/01/04(e)(f) AAA Aaa 2,100 2,274,237
================================================================================
5,056,561
================================================================================
NEW YORK-3.46%
Metropolitan Transportation
Authority; Dedicated Tax Fund
Series 2000 A RB
5.88%, 04/01/25(b) AAA Aaa 1,500 1,614,120
--------------------------------------------------------------------------------
Refunding Series 2002 A RB
5.13%, 01/01/29 AA- A3 1,000 990,660
--------------------------------------------------------------------------------
New York (City of);
Prerefunded Unlimited Tax Series 1994
B1 GO
7.38%, 08/15/04(e)(f) A Aaa 500 562,655
--------------------------------------------------------------------------------
Unlimited Tax Series 1996 A GO
6.25%, 08/01/17(e)(f) A A2 3,035 3,361,263
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1991 B
GO
7.00%, 02/01/18(e)(f) AAA Aaa 520 528,554
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1992 D
GO
7.70%, 02/01/09(e) A A2 15 15,298
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Sub-Series
1992 C-1 GO
7.00%, 08/01/17 A A2 10 10,187
--------------------------------------------------------------------------------
New York (City of) Industrial Development
Agency (University of Staten Island
Hospital Project); Civic Facilities
Series 2001 B RB
6.38%, 07/01/31 -- Baa3 600 605,430
--------------------------------------------------------------------------------
|
FS-72
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
NEW YORK-(CONTINUED)
New York (City of) Municipal Water
Finance Authority;
Water & Sewer System Series 1987 A RB
5.00%, 06/15/17 AA Aa2 $1,350 $ 1,352,201
--------------------------------------------------------------------------------
Water & Sewer System Series 1996 A RB
5.50%, 06/15/24(b) AAA Aaa 1,000 1,027,350
--------------------------------------------------------------------------------
Water & Sewer System Series 1997 B RB
5.75%, 06/15/29 AA Aa2 3,850 4,054,320
--------------------------------------------------------------------------------
New York (State of) Dorm Authority (State
University Educational Facilities);
Series 1995 A RB
6.50%, 05/15/06 AA- A3 1,000 1,134,790
--------------------------------------------------------------------------------
New York (State of) Environmental
Facilities Corp. (State Water Revolving
Project); Unrefunded Series 1991 E PCR
6.88%, 06/15/10 AAA Aaa 1,100 1,117,545
================================================================================
16,374,373
================================================================================
NORTH CAROLINA-1.23%
North Carolina (State of) Eastern
Municipal Power Agency; Power System
Series 1993 A RB
6.13%, 01/01/10(e)(f) AAA Aaa 1,500 1,742,115
--------------------------------------------------------------------------------
North Carolina (State of) Housing Finance
Agency; Single Family Series 1996 II RB
6.20%, 03/01/16 AA Aa2 445 468,367
--------------------------------------------------------------------------------
North Carolina (State of) Municipal Power
Agency (No. 1 Catawba Electric
Project);
Refunded Series 1990 RB
6.50%, 01/01/10(e)(f) AAA Aaa 260 302,918
--------------------------------------------------------------------------------
Refunding Series 1992 RB
7.25%, 01/01/07 BBB+ Baa1 2,890 3,289,571
================================================================================
5,802,971
================================================================================
NORTH DAKOTA-0.11%
Fargo (City of) Health System (Meritcare
Medical Group); Series 2002 A RB
5.13%, 06/01/27(b)(f) AAA Aaa 500 499,615
================================================================================
OHIO-2.01%
Cleveland (City of); Parking Facilities
Improvement Series 1992 RB
8.00%, 09/15/02(e)(f) NRR NRR 500 513,620
--------------------------------------------------------------------------------
Fairfield (City of) School District;
Unlimited Tax Series 1995 GO
6.10%, 12/01/05(e)(f) AAA Aaa 1,000 1,123,910
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
OHIO-(CONTINUED)
Findlay (City of); Limited Tax Series
1996 GO
5.88%, 07/01/17 AA- Aa3 $1,000 $ 1,083,890
--------------------------------------------------------------------------------
Lake Ohio School District; Unlimited Tax
Series 2000 GO
5.75%, 12/01/26(b) AAA Aaa 2,500 2,691,375
--------------------------------------------------------------------------------
Montgomery (County of) (Grandview
Hospital & Medical Center); Refunding
Hospital Series 1997 RB
5.50%, 12/01/09(e)(f) BBB+ NRR 1,000 1,126,090
--------------------------------------------------------------------------------
Ohio (State of) Department of
Transportation (Panhandle Rail Line
Project); Series 1992 COP
6.50%, 04/15/12(b) AAA Aaa 1,100 1,127,082
--------------------------------------------------------------------------------
University of Cincinnati; Series 2002 F
RB
5.00%, 06/01/22 AA Aa3 820 824,371
--------------------------------------------------------------------------------
5.00%, 06/01/23 AA Aa3 1,000 998,650
================================================================================
9,488,988
================================================================================
OKLAHOMA-1.76%
Mustang (City of) Improvement Utility
Authority; Series 1999 RB
5.70%, 10/01/19(b) AAA Aaa 1,500 1,632,735
--------------------------------------------------------------------------------
Oklahoma (State of) Development Finance
Authority (St. John Health System);
Refunding Series 1999 RB
5.75%, 02/15/18 AA Aa3 675 719,813
--------------------------------------------------------------------------------
5.75%, 02/15/25 AA Aa3 1,750 1,849,435
--------------------------------------------------------------------------------
Tulsa (City of) Industrial Authority (St.
John's Medical Center Project);
Hospital Series 1994 RB
6.25%, 02/15/06(e)(f) AA Aa3 2,000 2,252,460
--------------------------------------------------------------------------------
Tulsa (City of) Industrial Authority
(Tulsa Regional Medical Center);
Hospital Series 1992 RB
7.20%, 06/01/03(e)(f) AAA NRR 500 533,715
--------------------------------------------------------------------------------
Tulsa (City of) Public Facilities
Authority; Capital Improvement Series
1988 B RB
6.00%, 03/01/08 A+ -- 1,305 1,351,680
================================================================================
8,339,838
================================================================================
OREGON-0.73%
Cow Creek Band Umpqua Tribe of Indians;
Series 1998 B RB
(Acquired 08/18/98; Cost $997,470)
5.10%, 07/01/12(b)(i) AAA Aaa 1,000 1,040,240
--------------------------------------------------------------------------------
|
FS-73
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
OREGON-(CONTINUED)
Portland (City of) Sewer System; Series
1994 A RB
6.20%, 06/01/04(e)(f) AAA A1 $1,200 $ 1,310,136
--------------------------------------------------------------------------------
6.25%, 06/01/04(e)(f) AAA A1 1,000 1,092,680
================================================================================
3,443,056
================================================================================
PENNSYLVANIA-2.48%
Allegheny (County of) Higher Education
Building Authority (Carnegie Mellon
University); Series 2002 RB
5.25%, 03/01/32 AA- -- 1,500 1,505,535
--------------------------------------------------------------------------------
Allegheny (County of) Port Authority;
Special Transportation Series 1999 RB
6.13%, 03/01/09(e)(f) AAA Aaa 1,000 1,168,560
--------------------------------------------------------------------------------
Chester (County of) Industrial
Development Authority (Westtown School
Project); Educational Facilities Series
2002 RB
5.00%, 01/01/31(b) AAA Aaa 1,000 985,030
--------------------------------------------------------------------------------
Clarion (County of) Industrial
Development Authority (Beverly
Enterprises Inc. Project); Refunding
Series 2001 RB
7.38%, 12/01/08(d) -- -- 1,450 1,482,422
--------------------------------------------------------------------------------
Montgomery (County of) Industrial
Development Authority (Pennsburg
Nursing & Rehabilitation Center);
Series 1993 RB
7.63%, 03/31/04(e)(f) NRR Aaa 100 112,576
--------------------------------------------------------------------------------
Pennsylvania (State of); Unlimited Tax
Third Series 1994 GO
6.75%, 11/15/04(e)(f) AAA Aaa 1,250 1,409,650
--------------------------------------------------------------------------------
Pennsylvania (State of) Economic
Financing Authority (Colver Project);
Resource Recovery Series 1994 D RB
7.05%, 12/01/10(c) BBB- -- 2,900 3,043,753
--------------------------------------------------------------------------------
Pennsylvania (State of) Public School
Building Authority (Lehigh Career &
Technical Institution); Series 2001 RB
5.00%, 10/01/26(b) AAA Aaa 1,000 994,380
--------------------------------------------------------------------------------
Spring-Ford Area School District;
Unlimited Tax Series 2002 GO
5.00%, 04/01/23(b) AAA Aaa 1,025 1,027,265
================================================================================
11,729,171
================================================================================
PUERTO RICO-0.36%
Children's Trust Fund; Sr. Tobacco
Settlement Series 2000 RB
6.00%, 07/01/26 A Aa3 1,000 1,041,400
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
PUERTO RICO-(CONTINUED)
Puerto Rico (Commonwealth of); Unlimited
Tax Public Improvement Series 2000 GO
6.00%, 07/01/05(b)(f) A- Baa1 $ 500 $ 560,740
--------------------------------------------------------------------------------
Puerto Rico (Commonwealth of) Highway &
Transportation Authority;
Transportation Series 2000 B RB
6.00%, 07/01/10(e)(f) A Baa1 100 117,968
================================================================================
1,720,108
================================================================================
RHODE ISLAND-1.05%
Rhode Island (State of) Housing &
Mortgage Finance Corp.; Homeownership
Opportunity Series 1994 15-B RB
6.00%, 10/01/04 AA+ Aa2 1,000 1,052,060
--------------------------------------------------------------------------------
Tobacco Settlement Financing Corp.;
Asset-Backed Series 2002 A RB
6.00%, 06/01/23 A A1 4,000 3,934,280
================================================================================
4,986,340
================================================================================
SOUTH CAROLINA-0.94%
Piedmont Municipal Power Agency;
Refunding Electric Series 1986 A RB
5.75%, 01/01/24 BBB- Baa3 1,150 1,108,819
--------------------------------------------------------------------------------
South Carolina (State of) Jobs Economic
Development Authority (Palmetto Health
Alliance); Hospital Facilities
Improvement Series 2000 A RB
7.13%, 12/15/15 BBB Baa2 1,000 1,088,670
--------------------------------------------------------------------------------
South Carolina (State of) Public Service
Authority; Series 2002 B RB
5.13%, 01/01/32(b) AAA Aaa 1,250 1,255,038
--------------------------------------------------------------------------------
South Carolina (State of) Transportation
Infrastructure Bank; Series 2001 A RB
5.00%, 10/01/29(b) AAA Aaa 1,000 991,130
================================================================================
4,443,657
================================================================================
SOUTH DAKOTA-0.46%
Aberdeen (City of) School District No.
6-1; Unlimited Tax Series 2000 GO
5.45%, 01/01/26(b) AAA Aaa 2,000 2,055,520
--------------------------------------------------------------------------------
South Dakota (State of) Health &
Educational Facilities Authority (Huron
Regional Medical Center); Series 1994
RB
7.25%, 04/01/20 BBB -- 100 103,793
================================================================================
2,159,313
================================================================================
|
FS-74
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TENNESSEE-1.24%
Franklin (City of) Industrial Development
Board (Landings Apartment Project);
Multifamily Housing Refunding Series
1996 A RB
5.75%, 04/01/10(b) AAA Aaa $ 820 $ 878,851
--------------------------------------------------------------------------------
Putnam (County of); Refunding Unlimited
Tax Series 2001 GO
5.25%, 04/01/17(b) AAA Aaa 2,500 2,744,650
--------------------------------------------------------------------------------
Robertson & Somner (Counties of) White
House Utility District; Water & Sewer
Series 2000 RB
6.00%, 01/01/10(e)(f) NRR Aaa 1,000 1,151,950
--------------------------------------------------------------------------------
Shelby (County of) Health Educational &
Housing Facilities Board (Kirby Pines
Retirement Community); Health Care
Facilities Series 1997 A RB
6.25%, 11/15/16(d) -- -- 1,000 921,800
--------------------------------------------------------------------------------
Tennessee (State of) Housing Development
Agency; Homeownership Progressive
Series 1992 RB
6.80%, 07/01/17 AA Aa2 155 158,364
================================================================================
5,855,615
================================================================================
TEXAS-22.67%
Allen (City of) Independent School
District; Refunding Unlimited Tax
Series 2000 GO
5.95%, 02/15/25 AAA Aaa 1,600 1,717,168
--------------------------------------------------------------------------------
Arlington (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1995
GO
5.75%, 02/15/05(e)(f) NRR Aaa 705 767,477
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1995 GO
5.75%, 02/15/21 -- Aaa 295 306,714
--------------------------------------------------------------------------------
Austin (City of) Community College
District; Refunding Combined Fee Series
1995 RB
6.10%, 02/01/05(e)(f) AAA Aaa 1,115 1,221,750
--------------------------------------------------------------------------------
Austin (City of) Electric Utility System;
Refunding Series 2002 A RB
4.00%, 11/15/03(b) AAA Aaa 1,500 1,543,395
--------------------------------------------------------------------------------
Austin (City of) Hotel Occupancy Tax;
Refunding Sub. Lien Series 1999 RB
5.80%, 11/15/29(b) AAA Aaa 1,000 1,057,590
--------------------------------------------------------------------------------
Austin (City of) Water & Wastewater
System;
Refunding Series 2001 B RB
5.25%, 05/15/31(b) AAA Aaa 1,750 1,757,175
--------------------------------------------------------------------------------
Refunding Series 2002 A RB
4.00%, 11/15/03(b) AAA Aaa 1,000 1,029,190
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TEXAS-(CONTINUED)
Bellville (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1995
GO
6.13%, 02/01/06(e)(f) NRR Aaa $ 535 $ 599,601
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1995 GO
6.13%, 02/01/20 -- Aaa 295 322,149
--------------------------------------------------------------------------------
Bexar (County of) Housing Finance Corp.
(Dymaxion & Monarch Park Apartments);
Multifamily Housing Series 2000 RB
6.10%, 08/01/30(b)(f) AAA Aaa 1,000 1,044,070
--------------------------------------------------------------------------------
Bexar (County of) Metropolitan Water
District; Lease Purchase Series 2001 RB
(Acquired 07/27/01; Cost $684,426)
5.53%, 07/20/06(d) -- -- 678 686,025
--------------------------------------------------------------------------------
Brazos (County of) Health Facilities
Development Corp. (Franciscan Services
Corp.); Series 1997 A RB
5.38%, 01/01/22(b) AAA Aaa 1,250 1,274,838
--------------------------------------------------------------------------------
Carroll (City of) Independent School
District; Refunding Unlimited Tax
Series 2001 GO
5.25%, 02/15/33 AAA Aaa 1,350 1,358,276
--------------------------------------------------------------------------------
Carrollton (City of); Limited Tax Series
1996 GO
5.75%, 08/15/06(e)(f) AA Aa2 1,000 1,119,300
--------------------------------------------------------------------------------
Cisco (City of) Jr. College District;
Refunding Consolidated Fund Series 2002
RB
5.25%, 07/01/26(b) AAA Aaa 1,000 1,008,400
--------------------------------------------------------------------------------
Cleveland (City of) Independent School
District;
Unlimited Tax Series 2001 GO
5.13%, 02/01/31 AAA Aaa 2,000 1,983,700
--------------------------------------------------------------------------------
Comal (County of) Independent School
District; Refunding Unlimited Tax
Series 1999 GO
5.75%, 08/01/28 -- Aaa 1,000 1,065,050
--------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2001 GO
5.25%, 02/01/28 -- Aaa 1,000 1,010,220
--------------------------------------------------------------------------------
Dallas (City of) Area Rapid Transit; Sr.
Lien Series 2001 RB
5.00%, 12/01/31(b) AAA Aaa 1,250 1,218,013
--------------------------------------------------------------------------------
DeSoto (City of) Independent School
District; Refunding Unlimited Tax
Series 1998 GO
5.13%, 08/15/17 AAA -- 1,000 1,000,210
--------------------------------------------------------------------------------
Georgetown (City of) Utility System;
Series 1995 A RB
6.20%, 08/15/05(e)(f) AAA Aaa 1,500 1,672,005
--------------------------------------------------------------------------------
|
FS-75
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TEXAS-(CONTINUED)
Grapevine (City of); Limited Tax Series
2000 GO Ctfs.
5.88%, 08/15/26(b) AAA Aaa $1,610 $ 1,727,482
--------------------------------------------------------------------------------
Harris (County of); Refunding Limited Tax
Series 2002 GO
5.13%, 08/15/31 AA+ Aa1 1,000 994,750
--------------------------------------------------------------------------------
Harris (County of) Flood Control
District; Refunding Unlimited Tax
Series 2002 GO
3.00%, 10/01/03 AA+ Aa1 1,500 1,523,415
--------------------------------------------------------------------------------
Harris (County of) Health Facilities
Development Corp. (Memorial Hermann
Health Care Project); Hospital Series
2001 A RB
6.38%, 06/01/29 A- A3 750 798,045
--------------------------------------------------------------------------------
Harris (County of) Health Facilities
Development Corp. (St. Luke's Episcopal
Hospital Project);
Series 1991 RB
6.70%, 02/15/03(e)(f) AAA Aa3 1,000 1,028,040
--------------------------------------------------------------------------------
Series 2001 A RB
5.38%, 02/15/26 AA -- 1,000 1,008,880
--------------------------------------------------------------------------------
Harris (County of) Health Facilities
Development Corp. (Texas Children's
Hospital Project); Hospital Series 1999
A RB
5.25%, 10/01/29 AA Aa2 2,000 2,004,180
--------------------------------------------------------------------------------
Harris (County of) Houston Sports
Authority; Refunding Jr. Lien Series
2001 B RB
5.25%, 11/15/40(b) AAA Aaa 3,000 3,001,920
--------------------------------------------------------------------------------
Harris (County of) Mental Health and
Mental Retardation Authority; Refunding
Series 1992 RB
6.25%, 09/15/10(b) AAA Aaa 4,500 4,521,195
--------------------------------------------------------------------------------
Houston (City of) Airport System; Sub.
Lien Series 2000 B RB
5.50%, 07/01/30(b) AAA Aaa 1,000 1,024,400
--------------------------------------------------------------------------------
Houston (City of) Water & Sewer System;
Jr. Lien Series 1997 C RB
5.38%, 12/01/27(b) AAA Aaa 2,495 2,536,292
--------------------------------------------------------------------------------
Hurst-Euless-Bedford Independent School
District;
Prerefunded Unlimited Tax Series 1994
GO
6.50%, 08/15/04(e)(f) AAA Aaa 640 700,838
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1994 GO
6.50%, 08/15/24 AAA Aaa 360 390,308
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TEXAS-(CONTINUED)
Katy (City of) Independent School
District;
Limited Tax Series 1999 GO
6.13%, 02/15/32 AAA Aaa $1,500 $ 1,624,200
--------------------------------------------------------------------------------
Unlimited Tax Series 2001 B GO
5.00%, 02/15/32 AAA Aaa 3,000 2,909,910
--------------------------------------------------------------------------------
Keller (City of) Independent School
District;
Refunding Unlimited Tax Series 2001 GO
5.25%, 08/15/26 AAA Aaa 2,000 2,018,580
--------------------------------------------------------------------------------
Series 1994 COP
6.00%, 08/15/05(b) AAA Aaa 885 978,863
--------------------------------------------------------------------------------
Laredo (City of) Community College
District; Limited Tax Series 2002 GO
5.25%, 08/01/32(b) AAA Aaa 1,000 1,004,620
--------------------------------------------------------------------------------
Little Elm (City of) Independent School
District;
Refunding Unlimited Tax Series 1999 GO
6.00%, 08/15/35 AAA -- 2,500 2,697,225
--------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2000 GO
6.13%, 08/15/35 AAA -- 1,000 1,089,480
--------------------------------------------------------------------------------
Lockhart (City of) Tax and Utility
Systems; Limited Tax Series 1996 GO
Ctfs.
5.85%, 08/01/11(b) AAA Aaa 605 661,979
--------------------------------------------------------------------------------
5.90%, 08/01/06(e)(f) AAA Aaa 1,100 1,238,468
--------------------------------------------------------------------------------
Matagorda (County of) Navigation District
No. 1 (Reliant Energy Project);
Refunding Series 1999 B RB
5.95%, 05/01/30(c) BBB Baa2 2,000 1,788,860
--------------------------------------------------------------------------------
Nacogdoches (City of) Independent School
District; Refunding Unlimited Tax
Series 2001 GO
5.30%, 02/15/25 AAA Aaa 1,765 1,787,910
--------------------------------------------------------------------------------
North Texas Higher Education Authority
Inc.; Student Loan
Series 1993 C RB
6.10%, 04/01/08(c) -- Aa2 1,000 1,031,890
--------------------------------------------------------------------------------
Student Loan Series 1993 D RB
6.30%, 04/01/09(c) -- A2 500 515,525
--------------------------------------------------------------------------------
Northside Independent School District;
Unlimited Tax Series 1999 A GO
5.50%, 08/15/24 AAA Aaa 1,000 1,035,900
--------------------------------------------------------------------------------
Pasadena (City of); Limited Tax Series
2002 GO
5.25%, 04/01/32(b) AAA Aaa 2,000 2,015,080
--------------------------------------------------------------------------------
|
FS-76
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TEXAS-(CONTINUED)
Pflugerville (City of) Independent School
District; Unlimited Tax Series 2000 GO
5.50%, 08/15/23 AAA Aaa $1,615 $ 1,672,155
--------------------------------------------------------------------------------
Plano (City of); Limited Tax Series 2000
GO
5.88%, 09/01/19 AAA Aaa 850 928,948
--------------------------------------------------------------------------------
Richardson (City of);
Limited Tax Series 2000 A GO
5.75%, 02/15/21(b) AAA Aaa 2,000 2,138,360
--------------------------------------------------------------------------------
Limited Tax Series 2001 GO
5.00%, 02/15/19 AA+ Aa1 1,720 1,743,822
--------------------------------------------------------------------------------
Richardson (City of) Hospital Authority
(Richardson Medical Center); Unrefunded
Hospital Series 1993 RB
6.50%, 12/01/12 BBB+ Baa1 870 901,581
--------------------------------------------------------------------------------
6.75%, 12/01/23 BBB+ Baa1 1,000 1,026,710
--------------------------------------------------------------------------------
San Angelo (City of) Waterworks & Sewer
System; Refunding & Improvement Series
2001 RB
5.25%, 04/01/19(b) AAA Aaa 1,000 1,035,800
--------------------------------------------------------------------------------
San Antonio (City of) Independent School
District; Unlimited Tax Series 1999 GO
5.50%, 08/15/24 AAA Aaa 3,500 3,625,650
--------------------------------------------------------------------------------
Schertz-Cibolo-Universal City Independent
School District; Refunding Unlimited
Tax Building Series 2001 GO
5.13%, 08/01/25 AAA Aaa 1,535 1,536,627
--------------------------------------------------------------------------------
Spring Branch Independent School
District; Limited Tax Series 2000 GO
5.75%, 02/01/24 AAA Aaa 1,700 1,798,396
--------------------------------------------------------------------------------
Texas (State of); Refunding Unlimited Tax
Water Development Series 2001 A GO
5.25%, 08/01/35 AA Aa1 1,840 1,847,838
--------------------------------------------------------------------------------
Texas (State of) (Veteran's Land);
Unlimited Tax Series 1994 GO
6.40%, 12/01/24(c) AA Aa1 2,000 2,171,980
--------------------------------------------------------------------------------
Texas (State of) (Water Financial
Assistance); Unlimited Tax Series 2002
GO
5.00%, 08/01/23 AA Aa1 1,000 988,470
--------------------------------------------------------------------------------
5.00%, 08/01/24 AA Aa1 1,000 985,560
--------------------------------------------------------------------------------
Texas (State of) Department of Housing &
Community Affairs (Asmara Affordable
Housing Inc. Project); Multifamily
Housing Series 1996 A RB
6.30%, 01/01/16 A -- 310 317,809
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
TEXAS-(CONTINUED)
Texas (State of) Public Property Finance
Corp. (Mental Health & Mental
Retardation); Series 1996 RB
6.20%, 09/01/16 BBB+ -- $ 735 $ 737,536
--------------------------------------------------------------------------------
Town Center Improvement District; Sales &
Hotel Occupancy Tax Series 2001 RB
5.13%, 03/01/23(b) AAA Aaa 1,000 1,004,440
--------------------------------------------------------------------------------
5.25%, 03/01/27(b) AAA Aaa 2,800 2,819,096
--------------------------------------------------------------------------------
5.50%, 03/01/13(b) AAA Aaa 1,725 1,896,707
--------------------------------------------------------------------------------
Tyler (City of) Health Facilities
Development Corp. (Mother Frances
Hospital); Hospital Series 1997 A RB
5.63%, 07/01/13 -- Baa1 1,000 1,000,300
--------------------------------------------------------------------------------
United Independent School District;
Unlimited Tax Series 2000 GO
5.13%, 08/15/26 AAA Aaa 1,000 1,000,370
--------------------------------------------------------------------------------
University of Texas Financing System;
Series 1999 B RB
5.70%, 08/15/20 AAA Aaa 1,000 1,064,170
--------------------------------------------------------------------------------
Victoria (County of) (Citizens Medical
Center); Hospital Series 1994 RB
6.20%, 01/01/10(b) AAA Aaa 1,000 1,071,820
--------------------------------------------------------------------------------
Waxahachie (City of) Independent School
District; Refunding Unlimited Tax
Series 2002 GO
5.25%, 08/15/26 -- Aaa 2,000 2,018,580
--------------------------------------------------------------------------------
5.38%, 08/15/27 -- Aaa 1,000 1,018,230
--------------------------------------------------------------------------------
Weatherford (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1994
GO
6.40%, 02/15/05(e)(f) NRR Aaa 900 994,077
--------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1994 GO
6.40%, 02/15/12 -- Aaa 100 109,007
--------------------------------------------------------------------------------
Ysleta (City of) Independent School
District Public Facility Corp.;
Refunding Lease Series 2001 RB
5.38%, 11/15/24(b) AAA Aaa 1,300 1,323,894
================================================================================
107,198,484
================================================================================
UTAH-1.57%
Intermountain Power Agency;
Power Supply Series 1995 B RB
5.00%, 07/01/16(e)(f) A+ A1 2,000 2,004,940
--------------------------------------------------------------------------------
Unrefunded Power Supply Series 1995 B
RB
5.00%, 07/01/16 A+ A1 1,150 1,152,151
--------------------------------------------------------------------------------
|
FS-77
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
UTAH-(CONTINUED)
Salt Lake (County of) (Westminster
College Project); Series 1997 RB
5.75%, 10/01/27 BBB -- $1,000 $ 1,013,860
--------------------------------------------------------------------------------
South Jordan (City of); Sales Tax Series
2001 RB
5.20%, 08/15/26(b) AAA Aaa 1,500 1,548,045
--------------------------------------------------------------------------------
Utah (State of) Housing Finance
Agency; Single Family Mortgage
Sub-Series 1994 C RB
6.05%, 07/01/06 -- Aa3 125 132,505
--------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 1994
E-1 RB
6.30%, 07/01/06 AA- -- 85 90,451
--------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 1994
G-1 RB
7.15%, 07/01/06 AA- A1 30 31,256
--------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 2000
B-1 RB
6.00%, 07/01/10(c) AA- Aa3 855 890,448
--------------------------------------------------------------------------------
Sr. Single Family Mortgage Series 1995
G-2 RB
6.45%, 07/01/27(c) AAA Aaa 560 580,317
================================================================================
7,443,973
================================================================================
VERMONT-0.23%
Vermont (State of) Educational & Health
Buildings Financing Agency (Fletcher
Allen Health
Care); Hospital Series 2000 A RB
6.00%, 12/01/23(b) AAA Aaa 1,000 1,092,510
================================================================================
VIRGIN ISLANDS-0.33%
Virgin Islands (Territory of) Public
Finance Authority (Gross Receipts Taxes
Loan Notes); Series 1999 A RB
6.13%, 10/01/29(b) A A 500 530,695
--------------------------------------------------------------------------------
Virgin Islands (Territory of) Public
Financing Authority (Matching Fund Loan
Notes); Refunding Series 1992 A RB
7.25%, 10/01/02(e)(f) AAA NRR 1,000 1,029,390
================================================================================
1,560,085
================================================================================
VIRGINIA-0.64%
Fauquier (County of) Industrial
Development Authority (Fauquier
Hospital Foundation, Inc.); Hospital
Series 2002 RB
5.25%, 10/01/31 AA -- 1,000 996,960
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
VIRGINIA-(CONTINUED)
Norton (City) Industrial Development
Authority (Norton Community Hospital);
Refunding & Improvement Hospital Series
2001 RB
6.00%, 12/01/22(b) A -- $1,000 $ 1,036,510
--------------------------------------------------------------------------------
Virginia (State of) Resources Authority
(Goochland County Tuckahoe Creek
Service District Project); Water &
Sewer System Series 2002 RB
5.00%, 11/01/35 AA Aa2 1,000 987,150
================================================================================
3,020,620
================================================================================
WASHINGTON-1.68%
Clark (County of) School District No.
117; Unlimited Tax Series 1995 GO
6.00%, 12/01/05(e)(f) AAA Aaa 1,000 1,117,310
--------------------------------------------------------------------------------
King (County of);
Sewer Series 1999 RB
5.50%, 01/01/22(b) AAA Aaa 1,000 1,041,050
--------------------------------------------------------------------------------
Unlimited Tax Series 1969 GO
5.50%, 07/01/07(e)(f) AAA Aaa 490 548,565
--------------------------------------------------------------------------------
Pend Oreille (County of) Public Utility
District No. 1; Electric Series 1996 B
RB
6.30%, 01/01/17 BBB+ A3 1,400 1,498,602
--------------------------------------------------------------------------------
Washington (State of) Health Care
Facilities Authority (Providence Health
System Project); Series 2001 RB
5.25%, 10/01/21(b) AAA Aaa 1,000 1,018,120
--------------------------------------------------------------------------------
Washington (State of) Public Power Supply
System (Nuclear Project No. 1);
Refunding Series 1996 A RB
5.75%, 07/01/12(b) AAA Aaa 2,000 2,165,640
--------------------------------------------------------------------------------
West Richland (City of); Water & Sewer
Series 1994 RB
7.00%, 12/01/04(e)(f) AAA Aaa 500 559,950
================================================================================
7,949,237
================================================================================
WISCONSIN-1.12%
Muskego-Norway School District; Refunding
Unlimited Tax Series 2002 GO
5.00%, 04/01/21(b) AAA Aaa 1,000 1,003,740
--------------------------------------------------------------------------------
Wisconsin (State of) Health & Educational
Facilities Authority (Sinai Samaritan
Medical Center Inc.); Series 1996 RB
5.75%, 08/15/16(b) AAA Aaa 1,500 1,616,490
--------------------------------------------------------------------------------
Wisconsin (State of) Health & Educational
Facilities Authority (Sisters Sorrowful
Mother); Series 1997 A RB
5.90%, 08/15/24(b) AAA Aaa 2,500 2,663,675
================================================================================
5,283,905
================================================================================
|
FS-78
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
WYOMING-0.50%
Laramie (County of) (Memorial Hospital
Project); Hospital Series 1992 RB
6.70%, 05/01/12(b) AAA Aaa $ 250 $ 257,750
--------------------------------------------------------------------------------
Natrona (County of) (Wyoming Medical
Center Project); Hospital Series 1995
RB
6.00%, 09/15/11(b) AAA Aaa 1,000 1,101,850
--------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
WYOMING-(CONTINUED)
Sweetwater (County of) (Idaho Power Co.
Project); Refunding Series 1996 A PCR
6.05%, 07/15/26 BBB+ A3 $1,000 $ 1,023,970
================================================================================
2,383,570
================================================================================
TOTAL INVESTMENTS-99.27% (Cost
$446,261,602) 469,424,787
================================================================================
OTHER ASSETS LESS LIABILITIES-0.73% 3,444,540
================================================================================
NET ASSETS-100.00% $472,869,327
________________________________________________________________________________
================================================================================
|
Investment Abbreviations:
COP - Certificate of Participation FHA - Federal Housing Administration GNMA - Government National Mortgage Association GO - General Obligation Bonds Gtd. - Guaranteed IDR - Industrial Development Revenue Bonds Jr. - Junior PCR - Pollution Control Revenue Bonds RAC - Revenue Anticipation Certificates RB - Revenue Bonds Sr. - Senior Sub. - Subordinated TAN - Tax Allocation Notes VRD - Variable Rate Demand Wts. - Warrants |
Notes to Schedule of Investments:
(a) Ratings assigned by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). NRR indicates a security that is not
re-rated subsequent to funding of an escrow fund (consisting of U.S.
Treasury obligations); this funding is pursuant to an advance refunding of
this security. Ratings are not covered by the Report of the Independent
Auditors.
(b) Secured by bond insurance provided by one of the following companies: Ambac
Assurance Corp., American Capital Access Corp., Financial Guaranty Insurance
Co., Financial Security Assurance, or MBIA Insurance Co.
(c) Security subject to the alternative minimum tax.
(d) Unrated security; determined by the investment advisor to be of comparable
quality to the rated securities in which the Fund may invest pursuant to
guidelines of quality adopted by the Board of Trustees and followed by the
investment advisor.
(e) Secured by an escrow fund of U.S. Government obligations.
(f) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(g) Demand securities; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined weekly. Rates
shown are rates in effect on 07/31/02.
(h) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(i) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The market value of this security at 07/31/02 represented
0.22% of the Fund's net assets.
See Notes to Financial Statements
FS-79
JULY 31, 2002
ASSETS:
Investments, at market value (cost
$446,261,602) $469,424,787
-----------------------------------------------------------
Receivables for:
Investments sold 4,338,252
-----------------------------------------------------------
Fund shares sold 2,582,141
-----------------------------------------------------------
Interest 6,706,460
-----------------------------------------------------------
Investment for deferred compensation plan 102,139
-----------------------------------------------------------
Other assets 34,216
===========================================================
Total assets 483,187,995
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 8,067,370
-----------------------------------------------------------
Fund shares reacquired 1,132,293
-----------------------------------------------------------
Dividends 708,897
-----------------------------------------------------------
Deferred compensation plan 102,139
-----------------------------------------------------------
Accrued distribution fees 232,801
-----------------------------------------------------------
Accrued trustees' fees 730
-----------------------------------------------------------
Accrued transfer agent fees 12,815
-----------------------------------------------------------
Accrued operating expenses 61,623
===========================================================
Total liabilities 10,318,668
===========================================================
Net assets applicable to shares outstanding $472,869,327
___________________________________________________________
===========================================================
NET ASSETS:
Class A $339,544,853
___________________________________________________________
===========================================================
Class B $104,149,851
___________________________________________________________
===========================================================
Class C $ 29,174,623
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 42,123,332
___________________________________________________________
===========================================================
Class B 12,899,746
___________________________________________________________
===========================================================
Class C 3,620,231
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 8.06
-----------------------------------------------------------
Offering price per share:
(Net asset value of $8.06 divided by
95.25%) $ 8.46
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 8.07
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 8.06
___________________________________________________________
===========================================================
|
FOR THE YEAR ENDED JULY 31, 2002
INVESTMENT INCOME:
Interest $25,762,084
===========================================================
EXPENSES:
Advisory fees 2,040,421
-----------------------------------------------------------
Administrative services fees 112,021
-----------------------------------------------------------
Custodian fees 18,431
-----------------------------------------------------------
Distribution fees -- Class A 853,515
-----------------------------------------------------------
Distribution fees -- Class B 947,150
-----------------------------------------------------------
Distribution fees -- Class C 239,843
-----------------------------------------------------------
Transfer agent fees 229,495
-----------------------------------------------------------
Trustees' fees 10,348
-----------------------------------------------------------
Other 177,776
===========================================================
Total expenses 4,629,000
===========================================================
Less: Expenses paid indirectly (5,356)
===========================================================
Net expenses 4,623,644
===========================================================
Net investment income 21,138,440
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (210,205)
-----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (392,841)
===========================================================
Net gain (loss) from investment securities (603,046)
===========================================================
Net increase in net assets resulting from
operations $20,535,394
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-80
FOR THE YEARS ENDED JULY 31, 2002 AND 2001
2002 2001
------------ ------------
OPERATIONS:
Net investment income $ 21,138,440 $ 18,710,476
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (210,205) 84,203
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (392,841) 10,776,758
==========================================================================================
Net increase in net assets resulting from operations 20,535,394 29,571,437
==========================================================================================
Distributions to shareholders from net investment income:
Class A (16,156,773) (14,953,354)
------------------------------------------------------------------------------------------
Class B (3,770,131) (3,257,124)
------------------------------------------------------------------------------------------
Class C (953,868) (511,438)
------------------------------------------------------------------------------------------
Share transactions-net:
Class A 17,431,346 30,618,904
------------------------------------------------------------------------------------------
Class B 17,606,047 17,088,547
------------------------------------------------------------------------------------------
Class C 11,286,232 9,301,793
==========================================================================================
Net increase in net assets 45,978,247 67,858,765
==========================================================================================
NET ASSETS:
Beginning of year 426,891,080 359,032,315
==========================================================================================
End of year $472,869,327 $426,891,080
__________________________________________________________________________________________
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $460,855,163 $416,536,814
------------------------------------------------------------------------------------------
Undistributed net investment income 319,824 (18,974)
------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (11,468,845) (10,631,732)
------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 23,163,185 21,004,972
==========================================================================================
$472,869,327 $426,891,080
__________________________________________________________________________________________
==========================================================================================
|
See Notes to Financial Statements.
FS-81
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Municipal Bond 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 eight separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge. Matters affecting each portfolio or class will be 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 achieve a high level of current income exempt from federal income taxes, consistent with the preservation of principal.
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 -- Portfolio securities are valued on the basis of prices provided by an independent pricing service approved by the Board of Trustees. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices and may reflect appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Portfolio securities for which prices are not provided by the pricing service are valued at the mean between the last available bid and asked prices, unless the Board of Trustees, or persons designated by the Board of Trustees, determines that the mean between the last available bid and asked prices does not accurately reflect the current market value of the security. Securities with a demand feature exercisable within one to seven days are valued at par. Securities for which market quotations either 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. Notwithstanding the above, short-term obligations with maturities of 60 days or less are valued at amortized cost.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
On July 31, 2002, undistributed net investment income was increased by $13,103, undistributed net realized gains (losses) decreased by $626,908 and paid in capital increased by $613,805 as a result of differing book/tax treatment of capital loss and other reclassifications. Net assets of the Fund were unaffected by the reclassifications discussed above.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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 $11,200,174 as of July 31, 2002 expires as follows:
CAPITAL LOSS
CARRYFORWARD EXPIRATION
------------ ----------
$ 728,546 July 31, 2003
----------------------------
92,144 July 31, 2004
----------------------------
1,947,609 July 31, 2007
----------------------------
8,431,875 July 31, 2008
============================
$11,200,174
____________________________
============================
|
Utilization of such capital losses may be limited to the extent required under IRS rules. As of July 31, 2002 the Fund has a post-October capital loss deferral of $176,112, which will be recognized in the following tax year.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--CHANGE IN ACCOUNTING PRINCIPLE
As required, effective August 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing market discounts on debt securities. Prior to August 1, 2001, the Fund did not amortize market discounts on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $68,027 addition in the cost of securities and a corresponding $68,027 decrease in net unrealized gains and losses, based on securities held by the Fund on August 1, 2001.
The effect of this change in the current period was to increase net investment income by $20,700 and to decrease net unrealized gains and losses by $20,700. As a result, the net investment income per share and the net realized and unrealized gains and losses per share remained unchanged. The ratio of net investment income to average net assets remained unchanged.
FS-82
NOTE 3--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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion.
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, 2002, AIM was paid $112,021 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. During the year ended July 31, 2002, AFS retained $145,314 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, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. For the year ended July 31, 2002, the Class A, Class B and Class C shares paid AIM Distributors $853,515, $947,150 and $239,843, respectively, as compensation under the Plans.
AIM Distributors retained commissions of $67,279 from sales of the Class A shares of the Fund during the year ended July 31, 2002. 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. During the year ended July 31, 2002, AIM Distributors retained $56,839, $16,132 and $24,087 in contingent deferred sales charges imposed on redemptions of Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the year ended July 31, 2002, the Fund paid legal fees of $5,067 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 4--INDIRECT EXPENSES
For the year ended July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $5,356 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $5,356.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 6--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
----------- -----------
Distributions paid from ordinary
income -- tax exempt $20,880,772 $18,721,916
_____________________________________________________________
=============================================================
|
As of July 31, 2002, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income $ 347,045
-----------------------------------------------------------
Capital loss carryforward (11,200,174)
-----------------------------------------------------------
Unrealized appreciation 22,867,293
===========================================================
$ 12,014,164
___________________________________________________________
===========================================================
|
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and the deferral of capital losses incurred after October 31.
NOTE 8--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, 2002 was $181,855,428 and $154,317,109, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $25,452,716 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,293,361) =========================================================== Net unrealized appreciation of investment securities $23,159,355 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $446,265,432. |
FS-83
NOTE 9--SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Sold:
Class A 25,443,792 $ 203,919,132 17,360,190 $ 138,325,073
--------------------------------------------------------------------------------------------------------------------------
Class B 5,648,537 45,438,128 5,218,248 41,564,270
--------------------------------------------------------------------------------------------------------------------------
Class C 3,492,497 27,986,065 2,036,726 16,215,773
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,118,428 8,950,726 995,116 7,907,174
--------------------------------------------------------------------------------------------------------------------------
Class B 281,101 2,253,388 250,418 1,993,001
--------------------------------------------------------------------------------------------------------------------------
Class C 86,031 687,981 40,422 321,603
==========================================================================================================================
Issued in connection with acquisitions:*
Class A 4,890,500 39,744,960 -- --
==========================================================================================================================
Reacquired:
Class A (29,353,247) (235,183,472) (14,519,194) (115,613,343)
--------------------------------------------------------------------------------------------------------------------------
Class B (3,758,234) (30,085,469) (3,329,032) (26,468,724)
--------------------------------------------------------------------------------------------------------------------------
Class C (2,179,285) (17,387,814) (910,042) (7,235,583)
==========================================================================================================================
5,670,120 $ 46,323,625 7,142,852 $ 57,009,244
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* As of the close of business on September 7, 2001, the Fund acquired all the net assets of AIM Tax-Exempt Bond Fund of Connecticut pursuant to a plan of reorganization approved by AIM Tax-Exempt Bond Fund of Connecticut shareholders on June 13, 2001. The acquisition was accomplished by a tax-free exchange of 4,890,500 shares of the Fund for 3,624,409 shares of AIM Tax-Exempt Bond Fund of Connecticut outstanding as of the close of business on September 7, 2001. AIM Tax-Exempt Bond Fund of Connecticut net assets at that date of $39,744,960 including $2,619,081 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $446,100,096.
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------- JULY 31, --------------------------------
2002 2001 2000 1999 1998 1997
-------- -------- ------------ -------- -------- --------
Net asset value, beginning of period $ 8.06 $ 7.83 $ 7.74 $ 8.35 $ 8.34 $ 8.19
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.38(a) 0.40 0.24(b) 0.41 0.42 0.42
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.00 0.23 0.09 (0.61) 0.01 0.16
================================================================================================================================
Total from investment operations 0.38 0.63 0.33 (0.20) 0.43 0.58
================================================================================================================================
Less dividends from net investment income (0.38) (0.40) (0.24) (0.41) (0.42) (0.43)
================================================================================================================================
Net asset value, end of period $ 8.06 $ 8.06 $ 7.83 $ 7.74 $ 8.35 $ 8.34
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) 4.84% 8.28% 4.32% (2.45)% 5.28% 7.27%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $339,545 $322,437 $283,416 $294,720 $327,705 $318,469
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets 0.81%(d) 0.85% 0.85%(e) 0.84% 0.82% 0.90%
================================================================================================================================
Ratio of net investment income to average net
assets 4.79%(a)(d) 5.06% 5.32%(e) 5.01% 5.00% 5.14%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 35% 28% 18% 28% 19% 24%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing market discounts on debt securities. Had
the Fund not amortized market discounts on debt securities, the net
investment income per share and the ratio of net investment income to
average net assets would have remained the same. In accordance with the
AICPA Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include sales charges and is not annualized for periods less
than one year.
(d) Ratios are based on average daily net assets of $341,405,967.
(e) Annualized.
FS-84
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-------------------------------------------------------------------------
SEVEN MONTHS
YEAR ENDED JULY 31, ENDED YEAR ENDED DECEMBER 31,
------------------------ JULY 31, -----------------------------
2002 2001 2000 1999 1998 1997
-------- ------- ------------ ------- ------- -------
Net asset value, beginning of period $ 8.07 $ 7.84 $ 7.75 $ 8.37 $ 8.36 $ 8.19
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.32(a) 0.34 0.21(b) 0.35 0.36 0.36
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.00 0.23 0.08 (0.62) 0.01 0.17
===============================================================================================================================
Total from investment operations 0.32 0.57 0.29 (0.27) 0.37 0.53
===============================================================================================================================
Less dividends from net investment income (0.32) (0.34) (0.20) (0.35) (0.36) (0.36)
===============================================================================================================================
Net asset value, end of period $ 8.07 $ 8.07 $ 7.84 $ 7.75 $ 8.37 $ 8.36
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 4.05% 7.46% 3.84% (3.28)% 4.48% 6.59%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $104,150 $86,565 $67,363 $72,256 $72,723 $47,185
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.56%(d) 1.60% 1.61%(e) 1.59% 1.57% 1.66%
===============================================================================================================================
Ratio of net investment income to average net assets 4.04%(a)(d) 4.31% 4.56%(e) 4.26% 4.25% 4.38%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 35% 28% 18% 28% 19% 24%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing market discounts on debt securities. Had
the Fund not amortized market discounts on debt securities, the net
investment income per share and the ratio of net investment income to
average net assets would have remained the same. In accordance with the
AICPA Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $94,714,991.
(e) Annualized.
CLASS C
-----------------------------------------------------------------------------
AUGUST 4, 1997
SEVEN MONTHS YEAR ENDED (DATE SALES
YEAR ENDED JULY 31, ENDED DECEMBER 31, COMMENCED) TO
----------------------- JULY 31, ---------------- DECEMBER 31,
2002 2001 2000 1999 1998 1997
------- ------- ------------ ------ ------ --------------
Net asset value, beginning of period $ 8.05 $ 7.83 $ 7.74 $ 8.35 $ 8.35 $ 8.30
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.32(a) 0.34 0.21(b) 0.35 0.36 0.15
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.01 0.22 0.08 (0.61) -- 0.04
===============================================================================================================================
Total from investment operations 0.33 0.56 0.29 (0.26) 0.36 0.19
===============================================================================================================================
Less dividends from net investment income (0.32) (0.34) (0.20) (0.35) (0.36) (0.14)
===============================================================================================================================
Net asset value, end of period $ 8.06 $ 8.05 $ 7.83 $ 7.74 $ 8.35 $ 8.35
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c) 4.19% 7.34% 3.85% (3.16)% 4.36% 2.36%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,175 $17,889 $8,252 $9,652 $9,565 $ 825
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.56%(d) 1.60% 1.61%(e) 1.59% 1.57% 1.67%(e)
===============================================================================================================================
Ratio of net investment income to average net
assets 4.04%(a)(d) 4.31% 4.56%(e) 4.26% 4.25% 4.37%(e)
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 35% 28% 18% 28% 19% 24%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing market discounts on debt securities. Had
the Fund not amortized market discounts on debt securities, the net
investment income per share and the ratio of net investment income to
average net assets would have remained the same. In accordance with the
AICPA Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(d) Ratios are based on average daily net assets of $23,984,279.
(e) Annualized.
FS-85
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of AIM Total Return Bond Fund And Board of Trustees of AIM Investment Securities Funds:
We have audited the accompanying statement of assets and liabilities of Total Return Bond Fund (a portfolio of AIM Investment Securities Funds), including the schedule of investments, as of July 31, 2002, and the related statement of operations, statement of changes in net assets and financial highlights for the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Total Return Bond Fund as of July 31, 2002, and the results of its operations, changes in its net assets, and financial highlights for the period then ended in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Houston, Texas
September 10, 2002
|
FS-86
JULY 31, 2002
PRINCIPAL MARKET
AMOUNT VALUE
BONDS & NOTES-29.26%
AEROSPACE & DEFENSE-0.16%
Raytheon Co., Notes, 6.75%, 08/15/07 $ 40,000 $ 42,350
======================================================================
AUTOMOBILE MANUFACTURERS-0.24%
General Motors Corp., Unsec. Putable Deb.,
8.80%, 03/01/21 60,000 64,106
======================================================================
BANKS-4.92%
African Development Bank (Luxembourg), Sr.
Unsec. Unsub. Yankee Notes, 3.25%, 07/29/05 350,000 346,668
----------------------------------------------------------------------
Dresdner Funding Trust I, Bonds, 8.15%,
06/30/31 (Acquired 05/09/02; Cost
$53,049)(a) 50,000 55,369
----------------------------------------------------------------------
European Investment Bank (Luxembourg), Medium
Term Yankee Notes, 4.88%, 09/06/06 250,000 260,688
----------------------------------------------------------------------
Yankee Notes, 4.63%, 03/01/07 400,000 412,880
----------------------------------------------------------------------
Huntington National Bank, Sub. Notes, 6.60%,
06/15/18 80,000 76,012
----------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 100,000 101,207
----------------------------------------------------------------------
SunTrust Banks, Inc., Sr. Unsec. Putable Sub.
Deb., 6.00%, 01/15/08 50,000 50,890
----------------------------------------------------------------------
U.S. Bank N.A., Sub. Notes, 6.30%, 02/04/14 25,000 26,375
======================================================================
1,330,089
======================================================================
BREWERS-0.25%
Anheuser-Busch Cos., Inc., Sr. Unsec. Deb.,
6.50%, 02/01/43 65,000 66,517
======================================================================
BROADCASTING & CABLE TV-1.89%
Cox Communications, Inc., Sr. Unsec. RAPS
Floating Rate Notes, 2.62%, 11/07/02(b) 325,000 325,816
----------------------------------------------------------------------
Shaw Communications Inc. (Canada), Sr. Unsec.
Unsub. Yankee Notes, 8.25%, 04/11/10 60,000 59,720
----------------------------------------------------------------------
TCI Communications, Inc., Sr. Unsec. Deb.,
7.88%, 02/15/26 50,000 39,499
----------------------------------------------------------------------
Time Warner Inc.,
Sr. Unsec. Gtd. Deb., 6.88%, 06/15/18 60,000 41,472
----------------------------------------------------------------------
Unsec. Notes, 7.75%, 06/15/05 50,000 44,697
======================================================================
511,204
======================================================================
COMPUTER HARDWARE-0.63%
International Business Machines Corp., Deb.,
8.38%, 11/01/19 150,000 171,532
======================================================================
CONSUMER FINANCE-2.80%
CitiFinancial Credit Co., Putable Notes,
6.63%, 06/01/15 50,000 53,201
----------------------------------------------------------------------
Unsec. Notes, 6.75%, 07/01/07 100,000 110,385
----------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
CONSUMER FINANCE-(CONTINUED)
Ford Motor Credit Co.,
Notes, 7.88%, 06/15/10 $ 60,000 $ 61,689
----------------------------------------------------------------------
Unsec. Floating Rate Notes, 2.08%,
03/17/03(b) 350,000 347,135
----------------------------------------------------------------------
Unsec. Notes, 6.50%, 01/25/07 150,000 149,191
----------------------------------------------------------------------
Unsec. Notes, 6.88%, 02/01/06 35,000 35,364
======================================================================
756,965
======================================================================
DIVERSIFIED FINANCIAL SERVICES-8.21%
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 50,000 70,935
----------------------------------------------------------------------
Bombardier Capital Ltd. (Canada), Yankee
Notes, 7.50%, 08/15/04 (Acquired 06/19/02;
Cost $159,698)(a) 150,000 158,193
----------------------------------------------------------------------
CIT Group Inc., Sr. Notes, 7.13%, 10/15/04 40,000 40,225
----------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 200,000 209,122
----------------------------------------------------------------------
Citigroup Inc.,
Sr. Unsec. Notes, 4.13%, 06/30/05 110,000 110,860
----------------------------------------------------------------------
Unsec. Sub. Notes, 6.63%, 06/15/32 375,000 360,570
----------------------------------------------------------------------
Fidelity Investments, Bonds, 7.57%, 06/15/29
(Acquired 05/01/02-07/25/02; Cost
$218,028)(a) 200,000 215,700
----------------------------------------------------------------------
General Electric Capital Corp., Gtd. Sub.
Notes, 8.13%, 05/15/12 45,000 52,268
----------------------------------------------------------------------
Series A, Medium Term Notes, 5.00%,
06/15/07 200,000 204,836
----------------------------------------------------------------------
General Motors Acceptance Corp., Medium Term
Notes, 5.25%, 05/16/05 100,000 101,149
----------------------------------------------------------------------
Unsec. Unsub. Notes, 6.13%, 02/01/07 200,000 201,820
----------------------------------------------------------------------
Heller Financial, Inc., Unsec. Notes, 7.38%,
11/01/09 60,000 66,091
----------------------------------------------------------------------
John Hancock Global Funding II,
Medium Term Notes, 6.50%, 03/01/11
(Acquired 07/24/02; Cost $263,610)(a) 250,000 263,628
----------------------------------------------------------------------
Notes, 5.00%, 07/27/07 (Acquired 06/12/02;
Cost $99,945)(a) 100,000 102,184
----------------------------------------------------------------------
Lehman Brothers Holdings Inc., Notes, 6.63%,
01/18/12 60,000 62,501
======================================================================
2,220,082
======================================================================
ELECTRIC UTILITIES-0.44%
Cleveland Electric Illuminating Co.
(The)-Series D, Sec. Notes, 7.88%, 11/01/17 50,000 51,176
----------------------------------------------------------------------
Hydro-Quebec (Canada), Gtd. Yankee Bonds,
9.40%, 02/01/21 50,000 67,685
======================================================================
118,861
======================================================================
ENVIRONMENTAL SERVICES-0.95%
Waste Management, Inc., Unsec. Putable Notes,
7.10%, 08/01/03 250,000 256,665
======================================================================
|
FS-87
PRINCIPAL MARKET
AMOUNT VALUE
GAS UTILITIES-0.21%
El Paso Corp., Medium Term Notes, 8.05%,
10/15/30 $ 80,000 $ 57,900
======================================================================
INTEGRATED OIL & GAS-0.25%
Occidental Petroleum Corp., Sr. Unsec. Notes,
7.38%, 11/15/08 60,000 67,031
======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.65%
Sprint Capital Corp., Sr. Unsec. Gtd. Unsub.
Notes, 6.13%, 11/15/08 35,000 25,288
----------------------------------------------------------------------
Verizon Global Funding Corp., Sr. Unsec.
Notes, 6.13%, 06/15/07 150,000 149,574
======================================================================
174,862
======================================================================
LIFE & HEALTH INSURANCE-1.22%
American General Corp., Unsec. Notes, 7.50%,
08/11/10 200,000 225,016
----------------------------------------------------------------------
American General Institute-Series A, Gtd.
Bonds, 7.57%, 12/01/45 (Acquired 07/18/02;
Cost $109,169)(a) 100,000 105,962
======================================================================
330,978
======================================================================
MULTI-LINE INSURANCE-1.14%
AIG SunAmerica Global Financing IX, Bonds,
6.90%, 03/15/32 (Acquired 07/31/02; Cost
$313,425)(a) 300,000 309,132
======================================================================
OIL & GAS-1.14%
Canadian Oil Sands Ltd. (Canada), Sr. Yankee
Notes, 7.90%, 09/01/21 (Acquired 07/31/02;
Cost $304,776)(a) 300,000 308,073
======================================================================
OIL & GAS EQUIPMENT & SERVICES-0.98%
Kinder Morgan Energy Partners, L.P., Sr.
Unsec. Notes, 7.13%, 03/15/12 250,000 265,233
======================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.76%
Colorado Interstate Gas Co., Sr. Unsec. Deb.,
10.00%, 06/15/05 50,000 55,537
----------------------------------------------------------------------
Devon Energy Corp., Sr. Unsec. Deb., 7.95%,
04/15/32 30,000 32,629
----------------------------------------------------------------------
Devon Financing Corp. ULC, Unsec. Gtd. Unsub.
Deb., 7.88%, 09/30/31 30,000 32,232
----------------------------------------------------------------------
Noble Energy, Inc., Sr. Unsec. Deb., 7.25%,
08/01/97 100,000 84,916
======================================================================
205,314
======================================================================
PHARMACEUTICALS-0.84%
Johnson & Johnson, Unsec. Deb., 8.72%,
11/01/24 200,000 228,652
======================================================================
PROPERTY & CASUALTY INSURANCE-0.10%
American Re Corp.-Series B, Sr. Unsec. Notes,
7.45%, 12/15/26 25,000 26,544
======================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
REAL ESTATE INVESTMENT TRUSTS-0.19%
EOP Operating L.P.,
Sr. Unsec. Notes, 7.25%, 02/15/18 $ 30,000 $ 32,003
----------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 20,000 20,767
======================================================================
52,770
======================================================================
SOVEREIGN DEBT-1.29%
Export Development Canada (Canada), Yankee
Bonds, 4.00%, 08/01/07 350,000 349,374
======================================================================
Total Bonds & Notes (Cost $7,960,412) 7,914,234
======================================================================
ASSET-BACKED SECURITIES-1.55%
AIRLINES-0.62%
American Airlines, Inc.-Class A-1, Series
2001-1, Pass Through Ctfs., 6.98%, 05/23/21 64,623 63,486
----------------------------------------------------------------------
Continental Airlines, Inc.-Series 974A, Pass
Through Ctfs., 6.90%, 01/02/18 108,857 103,445
======================================================================
166,931
======================================================================
DIVERSIFIED FINANCIAL SERVICES-0.93%
Citicorp Lease-Class A-1, Series 1999-1, Pass
Through Ctfs., 7.22%, 06/15/05 (Acquired
05/08/02-06/19/02; Cost $247,976)(a) 234,378 251,311
======================================================================
Total Asset-Backed Securities (Cost
$414,304) 418,242
======================================================================
U.S. GOVERNMENT AGENCY SECURITIES-54.19%
FEDERAL HOME LOAN BANK-2.55%
Unsec. Bonds,
4.88%, 04/16/04 150,000 156,528
----------------------------------------------------------------------
5.70%, 03/03/09 500,000 533,055
======================================================================
689,583
======================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-19.15%
Pass Through Ctfs.,
6.50%, 06/01/16 to 05/01/32 199,122 206,775
----------------------------------------------------------------------
6.00%, 04/01/17 to 05/01/32 574,497 590,533
----------------------------------------------------------------------
7.50%, 04/01/17 to 03/01/32 314,938 333,096
----------------------------------------------------------------------
7.00%, 03/01/32 to 06/01/32 524,399 546,052
----------------------------------------------------------------------
Pass Through Ctfs., TBA,(c)
6.50%, 09/01/17 to 09/01/32(d) 1,475,000 1,519,180
----------------------------------------------------------------------
7.00%, 09/01/17 to 09/01/32 450,000 469,735
----------------------------------------------------------------------
6.00%, 09/01/32(d) 750,000 757,266
----------------------------------------------------------------------
7.50%, 09/01/32 225,000 237,164
----------------------------------------------------------------------
Unsec. Notes,
4.88%, 03/15/07 500,000 520,395
======================================================================
5,180,196
======================================================================
|
FS-88
PRINCIPAL MARKET
AMOUNT VALUE
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-21.05%
Pass Through Ctfs.,
7.50%, 11/01/15 to 05/01/32 $ 356,475 $ 376,403
----------------------------------------------------------------------
7.00%, 12/01/15 to 07/01/32 681,557 711,565
----------------------------------------------------------------------
6.50%, 05/01/16 to 05/01/17 166,588 173,702
----------------------------------------------------------------------
6.00%, 01/01/17 to 05/01/17 445,805 458,907
----------------------------------------------------------------------
8.00%, 08/01/21 to 08/01/31 248,983 266,052
----------------------------------------------------------------------
Pass Through Ctfs., TBA,(c)
6.00%, 09/01/32(d) 675,000 680,695
----------------------------------------------------------------------
6.50%, 09/01/32(d) 1,337,000 1,374,603
----------------------------------------------------------------------
Unsec. Bonds,
6.63%, 11/15/30 45,000 48,753
----------------------------------------------------------------------
Unsec. Notes,
5.25%, 06/15/06 to 04/15/07 560,000 591,829
----------------------------------------------------------------------
4.25%, 07/15/07 500,000 505,990
----------------------------------------------------------------------
6.00%, 05/15/11 90,000 96,482
----------------------------------------------------------------------
6.20%, 06/13/17 150,000 153,743
----------------------------------------------------------------------
Unsec. Sub. Notes,
4.75%, 01/02/07 150,000 155,663
----------------------------------------------------------------------
5.25%, 08/01/12 100,000 98,858
======================================================================
5,693,245
======================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-9.29%
Pass Through Ctfs.,
8.50%, 02/15/25 186,246 201,019
----------------------------------------------------------------------
8.00%, 08/15/25 45,361 48,677
----------------------------------------------------------------------
7.00%, 04/15/28 to 08/15/31 478,409 500,542
----------------------------------------------------------------------
7.50%, 12/15/30 to 05/15/32 258,441 273,802
----------------------------------------------------------------------
6.50%, 03/15/31 to 07/15/32 619,256 639,594
----------------------------------------------------------------------
6.00%, 12/15/31 to 01/15/32 274,551 278,478
----------------------------------------------------------------------
Pass Through Ctfs., TBA,(c)
6.50%, 09/01/32 350,000 360,828
----------------------------------------------------------------------
7.00%, 09/01/32 125,000 130,547
----------------------------------------------------------------------
7.50%, 09/01/32 75,000 79,641
======================================================================
2,513,128
======================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
TENNESSEE VALLEY AUTHORITY-2.15%
Unsec. Bonds,
7.14%, 05/23/12 $ 500,000 $ 579,835
======================================================================
Total U.S. Government Agency Securities
(Cost $14,513,785) 14,655,987
======================================================================
U.S. TREASURY SECURITIES-33.83%
U.S. TREASURY BILLS-25.85%
1.67%, 08/29/02(e) 7,000,000 6,990,917
======================================================================
U.S. TREASURY NOTES-7.29%
3.25%, 12/31/03 210,000 214,068
----------------------------------------------------------------------
6.75%, 05/15/05 1,000,000 1,108,300
----------------------------------------------------------------------
6.50%, 10/15/06 to 02/15/10 260,000 294,995
----------------------------------------------------------------------
6.13%, 08/15/07 150,000 167,521
----------------------------------------------------------------------
4.75%, 11/15/08 180,000 188,633
======================================================================
1,973,517
======================================================================
U.S. TREASURY BONDS-0.69%
8.88%, 08/15/17 135,000 186,870
======================================================================
Total U.S. Treasury Securities (Cost
$9,108,744) 9,151,304
======================================================================
SHARES
MONEY MARKET FUNDS-5.00%
STIC Liquid Assets Portfolio(f) 676,791 676,791
----------------------------------------------------------------------
STIC Prime Portfolio(f) 676,791 676,791
======================================================================
Total Money Market Funds (Cost
$1,353,582) 1,353,582
======================================================================
TOTAL INVESTMENTS--123.83% (Cost $33,350,827) 33,493,349
======================================================================
OTHER ASSETS LESS LIABILITIES-(23.83%) (6,445,657)
======================================================================
NET ASSETS-100.00% $27,047,692
______________________________________________________________________
======================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Deb. - Debentures Gtd. - Guaranteed Jr. - Junior N.A. - National Association RAPS - Redeemable and Putable Securities Sec. - Secured Sr. - Senior Sub. - Subordinated TBA - To Be Announced Unsec. - Unsecured Unsub. - Unsubordinated |
Notes to Schedule of Investments:
(a) Restricted securities. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The aggregate market value of these securities at 07/31/02
was $1,769,552, which represented 6.54% of the Fund's net assets.
(b) Interest rates are redetermined quarterly. Rates shown are rates in effect
on 07/31/02.
(c) Securities purchased on forward commitment basis.
(d) These securities are subject to dollar roll transactions. See Note 1 Section
B.
(e) The interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-89
JULY 31, 2002
ASSETS:
Investments, at market value (cost
$33,350,827) $33,493,349
-----------------------------------------------------------
Receivables for:
Investments sold 311,333
-----------------------------------------------------------
Fund shares sold 374,940
-----------------------------------------------------------
Dividends and interest 261,456
-----------------------------------------------------------
Investment for deferred compensation plan 1,218
-----------------------------------------------------------
Other assets 27,452
===========================================================
Total assets 34,469,748
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 7,185,330
-----------------------------------------------------------
Fund shares reacquired 186,829
-----------------------------------------------------------
Dividends 6,906
-----------------------------------------------------------
Deferred compensation plan 1,218
-----------------------------------------------------------
Accrued distribution fees 18,757
-----------------------------------------------------------
Accrued trustees' fees 837
-----------------------------------------------------------
Accrued transfer agent fees 3,878
-----------------------------------------------------------
Accrued operating expenses 18,301
===========================================================
Total liabilities 7,422,056
===========================================================
Net assets applicable to shares outstanding $27,047,692
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 9,324,539
___________________________________________________________
===========================================================
Class B $14,678,263
___________________________________________________________
===========================================================
Class C $ 3,044,890
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 914,968
___________________________________________________________
===========================================================
Class B 1,440,120
___________________________________________________________
===========================================================
Class C 298,760
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.19
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.19 divided
by 95.25%) $ 10.70
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 10.19
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 10.19
___________________________________________________________
===========================================================
|
FOR THE PERIOD DECEMBER 31, 2001 (DATE OPERATIONS COMMENCED) TO JULY 31, 2002
INVESTMENT INCOME:
Interest $ 201,020
----------------------------------------------------------
Dividends from affiliated money market funds 16,310
==========================================================
Total investment income 217,330
__________________________________________________________
==========================================================
EXPENSES:
Advisory fees 26,520
----------------------------------------------------------
Administrative services fees 29,178
----------------------------------------------------------
Custodian fees 4,849
----------------------------------------------------------
Distribution fees -- Class A 7,055
----------------------------------------------------------
Distribution fees -- Class B 23,688
----------------------------------------------------------
Distribution fees -- Class C 9,195
----------------------------------------------------------
Registration and filing fees 30,060
----------------------------------------------------------
Printing fees 15,305
----------------------------------------------------------
Professional fees 23,513
----------------------------------------------------------
Transfer agent fees 12,121
----------------------------------------------------------
Trustees' fees 5,355
----------------------------------------------------------
Other 4,996
==========================================================
Total expenses 191,835
==========================================================
Less: Fees waived and expenses reimbursed (114,038)
----------------------------------------------------------
Expenses paid indirectly (100)
----------------------------------------------------------
Net expenses 77,697
==========================================================
Net investment income 139,633
==========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 87,097
----------------------------------------------------------
Net unrealized appreciation of investment
securities 142,522
----------------------------------------------------------
Net gain from investment securities 229,619
==========================================================
Net increase in net assets resulting from
operations $ 369,252
__________________________________________________________
==========================================================
|
See Notes to Financial Statements.
FS-90
FOR THE PERIOD DECEMBER 31, 2001 (DATE OPERATIONS COMMENCED) TO JULY 31, 2002
2002
-----------
OPERATIONS:
Net investment income $ 139,633
---------------------------------------------------------------------------
Net realized gain from investment securities 87,097
---------------------------------------------------------------------------
Net unrealized appreciation of investment securities 142,522
===========================================================================
Net increase in net assets resulting from operations 369,252
===========================================================================
Distributions to shareholders from net investment income:
Class A (77,172)
---------------------------------------------------------------------------
Class B (73,438)
---------------------------------------------------------------------------
Class C (27,624)
---------------------------------------------------------------------------
Share transactions-net:
Class A 9,251,803
---------------------------------------------------------------------------
Class B 14,591,873
---------------------------------------------------------------------------
Class C 3,012,998
===========================================================================
Net increase in net assets 27,047,692
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of period $27,047,692
___________________________________________________________________________
===========================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $26,827,563
---------------------------------------------------------------------------
Undistributed net investment income (1,218)
---------------------------------------------------------------------------
Undistributed net realized gain from investment securities 78,825
---------------------------------------------------------------------------
Unrealized appreciation of investment securities 142,522
===========================================================================
$27,047,692
___________________________________________________________________________
===========================================================================
|
See Notes to Financial Statements.
FS-91
JULY 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Total Return Bond 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 eight separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge. Matters affecting each portfolio or class will be 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 achieve maximum total return consistent with preservation of capital. The Fund commenced operations on December 31, 2001.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis. The Fund may engage in dollar roll transactions with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of
FS-92
securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities.
Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
On July 31, 2002 shares of beneficial interest was decreased by $29,111, undistributed net investment income was increased by $37,383 and undistributed net realized gains decreased by $8,272 as a result of differing book/tax treatment of nondeductible stock issuances costs, reclassification of paydown gains/losses and other reclassifications. Net assets of the Fund were unaffected by the reclassification discussed above.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $500 million of the Fund's average daily net assets, plus 0.45% on the next $500 million of the Fund's average daily net assets, plus 0.40% on the Fund's average daily net assets in excess of $1 billion. AIM has agreed to waive and/or reimburse expenses (excluding Rule 12b-1 plan fees, interest, taxes, dividends on short sales, extraordinary items and increases in expenses due to expense offset arrangements, if any) of Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A expenses to 1.25%. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market fund of which the Fund has invested. For the period December 31, 2001 (date operations commenced) through July 31, 2002, AIM waived fees of $26,520 and reimbursed expenses of $85,502.
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 period December 31, 2001 (date operations commenced) through July 31, 2002, AIM was paid $29,178 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. During the period December 31, 2001 (date operations commenced) through July 31, 2002, AFS retained $4,909 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, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares 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 Plans would constitute an asset-based sales charge. The Plans also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the respective classes. AIM Distributors has agreed to waive 0.10% of the Rule 12b-1 plan fees on Class A shares. For the period December 31, 2001 (date operations commenced) through July 31, 2002, the Class A, Class B and Class C shares paid AIM Distributors $5,039, $23,688 and $9,195, respectively, as compensation under the Plans. AIM Distributors waived fees of $2,016 for Class A shares.
AIM Distributors retained commissions of $13,297 from sales of the Class A shares of the Fund during the period December 31, 2001 (date operations commenced) through July 31, 2002. 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. During the period December 31, 2001 (date operations commenced) through July 31, 2002, AIM Distributors retained $0, $0 and $14 in contingent deferred sales charges imposed on redemptions of Class A, Class B and Class C shares, respectively.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and AIM Distributors.
During the period December 31, 2001 (date operations commenced) through July 31, 2002, the Fund paid $1,390 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the period December 31, 2001 (date operations commenced) through July 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $51 and reductions in custodian fees of $49 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $100.
FS-93
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the year ended July 31, 2002,
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.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of distributions paid during 2002 was as follows:
2002
--------
Distributions paid from ordinary income $178,234
__________________________________________________________
==========================================================
|
As of July 31, 2002, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income $ 78,825
----------------------------------------------------------
Undistributed appreciation 141,304
==========================================================
$220,129
__________________________________________________________
==========================================================
|
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to deferral of Trustees compensation.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period December 31, 2001 (date operations commenced) through July 31, 2002 was $39,466,276 and $15,809,500, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of July 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $180,764 ---------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (38,242) ========================================================== Net unrealized appreciation of investment securities $142,522 __________________________________________________________ ========================================================== Investments have the same costs for tax and financial statement purposes. |
NOTE 8--SHARE INFORMATION
Changes in shares outstanding during the period December 31, 2001 (date operations commenced) through July 31, 2002 were as follows:
DECEMBER 31, 2001
(DATE OPERATIONS
COMMENCED) TO
JULY 31, 2002
------------------------
SHARES AMOUNT
--------- -----------
Sold:
Class A 992,436 $10,034,790
-------------------------------------------------------------
Class B 1,538,451 15,590,664
-------------------------------------------------------------
Class C 385,449 3,888,452
=============================================================
Issued as reinvestment of
dividends:
Class A 7,294 73,755
-------------------------------------------------------------
Class B 6,117 61,932
-------------------------------------------------------------
Class C 2,532 25,581
=============================================================
Reacquired:
Class A (84,762) (856,742)
-------------------------------------------------------------
Class B (104,448) (1,060,723)
-------------------------------------------------------------
Class C (89,221) (901,035)
=============================================================
2,653,848 $26,856,674
_____________________________________________________________
=============================================================
|
FS-94
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------
DECEMBER 31, 2001
(DATE OPERATIONS
COMMENCED) TO
JULY 31,
2002
-----------------
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a)
---------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.23
=================================================================================
Total from investment operations 0.41
=================================================================================
Less dividends from net investment income (0.22)
=================================================================================
Net asset value, end of period $10.19
_________________________________________________________________________________
=================================================================================
Total return(b) 4.09%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,325
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 1.00%(c)
---------------------------------------------------------------------------------
Without fee waivers and reimbursements 3.21%(c)
=================================================================================
Ratio of net investment income to average net assets 3.10%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 215%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Does not include sales charges and is not annualized for periods less
than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,454,144.
CLASS B
-----------------
DECEMBER 31, 2001
(DATE OPERATIONS
COMMENCED) TO
JULY 31,
2002
-----------------
Net asset value, beginning of period $ 10.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a)
---------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.22
=================================================================================
Total from investment operations 0.36
=================================================================================
Less dividends from net investment income (0.17)
=================================================================================
Net asset value, end of period $ 10.19
_________________________________________________________________________________
=================================================================================
Total return(b) 3.65%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $14,678
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 1.75%(c)
---------------------------------------------------------------------------------
Without fee waivers and reimbursements 3.86%(c)
=================================================================================
Ratio of net investment income to average net assets 2.35%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 215%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$4,059,180.
FS-95
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------
DECEMBER 31, 2001
(DATE OPERATIONS
COMMENCED) TO
JULY 31,
2002
-----------------
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a)
=================================================================================
Net gains on securities (both realized and unrealized) 0.22
=================================================================================
Total from investment operations 0.36
=================================================================================
Less dividends from net investment income (0.17)
=================================================================================
Net asset value, end of period $10.19
_________________________________________________________________________________
=================================================================================
Total return(b) 3.65%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,045
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:
With fee waivers and reimbursements 1.75%(c)
---------------------------------------------------------------------------------
Without fee waivers and reimbursements 3.86%(c)
=================================================================================
Ratio of net investment income to average net assets 2.35%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 215%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Does not include contingent deferred sales charges and is not annualized
for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,575,642.
FS-96
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
BONDS & NOTES-93.53%
ADVERTISING-0.26%
RH Donnelley Finance Corp. I, Sr. Notes,
8.88%, 12/15/10 (Acquired 11/26/02; Cost
$2,340,000)(a) $ 2,340,000 $ 2,503,800
=========================================================================
AEROSPACE & DEFENSE-0.38%
Dunlop Standard Aerospace Holdings PLC
(United Kingdom), Sr. Unsec. Sub. Yankee
Notes, 11.88%, 05/15/09 3,525,000 3,595,500
=========================================================================
AGRICULTURAL PRODUCTS-0.15%
Central Garden & Pet Co., Sr. Sub. Notes,
9.13%, 02/01/13 (Acquired 01/24/03; Cost
$1,345,000)(a)(b) 1,345,000 1,385,350
=========================================================================
AIRLINES-1.29%
Air Canada (Canada), Sr. Unsec. Global Notes,
10.25%, 03/15/11 8,130,000 3,943,050
-------------------------------------------------------------------------
Northwest Airlines Inc.,
Sr. Unsec. Gtd. Notes, 8.88%, 06/01/06 7,780,000 5,173,700
-------------------------------------------------------------------------
Unsec. Gtd. Unsub. Notes, 8.52%, 04/07/04 3,760,000 3,064,400
=========================================================================
12,181,150
=========================================================================
ALTERNATIVE CARRIERS-0.16%
LCI International, Inc., Sr. Notes, 7.25%,
06/15/07 2,680,000 1,514,200
=========================================================================
APPAREL RETAIL-2.42%
Big 5 Corp.-Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 7,579,000 7,920,055
-------------------------------------------------------------------------
Gap, Inc. (The), Unsec. Unsub. Global Notes,
9.90%, 12/15/05 8,085,000 8,731,800
-------------------------------------------------------------------------
Mothers Work, Inc., Sr. Unsec. Gtd. Notes,
11.25%, 08/01/10 5,790,000 6,195,300
=========================================================================
22,847,155
=========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.15%
Perry Ellis International Inc.-Series B, Sr.
Sec. Notes, 9.50%, 03/15/09 1,790,000 1,843,700
-------------------------------------------------------------------------
Russell Corp., Sr. Unsec. Gtd. Global Notes,
9.25%, 05/01/10 4,400,000 4,708,000
-------------------------------------------------------------------------
Samsonite Corp., Sr. Unsec. Sub Notes,
10.75%, 06/15/08 150,000 127,500
-------------------------------------------------------------------------
William Carter Co. (The)-Series B, Sr. Unsec.
Gtd. Sub. Global Notes, 10.88%, 08/15/11 3,805,000 4,214,037
=========================================================================
10,893,237
=========================================================================
AUTO PARTS & EQUIPMENT-0.30%
Dura Operating Corp.-Series B, Sr. Unsec.
Gtd. Global Notes, 8.63%, 04/15/12 425,000 425,000
-------------------------------------------------------------------------
Intermet Corp., Sr. Unsec. Gtd. Global Notes,
9.75%, 06/15/09 2,670,000 2,362,950
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT-(CONTINUED)
Key Plastics Holdings, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
03/15/07(b)(d) $23,770,000 $ 2
=========================================================================
2,787,952
=========================================================================
BANKS-0.65%
Western Financial Bank, Unsec. Sub. Deb.,
9.63%, 05/15/12 6,300,000 6,174,000
=========================================================================
BROADCASTING & CABLE TV-15.09%
Acme Communications, Inc.-Series B, Sr.
Unsec. Unsub. Gtd. Notes, 10.88%, 09/30/04 14,105,000 14,492,887
-------------------------------------------------------------------------
Adelphia Communications Corp.,
Series B, Sr. Unsec. Notes, 9.88%,
03/01/07(c) 4,220,000 1,888,450
-------------------------------------------------------------------------
Sr. Unsec. Notes, 10.88%, 10/01/10(c) 9,595,000 4,293,762
-------------------------------------------------------------------------
Allbritton Communications Co.,
Sr. Sub. Notes, 7.75%, 12/15/12
(Acquired 12/06/02-01/28/03;
Cost $7,891,862)(a)(b) 7,950,000 7,890,375
-------------------------------------------------------------------------
Alliance Atlantis Communications Inc.
(Canada), Sr. Unsec. Sub. Yankee Notes,
13.00%, 12/15/09 7,045,000 7,925,625
-------------------------------------------------------------------------
Charter Communications Holdings, LLC/Charter
Communications Holdings Capital Corp.,
Sr. Unsec. Sub. Disc. Notes, 9.92%,
04/01/11(e) 11,460,000 4,985,100
-------------------------------------------------------------------------
Sr. Unsec. Sub. Global Notes, 11.13%,
01/15/11 4,610,000 2,328,050
-------------------------------------------------------------------------
Comcast UK Cable Partners Ltd. (Bermuda), Sr.
Unsec. Yankee Disc. Deb., 11.20%, 11/15/07 9,395,000 6,811,375
-------------------------------------------------------------------------
CSC Holdings Inc.-Series B, Sr. Unsec. Unsub.
Notes, 7.63%, 04/01/11 9,895,000 9,548,675
-------------------------------------------------------------------------
EchoStar DBS Corp., Sr. Unsec. Global Notes,
10.38%, 10/01/07 4,605,000 4,973,400
-------------------------------------------------------------------------
Granite Broadcasting Corp., Sr. Sub. Notes,
10.38%, 05/15/05 1,778,000 1,626,870
-------------------------------------------------------------------------
Gray Television Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 9.25%, 12/15/11 2,230,000 2,380,525
-------------------------------------------------------------------------
Insight Midwest, L.P., Sr. Unsec. Global
Notes, 10.50%, 11/01/10 6,435,000 6,402,825
-------------------------------------------------------------------------
Knology, Inc., Sr. Unsec. Notes, 12.00%,
11/30/09 (Acquired 01/06/98-01/28/02; Cost
$18,371,219)(a) 10,698,000 6,445,545
-------------------------------------------------------------------------
LBI Media Inc., Sr. Unsec. Gtd. Sub. Notes,
10.13%, 07/15/12 (Acquired 06/28/02; Cost
$5,340,000)(a) 5,340,000 5,633,700
-------------------------------------------------------------------------
LIN Holdings Corp., Sr. Unsec. Disc. Notes,
10.00%, 03/01/08(e) 7,135,000 7,313,375
-------------------------------------------------------------------------
Mediacomm LLC, Sr. Unsec. Notes, 9.50%,
01/15/13 8,140,000 7,855,100
-------------------------------------------------------------------------
Nextmedia Operating Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.75%, 07/01/11 4,515,000 4,853,625
-------------------------------------------------------------------------
|
FS-97
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
Pegasus Communications Corp.
Series B, Sr. Notes, 9.63%, 10/15/05 $ 7,700,000 $ 5,582,500
-------------------------------------------------------------------------
Series B, Sr. Unsec. Notes, 12.50%,
08/01/07 11,960,000 8,431,800
-------------------------------------------------------------------------
Radio One, Inc.-Series B, Sr. Unsec. Gtd.
Sub. Global Notes, 8.88%, 07/01/11 6,595,000 7,089,625
-------------------------------------------------------------------------
Salem Communications Holding Corp.-Series B,
Sr. Unsec. Gtd. Sub. Global Notes, 9.00%,
07/01/11 5,070,000 5,348,850
-------------------------------------------------------------------------
Spanish Broadcasting System, Inc., Sr. Unsec.
Gtd. Sub. Global Notes, 9.63%, 11/01/09 6,114,000 6,327,990
-------------------------------------------------------------------------
United Pan-Europe Communications N.V.
(Netherlands)-Series B, Sr. Unsec. Yankee
Notes, 11.25%, 02/01/10(c) 12,385,000 1,300,425
-------------------------------------------------------------------------
11.50%, 02/01/10(c) 8,200,000 861,000
=========================================================================
142,591,454
=========================================================================
BUILDING PRODUCTS-0.48%
Associated Materials Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 9.75%, 04/15/12 1,780,000 1,895,700
-------------------------------------------------------------------------
Atrium Cos., Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 05/01/09 2,660,000 2,686,600
=========================================================================
4,582,300
=========================================================================
CASINOS & GAMBLING-4.02%
Ameristar Casinos, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 10.75%, 02/15/09 2,320,000 2,470,800
-------------------------------------------------------------------------
Boyd Gaming Corp.,
Sr. Unsec. Gtd. Global Notes, 9.25%,
08/01/09 4,705,000 5,128,450
-------------------------------------------------------------------------
Sr. Unsec. Sub. Global Notes, 8.75%,
04/15/12 4,450,000 4,672,500
-------------------------------------------------------------------------
Herbst Gaming, Inc.,
Series B, Sr. Sec. Global Notes, 10.75%,
09/01/08 4,450,000 4,705,875
-------------------------------------------------------------------------
Sr. Sec. Notes, 10.75%, 09/01/08
(Acquired 01/24/03; Cost $966,625)(a)(b) 925,000 978,187
-------------------------------------------------------------------------
Hollywood Casino Corp., Sr. Sec. Gtd.
Mortgage Notes, 11.25%, 05/01/07 6,410,000 6,906,775
-------------------------------------------------------------------------
Hollywood Casino Corp./Shreveport Capital
Corp., Sr. Unsec. Gtd. Mortgage Notes,
13.00%, 08/01/06 2,960,000 2,619,600
-------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, Sr. Unsec.
Gtd. Sub. Global Notes, 8.00%, 04/01/12 1,370,000 1,417,950
-------------------------------------------------------------------------
Park Place Entertainment Corp., Sr. Unsec.
Global Notes, 7.50%, 09/01/09 5,235,000 5,365,875
-------------------------------------------------------------------------
Venetian Casino Resort, LLC, Sec. Gtd.
Mortgage Global Notes, 11.00%, 06/15/10 3,565,000 3,707,600
=========================================================================
37,973,612
=========================================================================
COMMODITY CHEMICALS-0.65%
ISP Chemco Inc.-Series B, Sr. Unsec. Gtd.
Sub. Global Notes, 10.25%, 07/01/11 3,590,000 3,778,475
-------------------------------------------------------------------------
Methanex Corp. (Canada), Sr. Unsec. Notes,
8.75%, 08/15/12 2,225,000 2,358,500
=========================================================================
6,136,975
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS-0.05%
Seagate Technology, Sr. Unsec. Gtd. Global
Notes, 8.00%, 05/15/09 $ 480,000 $ 502,800
=========================================================================
CONSTRUCTION & ENGINEERING-0.77%
Schuff Steel Co., Sr. Unsec. Gtd. Sub. Notes,
10.50%, 06/01/08 9,020,000 7,261,100
=========================================================================
CONSTRUCTION, FARM MACHINERY & HEAVY
TRUCKS-0.63%
Terex Corp., Sr. Unsec. Gtd. Sub. Global
Notes, 9.25%, 07/15/11 6,380,000 5,965,300
=========================================================================
CONSTRUCTION MATERIALS-0.70%
MMI Products, Inc.-Series B, Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 7,720,000 6,600,600
=========================================================================
DEPARTMENT STORES-0.67%
JC Penney Co. Inc., Unsec. Notes, 7.60%,
04/01/07 6,240,000 6,372,600
=========================================================================
DISTILLERS & VINTNERS-0.46%
Constellation Brands, Inc.-Series B, Sr. Gtd.
Sub. Notes, 8.13%, 01/15/12 4,330,000 4,384,125
=========================================================================
DISTRIBUTORS-0.09%
AmeriGas Partners, L.P., Sr. Unsec. Global
Notes, 8.88%, 05/20/11 810,000 878,850
=========================================================================
DIVERSIFIED CHEMICALS-1.44%
Equistar Chemicals L.P./Equistar Funding
Corp., Sr. Unsec. Gtd. Global Notes,
10.13%, 09/01/08 6,580,000 6,020,700
-------------------------------------------------------------------------
FMC Corp., Sr. Sec. Notes, 10.25%, 11/01/09
(Acquired 10/09/02; Cost $1,975,440)(a) 2,000,000 2,140,000
-------------------------------------------------------------------------
Huntsman International LLC, Sr. Unsec. Gtd.
Global Notes, 9.88%, 03/01/09 5,500,000 5,472,500
=========================================================================
13,633,200
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-1.40%
Qwest Capital Funding, Inc., Unsec. Gtd.
Global Notes,
7.00%, 08/03/09 5,370,000 3,973,800
-------------------------------------------------------------------------
7.25%, 02/15/11 4,475,000 3,266,750
-------------------------------------------------------------------------
Technical Olympic USA, Inc., Sr. Unsec. Gtd.
Global Notes, 9.00%, 07/01/10 6,170,000 5,954,050
=========================================================================
13,194,600
=========================================================================
DRUG RETAIL-0.64%
Rite Aid Corp., Sr. Unsec. Unsub. Notes,
7.13%, 01/15/07 7,070,000 6,062,525
=========================================================================
ELECTRIC UTILITIES-1.31%
AES Corp. (The), Sec. Notes, 10.00%, 07/15/05
(Acquired 12/13/02; Cost $3,400,826)(a) 3,608,000 3,589,960
-------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Notes, 8.50%, 05/01/08 5,870,000 2,788,250
-------------------------------------------------------------------------
CMS Energy Corp., Sr. Unsec. Unsub. Notes,
8.90%, 07/15/08 3,425,000 2,945,500
-------------------------------------------------------------------------
|
FS-98
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
ELECTRIC UTILITIES-(CONTINUED)
Mission Energy Holding Co., Sr. Sec. Global
Notes, 13.50%, 07/15/08 $11,150,000 $ 3,066,250
=========================================================================
12,389,960
=========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.12%
Flextronics International Ltd. (Singapore),
Sr. Unsec. Sub. Yankee Notes, 9.88%,
07/01/10 5,530,000 5,972,400
-------------------------------------------------------------------------
Sanmina-SCI Corp., Sr. Sec. Notes, 10.38%,
01/15/10 (Acquired 12/18/02-12/20/02; Cost
$4,478,394)(a) 4,475,000 4,654,000
=========================================================================
10,626,400
=========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-1.80%
Fisher Scientific International Inc.,
Sr. Sub. Global Notes, 8.13%, 05/01/12
(Acquired 01/09/03; Cost $3,764,800)(a)(b) 3,620,000 3,801,000
-------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 8.13%, 05/01/12 4,395,000 4,625,737
-------------------------------------------------------------------------
Knowles Electronics Inc., Sr. Unsec. Gtd.
Sub. Notes, 13.13%, 10/15/09 8,860,000 5,891,900
-------------------------------------------------------------------------
Solectron Corp., Sr. Unsec. Notes, 9.63%,
02/15/09 2,645,000 2,697,900
=========================================================================
17,016,537
=========================================================================
EMPLOYMENT SERVICES-0.33%
MSX International, Inc., Sr. Unsec. Gtd. Sub.
Notes, 11.38%, 01/15/08 8,075,000 3,108,875
=========================================================================
ENVIRONMENTAL SERVICES-0.91%
Allied Waste North America Inc.,
Series B, Sr. Gtd. Sub. Global Notes,
8.50%, 12/01/08 4,365,000 4,430,475
-------------------------------------------------------------------------
Sr. Sec. Gtd. Notes, 9.25%, 09/01/12
(Acquired 11/12/02; Cost $4,000,000)(a) 4,000,000 4,150,000
=========================================================================
8,580,475
=========================================================================
FOOD DISTRIBUTORS-0.59%
Fleming Cos., Inc.,
Series D, Sr. Unsec. Gtd. Sub. Global
Notes, 10.63%, 07/31/07 3,565,000 1,764,675
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes, 10.13%,
04/01/08 1,000,000 715,000
-------------------------------------------------------------------------
Roundy's, Inc., Sr. Sub. Notes, 8.88%,
06/15/12 (Acquired 12/12/02; Cost
$3,109,375)(a) 3,125,000 3,062,594
=========================================================================
5,542,269
=========================================================================
FOREST PRODUCTS-1.94%
Georgia-Pacific Corp., Sr. Unsec. Notes,
8.88%, 02/01/10 (Acquired 01/23/03; Cost
$4,903,416)(a)(b) 4,935,000 4,910,325
-------------------------------------------------------------------------
Louisiana-Pacific Corp.,
Sr. Unsec. Notes, 8.50%, 08/15/05 5,355,000 5,569,200
-------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 10.88%, 11/15/08 2,610,000 2,831,850
-------------------------------------------------------------------------
Millar Western Forest Products Ltd. (Canada),
Sr. Unsec. Yankee Notes, 9.88%, 05/15/08 5,180,000 5,050,500
=========================================================================
18,361,875
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
GENERAL MERCHANDISE STORES-0.95%
Pantry, Inc. (The), Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 10/15/07 $ 9,500,000 $ 8,977,500
=========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-0.59%
AmerisourceBergen Corp., Sr. Notes, 7.25%,
11/15/12 (Acquired 11/12/02; Cost
$2,685,000)(a) 2,685,000 2,772,262
-------------------------------------------------------------------------
NDCHealth Corp., Sr. Unsec. Sub. Notes,
10.50%, 12/01/12 (Acquired
11/18/02-11/21/02; Cost $2,698,750)(a) 2,710,000 2,791,300
=========================================================================
5,563,562
=========================================================================
HEALTH CARE EQUIPMENT-1.18%
CONMED Corp., Sr. Unsec. Gtd. Sub. Notes,
9.00%, 03/15/08 2,140,000 2,214,900
-------------------------------------------------------------------------
Medquest Inc., Sr. Sub. Notes, 11.88%,
08/15/12 (Acquired 08/08/02; Cost
$2,593,582)(a) 2,650,000 2,544,000
-------------------------------------------------------------------------
Radiologix, Inc.-Series B, Sr. Unsec. Gtd.
Global Notes, 10.50%, 12/15/08 3,540,000 2,672,700
-------------------------------------------------------------------------
Vicar Operating, Inc., Sr. Unsec. Gtd. Notes,
9.88%, 12/01/09 3,420,000 3,744,900
=========================================================================
11,176,500
=========================================================================
HEALTH CARE FACILITIES-2.32%
Hanger Orthopedic Group, Inc.,
Sr. Gtd. Sub. Notes, 11.25%, 06/15/09 4,750,000 4,987,500
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes, 10.38%,
02/15/09 840,000 890,400
-------------------------------------------------------------------------
Select Medical Corp., Sr. Unsec. Sub. Global
Notes, 9.50%, 06/15/09 8,285,000 8,740,675
-------------------------------------------------------------------------
Triad Hospitals, Inc.-Series B, Sr. Unsec.
Gtd. Global Notes, 8.75%, 05/01/09 2,665,000 2,864,875
-------------------------------------------------------------------------
United Surgical Partners International, Inc.,
Sr. Unsec. Gtd. Sub. Global Notes, 10.00%,
12/15/11 4,275,000 4,467,375
=========================================================================
21,950,825
=========================================================================
HEALTH CARE SUPPLIES-0.56%
DJ Orthopedics LLC, Sr. Unsec. Gtd. Sub.
Notes, 12.63%, 06/15/09 5,275,000 5,248,625
=========================================================================
HOME FURNISHINGS-1.04%
Sealy Mattress Co.-Series B, Sr. Gtd. Sub.
Notes, 9.88%, 12/15/07 8,130,000 8,130,000
-------------------------------------------------------------------------
Winsloew Furniture, Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 12.75%, 08/15/07 2,025,000 1,670,625
=========================================================================
9,800,625
=========================================================================
HOMEBUILDING-2.69%
Beazer Homes USA, Inc., Sr. Unsec. Gtd.
Global Notes 8.38%, 04/15/12 3,515,000 3,664,388
-------------------------------------------------------------------------
K Hovnanian Enterprises, Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 10/01/07 3,400,000 3,723,000
-------------------------------------------------------------------------
KB HOME, Sr. Sub. Notes, 7.75%, 02/01/10 4,485,000 4,456,969
-------------------------------------------------------------------------
|
FS-99
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
HOMEBUILDING-(CONTINUED)
Schuler Homes, Inc.
Sr. Unsec. Gtd. Global Notes, 10.50%,
07/15/11 $ 3,017,000 $ 3,182,935
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 9.00%, 04/15/08 4,050,000 4,181,625
-------------------------------------------------------------------------
WCI Communities Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 10.63%, 02/15/11 6,250,000 6,187,500
=========================================================================
25,396,417
=========================================================================
HOTELS, RESORTS & CRUISE LINES-2.81%
HMH Properties Inc., Sr. Sec. Gtd. Notes,
7.88%, 08/01/08 1,805,000 1,696,700
-------------------------------------------------------------------------
Intrawest Corp. (Canada), Sr. Unsec. Gtd.
Global Notes, 10.50%, 02/01/10 5,990,000 6,319,450
-------------------------------------------------------------------------
John Q. Hammons Hotels, Inc., Sr. First
Mortgage Global Notes, 8.88%, 05/15/12 3,510,000 3,580,200
-------------------------------------------------------------------------
Kerzner International Ltd. (Bahamas), Sr.
Unsec. Gtd. Sub. Global Notes, 8.88%,
08/15/11 4,380,000 4,533,300
-------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. (Liberia), Sr.
Unsec. Unsub. Global Notes, 8.75%, 02/02/11 6,920,000 6,470,200
-------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.,
Notes, 7.88%, 05/01/12 (Acquired
04/11/02-09/13/02; Cost $4,003,296)(a) 4,025,000 3,994,813
=========================================================================
26,594,663
=========================================================================
HOUSEHOLD APPLIANCES-0.62%
Salton, Inc., Sr. Unsec. Gtd. Sub. Notes,
10.75%, 12/15/05 5,850,000 5,850,000
=========================================================================
INDUSTRIAL CONGLOMERATES-0.50%
Tyco International Group S.A. (Luxembourg),
Sr. Gtd. Conv. Putable Notes, 2.75%,
01/15/08
(Acquired 01/07/03; Cost $2,232,000)(a)(b) 2,232,000 2,243,160
-------------------------------------------------------------------------
Sr. Gtd. Conv. Putable Notes, 3.13%,
01/15/15
(Acquired 01/07/03; Cost $2,477,000)(a)(b) 2,477,000 2,492,481
=========================================================================
4,735,641
=========================================================================
INDUSTRIAL GASES-0.65%
Constar International Inc., Sr. Sub. Notes,
11.00%, 12/01/12 6,255,000 6,129,900
=========================================================================
INDUSTRIAL MACHINERY-1.27%
Actuant Corp., Sr. Unsec. Gtd. Sub. Notes,
13.00%, 05/01/09 856,000 1,005,800
-------------------------------------------------------------------------
Cabot Safety Corp., Sr. Sub. Notes, 12.50%,
07/15/05 8,000,000 8,120,000
-------------------------------------------------------------------------
Manitowoc Co. Inc. (The), Sr. Sub. Notes,
10.50%, 08/01/12 (Acquired
08/02/02-11/04/02; Cost $2,692,250)(a) 2,690,000 2,837,950
=========================================================================
11,963,750
=========================================================================
INTEGRATED OIL & GAS-1.73%
El Paso CGP Co., Unsec. Notes, 7.75%,
06/15/10 4,560,000 3,807,600
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
INTEGRATED OIL & GAS-(CONTINUED)
El Paso Energy Partners, L.P.,
Series B, Sr. Unsec. Gtd. Sub. Global
Notes, 8.50%, 06/01/11 $ 2,330,000 $ 2,283,400
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes, 8.50%, 06/01/11
(Acquired 05/14/02-10/11/02;
Cost $10,118,238)(a) 10,470,000 10,260,600
=========================================================================
16,351,600
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.71%
Madison River Capital LLC/Madison River
Finance Corp., Sr. Unsec. Notes, 13.25%,
03/01/10 10,720,000 7,504,000
-------------------------------------------------------------------------
PTC International Finance II S.A.
(Luxembourg), Sr. Unsec. Gtd. Sub. Yankee
Notes, 11.25%, 12/01/09 6,380,000 6,922,300
-------------------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec. Unsub. Gtd.
Global Notes, 6.13%, 11/15/08 2,000,000 1,742,500
=========================================================================
16,168,800
=========================================================================
LEISURE FACILITIES-1.35%
Hilton Hotels Corp., Sr. Unsec. Notes, 7.63%,
12/01/12 3,830,000 3,782,125
-------------------------------------------------------------------------
Six Flags, Inc.,
Sr. Unsec. Global Notes, 8.88%, 02/01/10 4,750,000 4,441,250
-------------------------------------------------------------------------
Sr. Unsec. Global Notes, 9.50%, 02/01/09 875,000 835,625
-------------------------------------------------------------------------
Sr. Unsec. Notes, 9.75%, 06/15/07 3,835,000 3,719,950
=========================================================================
12,778,950
=========================================================================
MARINE-0.14%
Stena A.B. (Sweden), Sr. Notes, 9.63%,
12/01/12 (Acquired 11/22/02; Cost
$1,305,000)(a)(b) 1,305,000 1,363,725
=========================================================================
METAL & GLASS CONTAINERS-3.73%
AEP Industries Inc., Sr. Unsec. Sub. Notes,
9.88%, 11/15/07 1,900,000 1,700,500
-------------------------------------------------------------------------
Anchor Glass Container Corp.,
Sr. Sec. Notes, 11.00%, 02/15/13
(Acquired 01/31/03; Cost
$6,245,000)(a)(b)(d) 6,245,000 6,245,000
-------------------------------------------------------------------------
Sr. Sec. Sub. First Mortgage Notes,
11.25%, 04/01/05 5,800,000 5,785,500
-------------------------------------------------------------------------
Ball Corp., Sr. Notes, 6.88%, 12/15/12
(Acquired 12/05/02; Cost $1,820,000)(a) 1,820,000 1,856,400
-------------------------------------------------------------------------
Greif Brothers Corp., Sr. Unsec. Gtd. Sub.
Global Notes, 8.88%, 08/01/12 6,290,000 6,698,850
-------------------------------------------------------------------------
Jarden Corp., Sr. Unsec. Gtd. Sub. Global
Notes, 9.75%, 05/01/12 4,194,000 4,372,245
-------------------------------------------------------------------------
Owens-Brockway, Sr. Sec. Notes, 8.75%,
11/15/12 (Acquired 11/05/02; Cost
$3,600,000)(a) 3,600,000 3,636,000
-------------------------------------------------------------------------
Plastipak Holdings Inc., Sr. Unsec. Gtd.
Global Notes, 10.75%, 09/01/11 4,535,000 4,807,100
-------------------------------------------------------------------------
Stone Container Corp., Sr. Unsec. Global
Notes, 8.38%, 07/01/12 150,000 156,000
=========================================================================
35,257,595
=========================================================================
|
FS-100
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
MOVIES & ENTERTAINMENT-1.06%
AMC Entertainment Inc., Sr. Unsec. Sub.
Notes, 9.50%, 02/01/11 $10,330,000 $ 9,994,275
=========================================================================
MULTI-UTILITIES & UNREGULATED POWER-0.32%
Transcontinental Gas Pipe Line, Notes, 6.13%,
01/15/05 3,095,000 3,017,625
=========================================================================
OFFICE ELECTRONICS-0.20%
Xerox Corp., Sr. Notes, 9.75%, 01/15/09
(Acquired 01/08/03; Cost $1,800,950)(a)(b) 1,810,000 1,873,350
=========================================================================
OFFICE SERVICES & SUPPLIES-0.32%
Falcon Products, Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 11.38%, 06/15/09 4,230,000 2,982,150
=========================================================================
OIL & GAS DRILLING-1.01%
Pride International, Inc., Sr. Unsec. Notes,
10.00%, 06/01/09 8,765,000 9,510,025
=========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.43%
Grant Prideco Escrow Corp., Sr. Notes, 9.00%,
12/15/09 (Acquired 11/25/02; Cost
$1,805,000)(a) 1,805,000 1,877,200
-------------------------------------------------------------------------
Hanover Equipment Trust-Series 2001-A, Sr.
Sec. Notes, 8.50%, 09/01/08 (Acquired
08/05/02-10/24/02; Cost $4,587,213)(a) 5,390,000 5,120,500
-------------------------------------------------------------------------
SESI, LLC, Sr. Unsec. Gtd. Global Notes,
8.88%, 05/15/11 6,335,000 6,556,725
=========================================================================
13,554,425
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.99%
Chesapeake Energy Corp.,
Sr. Notes, 7.75%, 01/15/15 (Acquired
12/13/02;
Cost $2,198,377)(a) 2,220,000 2,264,400
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 8.38%, 11/01/08 2,720,000 2,862,800
-------------------------------------------------------------------------
Comstock Resources, Inc., Sr. Unsec. Gtd.
Notes, 11.25%, 05/01/07 3,060,000 3,304,800
-------------------------------------------------------------------------
Pogo Producing Co.-Series B, Sr. Unsec. Sub.
Notes, 10.38%, 02/15/09 4,880,000 5,294,800
-------------------------------------------------------------------------
Swift Energy Co., Sr. Unsec. Sub. Notes,
9.38%, 05/01/12 2,200,000 2,189,000
-------------------------------------------------------------------------
Westport Resources Corp., Sr. Sub. Notes,
8.25%, 11/01/11 (Acquired 12/11/02; Cost
$2,791,300)(a) 2,710,000 2,872,600
=========================================================================
18,788,400
=========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-3.45%
Frontier Oil Corp., Sr. Unsec. Sub. Notes,
11.75%, 11/15/09 10,000,000 10,600,000
-------------------------------------------------------------------------
Premco Refining Group Inc. (The),
Sr. Notes, 9.25%, 02/01/10 (Acquired
01/28/03;
Cost $2,680,000)(a)(b) 2,680,000 2,700,100
-------------------------------------------------------------------------
Sr. Notes, 9.50%, 02/01/13 (Acquired
01/28/03;
Cost $3,600,000)(a)(b) 3,600,000 3,627,000
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
OIL & GAS REFINING, MARKETING & TRANSPORTATION-(CONTINUED)
Tesoro Petroleum Corp., Sr. Unsec. Sub.
Global Notes, 9.63%, 04/01/12 $ 890,000 $ 582,950
-------------------------------------------------------------------------
Texas Petrochemical Corp., Sr. Unsec. Sub.
Notes, 11.13%, 07/01/06 10,045,000 6,479,025
-------------------------------------------------------------------------
Western Gas Resources, Inc., Sr. Unsec. Gtd.
Sub. Notes, 10.00%, 06/15/09 8,000,000 8,600,000
=========================================================================
32,589,075
=========================================================================
PACKAGED FOODS & MEATS-0.35%
Dole Food Co., Inc., Sr. Unsec. Global Notes,
7.25%, 05/01/09 3,445,000 3,350,263
=========================================================================
PAPER PACKAGING-0.39%
Graphic Packaging Corp., Unsec. Gtd. Sub.
Global Notes, 8.63%, 02/15/12 3,425,000 3,647,625
=========================================================================
PAPER PRODUCTS-0.81%
Cascades Inc. (Canada), Sr. Notes, 7.25%,
02/15/13 (Acquired 01/31/03; Cost
$3,570,000)(a)(b)(d) 3,570,000 3,570,000
-------------------------------------------------------------------------
Tembec Industries Inc. (Canada), Sr. Unsec.
Gtd. Global Notes, 7.75%, 03/15/12 4,255,000 4,042,250
=========================================================================
7,612,250
=========================================================================
PERSONAL PRODUCTS-1.76%
Armkel LLC, Sr. Sub. Global Notes, 9.50%,
08/15/09 3,160,000 3,444,400
-------------------------------------------------------------------------
Elizabeth Arden, Inc., Sr. Sec. Global Notes,
11.75%, 02/01/11 8,045,000 8,447,250
-------------------------------------------------------------------------
Herbalife International, Inc., Sr. Sub.
Notes, 11.75%, 07/15/10 (Acquired
06/21/02-12/06/02; Cost $4,466,790)(a) 4,520,000 4,723,400
=========================================================================
16,615,050
=========================================================================
PHARMACEUTICALS-1.89%
aaiPharma Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 11.00%, 04/01/10 10,240,000 10,596,498
-------------------------------------------------------------------------
Biovail Corp. (Canada), Sr. Sub. Yankee
Notes, 7.88%, 04/01/10 7,010,000 7,220,300
=========================================================================
17,816,798
=========================================================================
PUBLISHING-1.29%
American Media Operations, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Global Notes, 10.25%,
05/01/09 4,350,000 4,654,500
-------------------------------------------------------------------------
Dex Media East LLC, Sr. Notes, 9.88%,
11/15/09 (Acquired 10/30/02; Cost
$2,660,000)(a) 2,660,000 2,839,550
-------------------------------------------------------------------------
PRIMEDIA Inc., Sr. Unsec. Gtd. Global Notes,
8.88%, 05/15/11 4,910,000 4,689,050
=========================================================================
12,183,100
=========================================================================
RAILROADS-1.85%
Kansas City Southern Railway, Sr. Unsec. Gtd.
Global Notes, 9.50%, 10/01/08 5,739,000 6,341,595
-------------------------------------------------------------------------
Railamerica Transportation Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.88%, 08/15/10 5,560,000 5,671,200
-------------------------------------------------------------------------
|
FS-101
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
RAILROADS-(CONTINUED)
TFM S.A. de C.V. (Mexico), Sr. Unsec. Gtd.
Yankee Deb., 11.75%, 06/15/09 $ 5,858,000 $ 5,477,230
=========================================================================
17,490,025
=========================================================================
REAL ESTATE-1.18%
Host Marriott L.P.,
Series E, Sr. Sec. Gtd. Notes, 8.38%,
02/15/06 300,000 295,500
-------------------------------------------------------------------------
Series G, Sr. Gtd. Global Notes, 9.25%,
10/01/07 2,845,000 2,859,225
-------------------------------------------------------------------------
Series I, Unsec. Gtd. Global Notes,
9.50%, 01/15/07 2,035,000 2,065,525
-------------------------------------------------------------------------
iStar Financial Inc., Sr. Unsec. Notes,
8.75%, 08/15/08 570,000 601,350
-------------------------------------------------------------------------
MeriStar Hospitality Corp., Sr. Unsec. Gtd.
Global Notes, 9.13%, 01/15/11 5,320,000 4,362,400
-------------------------------------------------------------------------
RFS Partnership L.P., Sr. Unsec. Gtd. Global
Notes, 9.75%, 03/01/12 980,000 999,600
=========================================================================
11,183,600
=========================================================================
RESTAURANTS-0.09%
Perkins Family Restaurants, L.P.-Series B,
Sr. Unsec. Notes, 10.13%, 12/15/07 970,000 873,000
=========================================================================
SEMICONDUCTORS-0.38%
ON Semiconductor Corp., Sr. Sec. Gtd. Notes,
12.00%, 05/15/08 (Acquired
05/01/02-06/11/02; Cost $4,314,771)(a) 4,515,000 3,634,575
=========================================================================
SPECIALTY CHEMICALS-0.96%
Macdermid Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 9.13%, 07/15/11 830,000 900,550
-------------------------------------------------------------------------
Millennium America, Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 9.25%, 06/15/08 4,935,000 5,113,894
-------------------------------------------------------------------------
OM Group, Inc., Sr. Unsec. Gtd. Sub. Global
Notes, 9.25%, 12/15/11 4,485,000 3,027,375
=========================================================================
9,041,819
=========================================================================
SPECIALTY STORES-2.65%
Advance Stores Co., Inc.-Series B, Sr. Unsec.
Gtd. Sub. Notes, 10.25%, 04/15/08 7,655,000 8,114,300
-------------------------------------------------------------------------
CSK Auto, Inc., Sr. Unsec. Gtd. Global Notes,
12.00%, 06/15/06 3,100,000 3,301,500
-------------------------------------------------------------------------
Petco Animal Supplies Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 10.75%, 11/01/11 4,390,000 4,829,000
-------------------------------------------------------------------------
Petro Stopping Centers L.P., Sr. Unsec.
Notes, 10.50%, 02/01/07 2,160,000 2,062,800
-------------------------------------------------------------------------
United Rentals North America Inc.,
Series B, Sr. Unsec. Gtd. Global Notes,
10.75%, 04/15/08 4,085,000 4,064,575
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 10.75%, 04/15/08
(Acquired 12/17/02; Cost $2,629,920)(a) 2,710,000 2,696,450
=========================================================================
25,068,625
=========================================================================
TRUCKING-1.10%
Avis Group Holdings, Inc., Sr. Unsec. Gtd.
Sub. Global Notes, 11.00%, 05/01/09 3,005,000 3,358,088
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
TRUCKING-(CONTINUED)
North American Van Lines, Sr. Unsec. Gtd.
Sub. Global Notes, 13.38%, 12/01/09 $ 6,825,000 $ 6,995,625
=========================================================================
10,353,713
=========================================================================
WIRELESS TELECOMMUNICATION SERVICES-3.36%
AirGate PCS, Inc., Sr. Sub. Disc. Notes,
13.50%, 10/01/09(e)(f) 5,745,000 545,775
-------------------------------------------------------------------------
Alamosa Holdings, Inc., Sr. Unsec. Gtd. Disc.
Notes, 12.88%, 02/15/10(e) 2,725,000 545,000
-------------------------------------------------------------------------
American Tower Escrow Corp., Sr. Sub. Disc.
Notes, 12.26%, 08/01/08 (Acquired 01/22/03;
Cost $2,096,828)(a)(b)(f)(g) 4,035,000 2,400,825
-------------------------------------------------------------------------
Horizon PCS, Inc., Sr. Unsec. Gtd. Disc.
Global Notes, 14.00%, 10/01/10(e) 4,865,000 267,575
-------------------------------------------------------------------------
iPCS, Inc., Sr. Unsec. Disc. Notes, 14.00%,
07/15/10(e) 5,760,000 259,200
-------------------------------------------------------------------------
IWO Holdings, Inc., Sr. Unsec. Gtd. Global
Notes, 14.00%, 01/15/11 10,020,000 1,853,700
-------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Notes,
12.00%, 11/01/08 9,705,000 10,141,725
-------------------------------------------------------------------------
NTELOS Inc., Sr. Unsec. Notes, 13.00%,
08/15/10 7,860,000 2,240,100
-------------------------------------------------------------------------
SBA Communications Corp., Sr. Unsec. Global
Notes, 10.25%, 02/01/09 5,105,000 3,190,625
-------------------------------------------------------------------------
Spectrasite Holdings, Inc.,
Sr. Disc. Notes, 12.00%, 07/15/08(e) 8,555,000 3,229,513
-------------------------------------------------------------------------
Sr. Unsec. Disc. Notes, 11.25%, 04/15/09(e) 1,490,000 521,500
-------------------------------------------------------------------------
Tritel PCS Inc.,
Sr. Unsec. Gtd. Sub. Disc. Notes,
12.75%, 05/15/09(e) 2,690,000 2,595,850
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Global Notes, 10.38%,
01/15/11 2,679,000 2,980,388
-------------------------------------------------------------------------
UbiquiTel Operating Co., Sr. Unsec. Gtd. Sub.
Disc. Notes, 14.00%, 04/15/10(e) 7,980,000 518,700
-------------------------------------------------------------------------
US Unwired Inc.-Series B, Sr. Unsec. Gtd.
Sub. Disc. Notes, 13.38%, 11/01/09(e) 4,580,000 480,900
=========================================================================
31,771,376
=========================================================================
Total Bonds & Notes (Cost $1,006,027,567) 883,908,598
=========================================================================
SHARES
WARRANTS & OTHER EQUITY INTERESTS-2.57%
BROADCASTING & CABLE TV-1.14%
Cablevision Systems New York Group
Series H, 11.75% Pfd. 35,680 3,478,800
-------------------------------------------------------------------------
Series M, 11.13% PIK Pfd. 69,120 6,808,320
-------------------------------------------------------------------------
Knology Inc.
Series D, Conv. Pfd. (Acquired 11/07/02;
Cost $0)(a)(b)(i) 605,183 453,887
-------------------------------------------------------------------------
Wts., expiring 10/22/07 (Acquired 03/12/98-
02/01/00; Cost $270)(a)(b)(d)(h) 47,295 0
-------------------------------------------------------------------------
United Pan-Europe Communications N.V.
(Netherlands)-Rts., expiring 02/14/03(d)(i) 6,593 0
=========================================================================
10,741,007
=========================================================================
|
FS-102
MARKET
SHARES VALUE
-------------------------------------------------------------------------
CONSTRUCTION MATERIALS-0.00%
Dayton Superior-Wts., expiring 06/15/09
(Acquired 08/07/00-01/30/01; Cost
$10,000)(a)(b)(h) 9,580 $ 4,790
=========================================================================
GENERAL MERCHANDISE STORES-0.01%
Travelcenters of America Inc.-Wts., expiring
05/01/09 (Acquired 01/29/01; Cost
$0)(a)(b)(h) 13,500 138,375
=========================================================================
HOME FURNISHINGS-0.00%
O'Sullivan Industries, Inc.
Series B, Pfd. Wts., expiring 11/15/09
(Acquired 06/13/00; Cost $0)(a)(b)(h) 20,195 202
-------------------------------------------------------------------------
Wts., expiring 11/15/09 (Acquired 06/13/00;
Cost $0)(a)(b)(h) 20,195 202
-------------------------------------------------------------------------
Winsloew Escrow Corp.-Wts., expiring 08/15/07
(Acquired 12/06/99; Cost $0)(a)(b)(h) 2,025 21,263
=========================================================================
21,667
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.00%
KMC Telecom Holdings, Inc.-Wts., expiring
4/15/08(h) 35 9
=========================================================================
RAILROADS-0.00%
Railamerica Inc.-Wts., expiring 08/15/10
(Acquired 10/05/00; Cost $0)(a)(b)(h) 14,375 17,969
=========================================================================
TELECOMMUNICATIONS EQUIPMENT-0.00%
Loral Space & Communications, Ltd.-Wts.,
expiring 12/26/06(h) 68,302 4,098
=========================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES-1.42%
Celcaribe S.A., Ordinary Trust Ctfs.
(Acquired 05/17/94-01/23/97; Cost
$0)(a)(b)(d)(i) 2,276,400 $ 22,764
-------------------------------------------------------------------------
Dobson Communications Corp.-12.25% PIK Pfd. 22,658 13,368,220
-------------------------------------------------------------------------
Horizon PCS, Inc.-Wts., expiring 10/01/10
(Acquired 05/02/01; Cost $0)(a)(b)(h) 27,480 27
-------------------------------------------------------------------------
iPCS, Inc.-Wts., expiring 07/15/10 (Acquired
01/29/01; Cost $0)(a)(b)(h) 5,880 1,470
-------------------------------------------------------------------------
IWO Holdings Inc.-Wts., expiring 01/15/11
(Acquired 08/24/01; Cost $0)(a)(b)(h) 13,320 3,330
-------------------------------------------------------------------------
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(a)(b)(h) 15,155 152
-------------------------------------------------------------------------
Ubiquitel Inc.-Wts., expiring 04/15/10
(Acquired 08/10/00; Cost $0)(a)(b)(h) 25,910 9,716
=========================================================================
13,405,679
=========================================================================
Total Warrants and Other Equity Interests
(Cost $29,599,237) 24,333,594
=========================================================================
MONEY MARKET FUNDS-2.82%
STIC Liquid Assets Portfolio(j) 13,333,553 13,333,553
-------------------------------------------------------------------------
STIC Prime Portfolio(j) 13,333,553 13,333,553
=========================================================================
Total Money Market Funds (Cost
$26,667,106) 26,667,106
=========================================================================
TOTAL INVESTMENTS-98.92% (Cost
$1,062,293,910) 934,909,298
=========================================================================
OTHER ASSETS LESS LIABILITIES-1.08% 10,183,863
=========================================================================
NET ASSETS-100.00% $945,093,161
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
Conv. - Convertible Ctfs. - Certificates Deb. - Debentures Disc. - Discounted Gtd. - Guaranteed Pfd. - Preferred PIK - Payment in Kind Rts. - Rights Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated Wts. - Warrants |
Notes to Schedule of Investments:
(a) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $135,056,624,
which represented 14.29% of the Fund's net assets.
(b) Security considered to be illiquid. The aggregate market value of securities
considered illiquid at 01/31/03 was $46,155,027, which represented 4.88% of
the Fund's net assets.
(c) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(d) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(e) Discounted bond at issue. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(f) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit includes warrants to purchase
common or preferred shares of the issuer.
(g) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i) Non-income producing security.
(j) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-103
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,062,293,910) $934,909,298
-----------------------------------------------------------
Receivables for:
Investments sold 19,349,196
-----------------------------------------------------------
Fund shares sold 2,253,462
-----------------------------------------------------------
Dividends and interest 22,248,268
-----------------------------------------------------------
Investment for deferred compensation plan 74,498
-----------------------------------------------------------
Other assets 52,118
===========================================================
Total assets 978,886,840
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 25,768,337
-----------------------------------------------------------
Fund shares reacquired 3,177,663
-----------------------------------------------------------
Dividends 3,578,939
-----------------------------------------------------------
Deferred compensation plan 74,498
-----------------------------------------------------------
Accrued distribution fees 538,783
-----------------------------------------------------------
Accrued trustees' fees 1,083
-----------------------------------------------------------
Accrued transfer agent fees 394,583
-----------------------------------------------------------
Accrued operating expenses 259,793
===========================================================
Total liabilities 33,793,679
===========================================================
Net assets applicable to shares outstanding $945,093,161
___________________________________________________________
===========================================================
NET ASSETS:
Class A $449,581,469
___________________________________________________________
===========================================================
Class B $444,139,531
___________________________________________________________
===========================================================
Class C $ 51,372,161
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 119,512,104
___________________________________________________________
===========================================================
Class B 117,727,154
___________________________________________________________
===========================================================
Class C 13,665,008
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 3.76
-----------------------------------------------------------
Offering price per share:
(Net asset value of $3.76 divided by
95.25%) $ 3.95
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 3.77
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 3.76
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $ 54,420,152
------------------------------------------------------------
Dividends 1,034,898
------------------------------------------------------------
Dividends from affiliated money market funds 358,153
============================================================
Total investment income 55,813,203
============================================================
EXPENSES:
Advisory fees 2,546,326
------------------------------------------------------------
Administrative services fees 106,370
------------------------------------------------------------
Custodian fees 63,413
------------------------------------------------------------
Distribution fees -- Class A 549,470
------------------------------------------------------------
Distribution fees -- Class B 2,247,046
------------------------------------------------------------
Distribution fees -- Class C 244,437
------------------------------------------------------------
Transfer agent fees 1,436,424
------------------------------------------------------------
Trustees' fees 6,535
------------------------------------------------------------
Other 203,796
============================================================
Total expenses 7,403,817
============================================================
Less: Fees waived (2,389)
------------------------------------------------------------
Expenses paid indirectly (35,777)
============================================================
Net expenses 7,365,651
============================================================
Net investment income 48,447,552
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (165,436,865)
------------------------------------------------------------
Change in net unrealized appreciation of
investment securities 185,290,851
============================================================
Net gain from investment securities 19,853,986
============================================================
Net increase in net assets resulting from
operations $ 68,301,538
____________________________________________________________
============================================================
|
See Notes to Financial Statements.
FS-104
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 48,447,552 $ 141,056,268
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (165,436,865) (486,124,409)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 185,290,851 148,209,888
================================================================================================
Net increase (decrease) in net assets resulting from
operations 68,301,538 (196,858,253)
================================================================================================
Distributions to shareholders from net investment income:
Class A (24,346,702) (69,550,001)
------------------------------------------------------------------------------------------------
Class B (23,269,658) (71,741,714)
------------------------------------------------------------------------------------------------
Class C (2,535,096) (7,514,536)
------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 21,326,981 (111,693,259)
------------------------------------------------------------------------------------------------
Class B (32,351,433) (114,155,181)
------------------------------------------------------------------------------------------------
Class C 525,245 (13,464,843)
================================================================================================
Net increase (decrease) in net assets 7,650,875 (584,977,787)
================================================================================================
NET ASSETS:
Beginning of period 937,442,286 1,522,420,073
================================================================================================
End of period $ 945,093,161 $ 937,442,286
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 2,978,470,026 $ 2,988,969,233
------------------------------------------------------------------------------------------------
Undistributed net investment income (14,129,350) (12,425,446)
------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (1,891,862,903) (1,726,426,038)
------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (127,384,612) (312,675,463)
================================================================================================
$ 945,093,161 $ 937,442,286
________________________________________________________________________________________________
================================================================================================
|
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM High Yield Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be 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 achieve a high level of current income. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
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.
FS-105
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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 and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
FS-106
G. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.625% on the first $200 million of the Fund's average daily net assets, plus 0.55% on the next $300 million of the Fund's average daily net assets, plus 0.50% on the next $500 million of the Fund's average daily net assets, plus 0.45% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the six months ended January 31, 2003, AIM waived fees of $2,389.
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 six months ended January 31, 2003, AIM was paid $106,370 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. During the six months ended January 31, 2003, AFS retained $763,810 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, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges, that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the Class A, Class B and Class C shares paid $549,470, $2,247,046 and $244,437, respectively.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During six months ended January 31, 2003, AIM Distributors retained $36,575 in front-end sales commissions from the sale of Class A shares and $18,627, $3,560 and $6,289 for Class A, Class B and Class C shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the six months ended January 31, 2003, the Fund paid legal fees of $2,987 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $7,399 and reductions in custodian fees of $28,378 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $35,777.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the six months ended January
31, 2003, 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
FS-107
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------------------------------------------------------
July 31, 2003 $ 3,132,878
------------------------------------------------------------
July 31, 2006 115,531,161
------------------------------------------------------------
July 31, 2007 297,433,797
------------------------------------------------------------
July 31, 2008 297,100,942
------------------------------------------------------------
July 31, 2009 131,908,743
------------------------------------------------------------
July 31, 2010 469,417,120
============================================================
Total capital loss carryforward $1,314,524,641
____________________________________________________________
============================================================
|
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $348,573,483 and $374,889,657, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $ 33,879,933 ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (162,993,819) ============================================================ Net unrealized appreciation (depreciation) of investment securities $(129,113,886) ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $1,064,023,184. |
NOTE 8--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class A shares are subject to CDSC charges. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2003 JULY 31, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 57,332,671 $ 207,622,814 61,671,459 $ 274,866,210
--------------------------------------------------------------------------------------------------------------------------
Class B 12,801,289 46,208,170 28,855,909 131,251,628
--------------------------------------------------------------------------------------------------------------------------
Class C 4,547,860 16,547,589 7,361,669 32,891,393
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 3,933,527 14,353,816 9,782,026 43,420,316
--------------------------------------------------------------------------------------------------------------------------
Class B 2,934,200 10,732,400 7,389,848 32,867,780
--------------------------------------------------------------------------------------------------------------------------
Class C 399,034 1,456,498 918,849 4,077,812
==========================================================================================================================
Conversion of Class B to Class A shares:*
Class A 2,474,003 9,059,337 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B (2,457,944) (9,059,337) -- --
==========================================================================================================================
Reacquired:
Class A (57,168,991) (209,708,986) (97,447,190) (429,979,785)
--------------------------------------------------------------------------------------------------------------------------
Class B (21,958,872) (80,232,666) (63,245,842) (278,274,589)
--------------------------------------------------------------------------------------------------------------------------
Class C (4,798,788) (17,478,842) (11,408,493) (50,434,048)
==========================================================================================================================
(1,962,011) $ (10,499,207) (56,121,765) $(239,313,283)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Prior to the six months ended January 31, 2003, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-108
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, --------------------- JULY 31, ------------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.70 $ 4.92 $ 7.00 $ 8.07 $ 8.77 $ 10.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.20 0.49(a) 0.68 0.47 0.85 0.92
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.06 (1.19) (2.03) (1.03) (0.66) (1.40)
=================================================================================================================================
Total from investment operations 0.26 (0.70) (1.35) (0.56) 0.19 (0.48)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.52) (0.69) (0.49) (0.87) (0.91)
---------------------------------------------------------------------------------------------------------------------------------
Returns of capital -- -- (0.03) (0.02) (0.02) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
income -- -- (0.01) -- -- --
=================================================================================================================================
Total distributions (0.20) (0.52) (0.73) (0.51) (0.89) (0.91)
=================================================================================================================================
Net asset value, end of period $ 3.76 $ 3.70 $ 4.92 $ 7.00 $ 8.07 $ 8.77
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.44% (15.36)% (19.98)% (7.12)% 2.21% (5.10)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $449,581 $417,974 $683,845 $1,056,453 $1,364,502 $1,670,863
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.18%(c) 1.07% 0.99% 0.93%(d) 0.92% 0.85%
=================================================================================================================================
Ratio of net investment income to average
net assets 10.73%(c) 11.15%(a) 11.98% 10.79%(d) 10.06% 9.45%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 40% 59% 55% 23% 79% 76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have remained the same and the ratio of net investment
income to average net assets would have been 11.22%. In accordance with
the AICPA Audit and Accounting Guide for Investment Companies, per share
and ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$435,992,654.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-109
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, --------------------- JULY 31, ------------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.71 $ 4.93 $ 7.01 $ 8.07 $ 8.76 $ 10.16
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.45(a) 0.64 0.44 0.79 0.84
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.07 (1.18) (2.03) (1.03) (0.66) (1.40)
=================================================================================================================================
Total from investment operations 0.25 (0.73) (1.39) (0.59) 0.13 (0.56)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.19) (0.49) (0.65) (0.45) (0.80) (0.84)
---------------------------------------------------------------------------------------------------------------------------------
Returns of capital -- -- (0.03) (0.02) (0.02) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
income -- -- (0.01) -- -- --
=================================================================================================================================
Total distributions (0.19) (0.49) (0.69) (0.47) (0.82) (0.84)
=================================================================================================================================
Net asset value, end of period $ 3.77 $ 3.71 $ 4.93 $ 7.01 $ 8.07 $ 8.76
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.02% (15.99)% (20.60)% (7.49)% 1.46% (5.90)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $444,140 $469,408 $756,704 $1,206,737 $1,559,864 $1,820,899
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.93%(c) 1.82% 1.75% 1.69%(d) 1.68% 1.61%
=================================================================================================================================
Ratio of net investment income to average
net assets 9.98%(c) 10.40%(a) 11.22% 10.03%(d) 9.30% 8.69%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 40% 59% 55% 23% 79% 76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.46 and the ratio of net investment income to
average net assets would have been 10.47%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$445,745,533.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-110
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, ------------------- JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 3.70 $ 4.92 $ 6.99 $ 8.05 $ 8.74 $ 10.14
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.45(a) 0.65 0.44 0.78 0.82(b)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.07 (1.18) (2.03) (1.03) (0.65) (1.38)
=================================================================================================================================
Total from investment operations 0.25 (0.73) (1.38) (0.59) 0.13 (0.56)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.19) (0.49) (0.65) (0.45) (0.80) (0.84)
---------------------------------------------------------------------------------------------------------------------------------
Returns of capital -- -- (0.03) (0.02) (0.02) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- -- (0.01) -- -- --
=================================================================================================================================
Total distributions (0.19) (0.49) (0.69) (0.47) (0.82) (0.84)
=================================================================================================================================
Net asset value, end of period $ 3.76 $ 3.70 $ 4.92 $ 6.99 $ 8.05 $ 8.74
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.04% (16.02)% (20.52)% (7.51)% 1.46% (5.92)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,372 $50,060 $81,871 $110,297 $129,675 $113,246
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.93%(d) 1.82% 1.75% 1.69%(e) 1.68% 1.61%
=================================================================================================================================
Ratio of net investment income to average net
assets 9.98%(d) 10.40%(a) 11.22% 10.03%(e) 9.30% 8.69%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 40% 59% 55% 23% 79% 76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premium on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.46 and the ratio of net investment income to
average net assets would have been 10.47%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$48,488,832.
(e) Annualized.
(f) Not annualized for period less than one year.
NOTE 10--SUBSEQUENT EVENT
The Board of Trustees unanimously approved, on February 6, 2003, an Agreement and Plan of Reorganization ("Plan") pursuant to which AIM High Yield Fund II ("High Yield Fund II"), a series of AIM Investment Securities Funds ("AIS"), would transfer substantially all of its assets to AIM High Yield Fund ("High Yield Fund"), a series of AIS. As a result of the transaction, shareholders of High Yield Fund II would receive shares of High Yield Fund in exchange for their shares of High Yield Fund II, and High Yield II Fund would cease operations.
The Plan requires approval of High Yield Fund II shareholders and will be submitted to the shareholders for their consideration at a meeting to be held on June 4, 2003. If the Plan is approved by shareholders of High Yield Fund II and certain conditions required by the Plan are satisfied, the transaction is expected to become effective shortly thereafter.
FS-111
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED BONDS & NOTES-74.70%
ADVERTISING-0.71%
Interpublic Group of Cos., Inc. (The), Unsec.
Sub. Conv. Disc. Notes, 1.87%, 06/01/06(a) $4,900,000 $ 3,797,500
========================================================================
AEROSPACE & DEFENSE-0.73%
Lockheed Martin Corp., Unsec. Gtd. Unsub.
Notes, 7.25%, 05/15/06 1,800,000 2,025,486
------------------------------------------------------------------------
Raytheon Co., Notes, 6.75%, 08/15/07 1,700,000 1,860,327
========================================================================
3,885,813
========================================================================
AGRICULTURAL PRODUCTS-0.36%
Archer-Daniels-Midland Co., Unsec. Unsub.
Deb., 6.95%, 12/15/97 1,750,000 1,904,227
========================================================================
APPAREL RETAIL-0.38%
Big 5 Corp.-Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 1,377,000 1,438,965
------------------------------------------------------------------------
Gap, Inc. (The), Unsec. Unsub. Notes, 9.90%,
12/15/05 565,000 610,200
========================================================================
2,049,165
========================================================================
AUTO PARTS & EQUIPMENT-0.00%
Key Plastics Holdings, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
03/15/07(b)(c) 1,325,000 0
========================================================================
AUTOMOBILE MANUFACTURERS-1.08%
DaimlerChrysler N.A. Holding Corp.-Series D,
Gtd. Medium Term Notes, 3.40%, 12/15/04 1,500,000 1,512,690
------------------------------------------------------------------------
General Motors Corp., Unsec. Deb., 8.80%,
03/01/21 4,000,000 4,273,000
========================================================================
5,785,690
========================================================================
BANKS-9.95%
African Development Bank (Luxembourg), Sr.
Unsec. Unsub. Global Notes, 3.25%, 07/29/05 1,700,000 1,742,075
------------------------------------------------------------------------
Bank One Corp., Sr. Unsec. Unsub. Global
Notes, 7.63%, 08/01/05 1,950,000 2,184,253
------------------------------------------------------------------------
Bank United-Series A, Medium Term Notes,
8.00%, 03/15/09 2,500,000 2,892,825
------------------------------------------------------------------------
Barclays O/S Investment Co. (Netherlands),
Unsec. Gtd. Unsub. Floating Rate Euro
Notes, 1.63%, 05/14/03 4,000,000 3,400,428
------------------------------------------------------------------------
BB&T Corp., RAPS, Sub. Notes, 6.38%, 06/30/05 1,930,000 2,090,132
------------------------------------------------------------------------
Chase Manhattan Corp., Sub. Deb., 7.88%,
07/15/06 250,000 282,687
------------------------------------------------------------------------
Citicorp,
Jr. Unsec. Sub. Notes, 6.38%, 01/15/06 1,500,000 1,618,080
------------------------------------------------------------------------
Sub. Global Notes, 6.75%, 08/15/05 2,900,000 3,190,435
------------------------------------------------------------------------
Danske Bank A/S (Denmark), Sub. Yankee Notes,
6.38%, 06/15/08 (Acquired 08/30/02; Cost
$912,441)(d)(e) 850,000 910,027
------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
BANKS-(CONTINUED)
Dresdner Funding Trust I, Bonds, 8.15%,
06/30/31 (Acquired 05/09/02; Cost
$3,182,910)(d)(e) $3,000,000 $ 3,040,110
------------------------------------------------------------------------
European Investment Bank (Luxembourg), Global
Notes, 4.63%, 03/01/07 1,000,000 1,064,520
------------------------------------------------------------------------
Golden State Bancorp. Inc., Sub. Deb.,
10.00%, 10/01/06 1,760,000 2,109,659
------------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 1,600,000 1,655,280
------------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom), Unsec. Sub.
Floating Rate Euro Notes, 1.69%,
06/29/49(f) 1,350,000 1,086,022
------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Putable Sub.
Deb., 8.25%, 11/01/04 2,500,000 3,164,625
------------------------------------------------------------------------
Santander Financial Issuances (Spain), Unsec.
Gtd. Sub. Yankee Notes, 7.00%, 04/01/06 900,000 978,210
------------------------------------------------------------------------
St. Paul Bancorp. Inc., Sr. Unsec. Unsub.
Notes, 7.13%, 02/15/04 1,500,000 1,571,175
------------------------------------------------------------------------
UBS Preferred Funding Trust I, Gtd. Global
Bonds, 8.62%, 10/29/49 1,750,000 2,082,500
------------------------------------------------------------------------
U.S. Bank N.A., Sub. Global Notes, 6.30%,
02/04/14 3,000,000 3,346,980
------------------------------------------------------------------------
Union Planters Bank N.A., Unsec. Putable Sub.
Notes, 6.50%, 03/15/08 2,650,000 2,951,437
------------------------------------------------------------------------
Wachovia Corp.,
Unsec. Putable Sub. Deb.,
6.55%, 10/15/05 660,000 725,485
------------------------------------------------------------------------
7.50%, 04/15/05 5,000,000 6,075,600
------------------------------------------------------------------------
Unsec. Sub. Notes, 6.80%, 06/01/05 1,850,000 2,035,055
------------------------------------------------------------------------
Washington Mutual, Inc., Jr. Unsec. Sub.
Notes, 8.25%, 04/01/10 2,500,000 2,955,750
========================================================================
53,153,350
========================================================================
BREWERS-0.36%
Anheuser-Busch Cos., Inc., Sr. Unsec. Deb.,
6.50%, 02/01/43 1,705,000 1,908,628
========================================================================
BROADCASTING & CABLE TV-9.38%
Adelphia Communications Corp., Sr. Unsec.
Notes, 10.88%, 10/01/10(b) 2,350,000 1,051,625
------------------------------------------------------------------------
British Sky Broadcasting Group PLC (United
Kingdom), Unsec. Gtd. Yankee Notes, 7.30%,
10/15/06 3,000,000 3,086,670
------------------------------------------------------------------------
Charter Communications Holdings, LLC/Charter
Communications Holdings Capital Corp., Sr.
Unsec. Sub. Notes, 10.75%, 10/01/09 995,000 487,550
------------------------------------------------------------------------
Comcast Cable Communications, Inc., Unsec.
Unsub. Notes, 8.88%, 05/01/17 1,135,000 1,348,732
------------------------------------------------------------------------
Comcast Corp., Sr. Unsec. Gtd. Unsub. Global
Notes, 6.50%, 01/15/15 2,100,000 2,103,213
------------------------------------------------------------------------
Comcast UK Cable Partners Ltd. (United
Kingdom), Sr. Unsec. Yankee Disc. Deb.,
11.20%, 11/15/07(a) 500,000 362,500
------------------------------------------------------------------------
|
FS-112
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
CSC Holdings Inc.,
Sr. Unsec. Deb., 7.88%, 02/15/18 $1,000,000 $ 910,000
------------------------------------------------------------------------
Sr. Unsec. Notes,
7.25%, 07/15/08 5,760,000 5,457,600
------------------------------------------------------------------------
7.88%, 12/15/07 6,680,000 6,513,000
------------------------------------------------------------------------
Jones Intercable, Inc., Sr. Unsec. Notes,
8.88%, 04/01/07 1,000,000 1,063,910
------------------------------------------------------------------------
Knology, Inc., Sr. Unsec. Notes, 12.00%,
11/30/09 (Acquired 01/06/98; Cost
$1,928,480)(e) 1,123,000 676,607
------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec. Sub.
Notes, 8.25%, 02/15/08 5,000,000 5,237,500
------------------------------------------------------------------------
TCI Communications, Inc.,
Medium Term Notes, 8.35%, 02/15/05 1,500,000 1,623,872
------------------------------------------------------------------------
Sr. Notes, 8.65%, 09/15/04 2,060,000 2,206,775
------------------------------------------------------------------------
Sr. Unsec. Deb.,
7.88%, 02/15/26 1,100,000 1,142,856
------------------------------------------------------------------------
8.75%, 08/01/15 4,750,000 5,571,418
------------------------------------------------------------------------
Time Warner Inc.,
Unsec. Deb., 9.15%, 02/01/23 5,800,000 6,725,100
------------------------------------------------------------------------
Unsec. Notes, 7.75%, 06/15/05 1,200,000 1,280,004
------------------------------------------------------------------------
Turner Broadcasting System, Inc.-Class A, Sr.
Notes, 8.38%, 07/01/13 2,825,000 3,275,192
========================================================================
50,124,124
========================================================================
CASINOS & GAMBLING-0.65%
Boyd Gaming Corp., Sr. Unsec. Sub. Global
Notes, 8.75%, 04/15/12 1,175,000 1,233,750
------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, Sr. Unsec.
Gtd. Sub. Notes, 8.00%, 04/01/12 1,500,000 1,552,500
------------------------------------------------------------------------
Park Place Entertainment Corp., Sr. Unsec.
Global Notes, 7.50%, 09/01/09 665,000 681,625
========================================================================
3,467,875
========================================================================
COMPUTER HARDWARE-0.37%
Candescent Technologies Corp., Sr. Conv.
Unsec. Gtd. Sub. Deb., 8.00%, 05/01/03
(Acquired 04/20/98; Cost
$2,000,000)(b)(c)(d)(e) 2,000,000 106,000
------------------------------------------------------------------------
International Business Machines Corp., Deb.,
8.38%, 11/01/19 1,500,000 1,895,040
========================================================================
2,001,040
========================================================================
CONSTRUCTION MATERIALS-0.26%
MMI Products, Inc.-Series B, Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 1,600,000 1,368,000
========================================================================
CONSUMER FINANCE-4.86%
CitiFinancial Credit Co.,
Notes, 6.63%, 06/01/15 4,068,000 4,567,794
------------------------------------------------------------------------
Unsec. Notes, 6.75%, 07/01/07 1,000,000 1,117,190
------------------------------------------------------------------------
Countrywide Home Loans, Inc.
Series K, Medium Term
Global Notes, 3.50%, 12/19/05 900,000 907,569
------------------------------------------------------------------------
Unsec. Gtd. Global Notes, 6.85%, 06/15/04 750,000 793,073
------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
CONSUMER FINANCE-(CONTINUED)
Ford Motor Credit Co.,
Global Notes, 7.88%, 06/15/10 $2,000,000 $ 1,991,100
------------------------------------------------------------------------
Unsec. Floating Rate Notes, 1.60%,
03/17/03(g) 1,500,000 1,497,631
------------------------------------------------------------------------
Unsec. Global Notes,
6.88%, 02/01/06 1,800,000 1,816,416
------------------------------------------------------------------------
7.38%, 10/28/09 1,600,000 1,571,024
------------------------------------------------------------------------
General Motors Acceptance Corp.,
Global Bonds,
6.15%, 04/05/07 3,000,000 3,050,250
------------------------------------------------------------------------
6.85%, 06/17/04 1,760,000 1,840,872
------------------------------------------------------------------------
Medium Term Notes, 5.25%, 05/16/05 2,200,000 2,235,442
------------------------------------------------------------------------
Unsec. Unsub. Notes, 7.63%, 06/15/04 975,000 1,028,781
------------------------------------------------------------------------
Household Finance Corp.,
Sr. Unsec. Global Notes,
6.50%, 01/24/06 1,000,000 1,074,090
------------------------------------------------------------------------
8.00%, 05/09/05 2,235,000 2,449,985
========================================================================
25,941,217
========================================================================
DISTILLERS & VINTNERS-0.59%
Constellation Brands, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 8.13%, 01/15/12 1,000,000 1,012,500
------------------------------------------------------------------------
Diageo PLC, Sr. Unsec. Gtd. Putable Notes,
7.45%, 04/15/05 1,750,000 2,128,560
========================================================================
3,141,060
========================================================================
DIVERSIFIED CHEMICALS-0.12%
Equistar Chemicals L.P./Equistar Funding
Corp., Sr. Unsec. Gtd. Global Notes,
10.13%, 09/01/08 680,000 622,200
========================================================================
DIVERSIFIED FINANCIAL SERVICES-10.60%
American General Finance Corp., Sr. Notes,
6.75%, 11/15/04 1,370,000 1,470,353
------------------------------------------------------------------------
ASIF Global Financing XIX, Sec. Notes, 4.90%,
01/17/13 (Acquired 01/08/03; Cost
$1,594,992)(d)(e) 1,600,000 1,595,712
------------------------------------------------------------------------
ASIF Global Financing XX, Sec. Notes, 2.65%,
01/17/06 (Acquired 01/08/03; Cost
$998,420)(d)(e) 1,000,000 998,820
------------------------------------------------------------------------
Associates Corp. of North America, Sr. Global
Notes, 5.80%, 04/20/04 1,100,000 1,152,844
------------------------------------------------------------------------
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 3,250,000 4,937,888
------------------------------------------------------------------------
CIT Group Inc.,
Sr. Floating Rate Medium Term Global Notes,
2.60%, 11/25/03(h) 1,000,000 1,000,630
------------------------------------------------------------------------
Sr. Global Notes, 7.13%, 10/15/04 600,000 636,804
------------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 3,000,000 3,337,530
------------------------------------------------------------------------
Citigroup Inc., Unsec. Sub. Notes, 6.63%,
06/15/32 3,400,000 3,748,126
------------------------------------------------------------------------
Fidelity Investments, Bonds, 7.57%, 06/15/29
(Acquired 04/10/01-05/01/02; Cost
$4,177,488)(d)(e) 3,835,000 4,576,421
------------------------------------------------------------------------
|
FS-113
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
General Electric Capital Corp.
Series A, Medium Term Global Notes,
5.00%, 06/15/07 $1,000,000 $ 1,057,260
------------------------------------------------------------------------
6.80%, 11/01/05 500,000 555,060
------------------------------------------------------------------------
Heller Financial, Inc.,
Sr. Unsec. Global Notes, 6.38%, 03/15/06 2,985,000 3,267,500
------------------------------------------------------------------------
Unsec. Global Notes, 7.38%, 11/01/09 1,500,000 1,743,840
------------------------------------------------------------------------
John Hancock Funds, Notes, 6.50%, 03/01/11
(Acquired 07/24/02; Cost $1,687,104)(d)(e) 1,600,000 1,707,648
------------------------------------------------------------------------
John Hancock Global Funding II, Notes, 5.00%,
07/27/07 (Acquired 06/12/02; Cost
$1,699,065)(d)(e) 1,700,000 1,764,668
------------------------------------------------------------------------
Lehman Brothers Holdings Inc.
Series E, Medium Term Disc. Notes, 9.94%,
02/10/28(i) 8,700,000 1,238,097
------------------------------------------------------------------------
Sr. Notes, 8.75%, 03/15/05 700,000 786,310
------------------------------------------------------------------------
Lehman Brothers Inc., Sr. Sub. Deb., 11.63%,
05/15/05 500,000 590,835
------------------------------------------------------------------------
Morgan Stanley, Unsec. Notes, 6.30%, 01/15/06 1,538,000 1,661,686
------------------------------------------------------------------------
NiSource Finance Corp., Sr. Unsec. Gtd.
Notes, 5.75%, 04/15/03 9,800,000 9,849,490
------------------------------------------------------------------------
Regional Diversified Funding, Sr. Notes,
9.25%, 03/15/30 (Acquired 01/10/03; Cost
$1,801,163)(d)(e) 1,605,257 1,855,805
------------------------------------------------------------------------
Salomon Smith Barney Holdings Inc., Unsec.
Notes, 7.13%, 10/01/06 2,325,000 2,602,396
------------------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Notes, 7.38%,
06/15/17 1,300,000 1,552,798
------------------------------------------------------------------------
USL Capital Corp., Sr. Global Notes, 5.95%,
10/15/03 1,300,000 1,331,668
------------------------------------------------------------------------
Washington Mutual Financial Corp., Sr. Unsec.
Notes, 8.25%, 06/15/05 900,000 1,015,587
------------------------------------------------------------------------
Wells Fargo Financial, Inc., Global Notes,
6.13%, 02/15/06 525,000 568,717
========================================================================
56,604,493
========================================================================
DIVERSIFIED METALS & MINING-0.70%
Rio Algom Ltd. (Canada), Unsec. Yankee Deb.,
7.05%, 11/01/05 3,500,000 3,751,440
========================================================================
ELECTRIC UTILITIES-7.80%
AES Corp. (The), Sec. Notes, 10.00%, 07/15/05
(Acquired 12/13/02; Cost $1,789,016)(e) 1,898,000 1,888,510
------------------------------------------------------------------------
Calpine Canada Energy Finance ULC (Canada),
Sr. Unsec. Gtd. Yankee Notes, 8.50%,
05/01/08 1,680,000 798,000
------------------------------------------------------------------------
Cleveland Electric Illuminating Co. (The),
First Mortgage Bonds, 6.86%, 10/01/08 1,700,000 1,855,635
------------------------------------------------------------------------
Duke Energy Corp., Bonds, 6.45%, 10/15/32 1,100,000 1,074,271
------------------------------------------------------------------------
El Paso Electric Co.-Series E, Sr. Sec. First
Mortgage Bonds, 9.40%, 05/01/11 3,000,000 3,131,010
------------------------------------------------------------------------
Hydro-Quebec (Canada),
Gtd. Euro Notes, 1.94%, 09/29/49 2,500,000 2,216,903
------------------------------------------------------------------------
Gtd. Yankee Bonds, 9.40%, 02/01/21(j) 2,000,000 2,842,720
------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
ELECTRIC UTILITIES-(CONTINUED)
Kincaid Generation LLC, Sr. Sec. Bonds,
7.33%, 06/15/20 (Acquired 04/30/98; Cost
$1,887,026)(d)(e) $1,856,765 $ 1,756,091
------------------------------------------------------------------------
Mission Energy Holding Co., Sr. Sec. Global
Notes, 13.50%, 07/15/08 1,130,000 310,750
------------------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 7.75%, 05/15/06(j) 4,300,000 4,883,209
------------------------------------------------------------------------
Series H, Sr. Unsec. Notes, 8.50%, 07/01/10 6,700,000 6,739,262
------------------------------------------------------------------------
Public Service Company of New Mexico-Series
A, Sr. Unsec. Notes, 7.10%, 08/01/05 1,200,000 1,232,628
------------------------------------------------------------------------
RGS (I&M) Funding Corp.-Series F, Sec. Lease
Obligation Bonds, 9.82%, 12/07/22 4,962,416 5,128,260
------------------------------------------------------------------------
South Carolina Electric & Gas Co., First
Mortgage Bonds, 9.00%, 07/15/06 1,550,000 1,700,769
------------------------------------------------------------------------
Texas-New Mexico Power Co., Sr. Unsec. Notes,
6.25%, 01/15/09 4,800,000 4,598,880
------------------------------------------------------------------------
Wisconsin Public Service Corp., Sr. Sec.
Notes, 4.88%, 12/01/12 1,500,000 1,519,215
========================================================================
41,676,113
========================================================================
ENVIRONMENTAL SERVICES-0.45%
Browning-Ferris Industries, Inc., Deb.,
9.25%, 05/01/21 2,570,000 2,377,250
========================================================================
FOOD DISTRIBUTORS-0.19%
Roundy's, Inc.-Series B, Sr. Sub. Notes,
8.88%, 06/15/12 (Acquired 12/12/02; Cost
$1,039,775)(e) 1,045,000 1,024,131
========================================================================
FOREST PRODUCTS-0.12%
Louisiana-Pacific Corp., Sr. Unsec. Notes,
8.50%, 08/15/05 635,000 660,400
========================================================================
GAS UTILITIES-0.71%
Kinder Morgan, Inc., Sr. Notes, 6.80%,
03/01/08 2,725,000 2,951,175
------------------------------------------------------------------------
Tennessee Gas Pipeline Co., Unsec. Deb.,
7.63%, 04/01/37 1,000,000 845,000
========================================================================
3,796,175
========================================================================
GENERAL MERCHANDISE STORES-0.21%
Wal-Mart Stores, Inc., Unsec. Deb., 8.50%,
09/15/24 1,000,000 1,128,710
========================================================================
HEALTH CARE FACILITIES-0.36%
Hanger Orthopedic Group, Inc., Sr. Unsec.
Gtd. Global Notes, 10.38%, 02/15/09 1,820,000 1,929,200
========================================================================
HOMEBUILDING-0.55%
K Hovnanian Enterprises, Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 10/01/07 1,750,000 1,916,250
------------------------------------------------------------------------
WCI Communities, Inc., Sr. Unsec. Gtd. Sub.
Global Notes, 9.13%, 05/01/12 1,150,000 1,040,750
========================================================================
2,957,000
========================================================================
INDUSTRIAL MACHINERY-0.23%
Pall Corp., Notes, 6.00%, 08/01/12 (Acquired
08/01/02; Cost $1,174,401)(d)(e) 1,175,000 1,235,583
========================================================================
|
FS-114
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
INTEGRATED OIL & GAS-2.90%
Conoco Inc., Sr. Unsec. Global Notes, 5.90%,
04/15/04 $1,025,000 $ 1,074,672
------------------------------------------------------------------------
Husky Oil Ltd. (Canada),
Sr. Unsec. Yankee Notes, 7.13%, 11/15/06 3,000,000 3,303,000
------------------------------------------------------------------------
Yankee Bonds, 8.90%, 08/15/28 2,645,000 2,906,614
------------------------------------------------------------------------
Occidental Petroleum Corp.,
Sr. Putable Deb., 9.25%, 08/01/04 4,375,000 5,714,056
------------------------------------------------------------------------
Sr. Unsec. Notes,
6.50%, 04/01/05 400,000 430,424
------------------------------------------------------------------------
7.38%, 11/15/08 1,800,000 2,074,140
========================================================================
15,502,906
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.07%
GTE Hawaiian Telephone Co., Inc.-Series A,
Unsec. Deb., 7.00%, 02/01/06 700,000 760,214
------------------------------------------------------------------------
Sprint Capital Corp.,
Gtd. Global Notes, 5.88%, 05/01/04 1,065,000 1,045,031
------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
5.70%, 11/15/03 2,500,000 2,490,625
------------------------------------------------------------------------
6.00%, 01/15/07 1,300,000 1,184,625
------------------------------------------------------------------------
Sr. Unsec. Unsub. Gtd. Global Notes,
6.13%, 11/15/08 2,500,000 2,178,125
------------------------------------------------------------------------
Sprint Corp., Deb., 9.00%, 10/15/19 2,500,000 2,334,375
------------------------------------------------------------------------
Verizon Pennsylvania Inc.-Series A, Global
Notes, 5.65%, 11/15/11 1,000,000 1,045,010
========================================================================
11,038,005
========================================================================
LEISURE FACILITIES-0.08%
Hilton Hotels Corp., Sr. Unsec. Notes, 7.63%,
12/01/12 430,000 424,625
========================================================================
LIFE & HEALTH INSURANCE-0.78%
Americo Life, Inc., Sr. Sub. Notes, 9.25%,
06/01/05 1,000,000 955,000
------------------------------------------------------------------------
Lincoln National Corp., Unsec. Deb., 9.13%,
10/01/24 835,000 956,543
------------------------------------------------------------------------
Sun Canada Financial Co., Gtd. Sub. Bonds,
6.63%, 12/15/07 (Acquired 10/14/99; Cost
$654,311)(d)(e) 700,000 756,539
------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 1,325,000 1,480,476
========================================================================
4,148,558
========================================================================
MOVIES & ENTERTAINMENT-0.19%
AOL Time Warner Inc., Sr. Gtd. Unsub. Global
Notes, 6.13%, 04/15/06 585,000 607,388
------------------------------------------------------------------------
Walt Disney Co. (The), Medium Term Notes,
5.25%, 11/10/03 400,000 409,600
========================================================================
1,016,988
========================================================================
OIL & GAS DRILLING-0.90%
Transocean Inc., Unsec. Notes, 6.95%,
04/15/08 4,300,000 4,811,399
========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-0.79%
National-Oilwell, Inc.-Series B, Sr. Unsec.
Notes, 6.50%, 03/15/11 $4,000,000 $ 4,221,560
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-5.73%
Amerada Hess Corp.,
Unsec. Notes,
5.30%, 08/15/04 1,050,000 1,095,381
------------------------------------------------------------------------
7.30%, 08/15/31 1,000,000 1,055,920
------------------------------------------------------------------------
Anadarko Petroleum Corp., Unsec. Putable
Deb., 7.73%, 09/15/26 1,200,000 1,438,932
------------------------------------------------------------------------
Burlington Resources Finance Co. (Canada),
Sr. Unsec. Gtd. Yankee Notes, 7.40%,
12/01/31 1,400,000 1,640,002
------------------------------------------------------------------------
Canadian Oil Sands Ltd. (Canada), Sr. Yankee
Notes, 7.90%, 09/01/21 (Acquired 08/17/01-
07/31/02; Cost $3,220,956)(d)(e) 3,200,000 3,579,936
------------------------------------------------------------------------
Chesapeake Energy Corp., Sr. Unsec. Gtd.
Notes, 8.38%, 11/01/08 1,250,000 1,315,625
------------------------------------------------------------------------
Devon Energy Corp., Sr. Unsec. Deb., 7.95%,
04/15/32 795,000 951,392
------------------------------------------------------------------------
Devon Financing Corp. ULC, Unsec. Gtd. Unsub.
Global Deb., 7.88%, 09/30/31 2,155,000 2,558,524
------------------------------------------------------------------------
Louis Dreyfus Natural Gas Corp., Unsec.
Notes, 6.88%, 12/01/07 3,500,000 3,921,855
------------------------------------------------------------------------
Newfield Exploration Co., Sr. Unsec. Unsub.
Notes, 7.63%, 03/01/11 5,500,000 5,912,500
------------------------------------------------------------------------
Noble Energy, Inc.,
Sr. Unsec. Deb., 7.25%, 08/01/97 3,000,000 2,747,280
------------------------------------------------------------------------
Sr. Unsec. Notes, 8.00%, 04/01/27 2,800,000 3,169,796
------------------------------------------------------------------------
Union Pacific Resources Group Inc., Unsec.
Notes, 6.75%, 05/15/08 1,050,000 1,195,572
========================================================================
30,582,715
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.50%
Petroleos Mexicanos (Mexico),
Sr. Unsec. Gtd. Yankee Bonds, 9.38%,
12/02/08 2,500,000 2,859,375
------------------------------------------------------------------------
Series P, Sr. Unsec. Putable Unsub. Yankee
Bonds, 9.50%, 03/15/06 3,100,000 3,589,490
------------------------------------------------------------------------
Premco Refining Group Inc. (The), Sr. Notes,
9.25%, 02/01/10 (Acquired 01/28/03; Cost
$1,560,000)(d)(e) 1,560,000 1,571,700
========================================================================
8,020,565
========================================================================
PACKAGED FOODS & MEATS-0.12%
Dole Food Co., Inc., Sr. Unsec. Global Notes,
7.25%, 05/01/09 640,000 622,400
========================================================================
PHARMACEUTICALS-0.48%
Johnson & Johnson, Unsec. Deb., 8.72%,
11/01/24 2,200,000 2,580,556
========================================================================
PROPERTY & CASUALTY INSURANCE-0.35%
Allstate Financial Global Funding, Notes,
6.50%, 06/14/11 (Acquired 06/07/01; Cost
$2,246,558)(d)(e) 1,680,000 1,858,920
========================================================================
|
FS-115
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
PUBLISHING-1.48%
News America Holdings, Sr. Unsec. Gtd. Deb.,
8.00%, 10/17/16 $5,000,000 $ 5,703,200
------------------------------------------------------------------------
News America Inc., Putable Deb., 6.75%,
01/09/10 1,100,000 1,136,113
------------------------------------------------------------------------
Tribune Co., Putable Notes, 6.61%, 09/15/04 1,000,000 1,069,600
========================================================================
7,908,913
========================================================================
RAILROADS-1.74%
CSX Corp., Sr. Unsec. Putable Deb., 7.25%,
05/01/05 7,250,000 7,993,270
------------------------------------------------------------------------
Railamerica Transportation Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.88%, 08/15/10 1,300,000 1,326,000
========================================================================
9,319,270
========================================================================
REAL ESTATE-2.45%
EOP Operating L.P.,
Sr. Unsec. Notes,
6.50%, 06/15/04 1,805,000 1,880,442
------------------------------------------------------------------------
7.25%, 02/15/18 600,000 653,664
------------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 600,000 642,150
------------------------------------------------------------------------
Unsec. Notes, 6.50%, 01/15/04 800,000 827,216
------------------------------------------------------------------------
Health Care REIT, Inc., Sr. Unsec. Notes,
7.50%, 08/15/07 3,500,000 3,649,800
------------------------------------------------------------------------
Host Marriott L.P.
Series E, Sr. Sec. Gtd. Notes, 8.38%,
02/15/06 920,000 906,200
------------------------------------------------------------------------
Series I, Unsec. Gtd. Global Notes, 9.50%,
01/15/07 1,500,000 1,522,500
------------------------------------------------------------------------
iStar Financial Inc., Sr. Unsec. Notes,
8.75%, 08/15/08 755,000 796,525
------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub. Deb.,
7.35%, 12/01/17 2,000,000 2,196,280
========================================================================
13,074,777
========================================================================
SOVEREIGN DEBT-0.70%
Export Development Canada (Canada), Yankee
Bonds, 4.00%, 08/01/07 1,100,000 1,138,863
------------------------------------------------------------------------
Region of Lombardy (Italy), Unsec. Global
Bonds, 5.80%, 10/25/32 1,000,000 1,034,120
------------------------------------------------------------------------
United Mexican States (Mexico)-Series A,
Medium Term Global Notes, 6.38%, 01/16/13 1,600,000 1,564,000
========================================================================
3,736,983
========================================================================
SPECIALTY STORES-0.43%
CSK Auto, Inc., Sr. Unsec. Gtd. Global Notes,
12.00%, 06/15/06 990,000 1,054,350
------------------------------------------------------------------------
United Rentals North America Inc., Sr. Unsec.
Gtd. Notes, 10.75%, 04/15/08 1,240,000 1,233,800
========================================================================
2,288,150
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.29%
AT&T Wireless Services Inc., Sr. Unsec.
Unsub. Global Notes, 8.75%, 03/01/31 1,500,000 1,550,625
========================================================================
Total U.S. Dollar Denominated Bonds &
Notes (Cost $392,559,311) 398,998,299
========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES-9.28%
CANADA-0.82%
Bell Mobility Cellular Inc. (Wireless
Telecommunication Services), Unsec. Deb.,
6.55%, 06/02/08 CAD 2,250,000 $ 1,555,817
------------------------------------------------------------------------
Rogers Cablesystems Ltd. (Broadcasting &
Cable TV), Sr. Sec. Second Priority Deb.,
9.65%, 01/15/14 CAD 3,300,000 2,152,929
------------------------------------------------------------------------
Westcoast Energy Inc. (Gas Utilities)-Series
V, Unsec. Deb., 6.45%, 12/18/06 CAD 1,000,000 689,483
========================================================================
4,398,229
========================================================================
GERMANY-5.18%
Bundesrepublik Deutschland (Sovereign Debt)-
Series 2002, Euro Bonds, 5.00%, 07/04/12EUR 9,700,000 11,208,420
------------------------------------------------------------------------
Eurohypo AG (Banks)-Series 2212, Sec. Euro
Bonds, 4.50%, 01/21/13 EUR 8,000,000 8,731,591
------------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau (Banks),
Sr. Unsec. Gtd. Unsub. Global Notes, 3.50%,
11/15/05 EUR 3,600,000 3,941,618
------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Notes.,
5.25%, 07/04/12 EUR 3,250,000 3,796,323
========================================================================
27,677,952
========================================================================
LUXEMBOURG-0.79%
International Bank for Reconstruction &
Development (Banks), Sr. Unsec. Global
Notes, 5.61%, 08/20/07(i) NZD 10,000,000 4,196,728
========================================================================
NETHERLANDS-0.42%
Olivetti International Finance N.V.
(Integrated Telecommunication
Services)-Series E, Gtd. Medium Term Euro
Notes, 6.58%, 07/30/09 EUR 2,050,000 2,231,450
========================================================================
UNITED KINGDOM-2.07%
British Sky Broadcasting Group PLC
(Broadcasting & Cable TV), Sr. Unsec. Gtd.
Unsub. Euro Bonds, 7.75%, 07/09/09 GBP 1,750,000 2,976,385
------------------------------------------------------------------------
Sutton Bridge Financing Ltd. (Electric
Utilities), Gtd. Euro Bonds, 8.63%,
06/30/22 GBP 1,885,780 3,423,243
------------------------------------------------------------------------
United Kingdom (Treasury of) (Sovereign
Debt), Bonds, 7.25%, 12/07/07 GBP 2,475,000 4,646,908
========================================================================
11,046,536
========================================================================
Total Non-U.S. Dollar Denominated Bonds &
Notes (Cost $45,451,019) 49,550,895
========================================================================
SHARES
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-1.03%
BROADCASTING & CABLE TV-0.01%
Knology Inc.
Wts., expiring 10/22/07 (Acquired 03/12/98;
Cost $0)(c)(d)(l) 4,100 0
------------------------------------------------------------------------
Series D, Conv. Pfd. (Acquired 11/07/02;
Cost $0)(d)(e)(l) 63,537 47,653
========================================================================
47,653
========================================================================
|
FS-116
MARKET
SHARES VALUE
------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-0.22%
Cendant Corp.(m) 105,409 $ 1,167,931
========================================================================
HOME FURNISHINGS-0.00%
O'Sullivan Industries, Inc.
Series B, Pfd. Wts., expiring 11/15/09
(Acquired 06/13/00; Cost $0)(d)(e)(l) 2,885 29
------------------------------------------------------------------------
Wts., expiring 11/15/09 (Acquired 06/13/00;
Cost $0)(d)(e)(l) 2,885 29
========================================================================
58
========================================================================
RAILROADS-0.00%
Railamerica Inc.-Wts., expiring 08/15/10
(Acquired 10/05/00; Cost $0)(d)(e)(l) 1,300 1,625
========================================================================
REAL ESTATE-0.62%
First Republic Capital Corp.-Series A, Pfd.
(Acquired 05/26/99; Cost $3,500,000)(d)(e) 3,150 3,307,500
========================================================================
SYSTEMS SOFTWARE-0.18%
Microsoft Corp. 20,291 963,011
========================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.00%
NTELOS Inc.-Wts., expiring 08/15/10 (Acquired
11/15/00; Cost $0)(d)(e)(l) 1,775 18
========================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $8,020,114) 5,487,796
========================================================================
PRINCIPAL
AMOUNT
U.S. GOVERNMENT AGENCY SECURITIES-6.34%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-1.14%
Pass Through Ctfs.,
7.00%, 06/01/15 to 06/01/32 $ 321,666 $ 340,945
------------------------------------------------------------------------
6.00%, 04/01/17 to 06/01/17 949,125 992,016
------------------------------------------------------------------------
6.50%, 04/01/17 to 08/01/32 3,330,564 3,475,938
------------------------------------------------------------------------
7.50%, 06/01/30 77,674 82,868
------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.00%, 02/01/33(n) 1,150,000 1,190,398
========================================================================
6,082,165
========================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-4.48%
Pass Through Ctfs.,
7.50%, 11/01/15 to 05/01/32 2,680,121 2,854,103
------------------------------------------------------------------------
7.00%, 02/01/16 to 09/01/32 2,525,475 2,665,100
------------------------------------------------------------------------
6.50%, 09/01/16 to 11/01/31 2,573,596 2,697,056
------------------------------------------------------------------------
6.00%, 07/01/17 417,019 436,460
------------------------------------------------------------------------
8.00%, 10/01/30 to 04/01/32 2,521,570 2,723,258
------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.00%, 02/01/33(n) 1,693,000 1,752,644
------------------------------------------------------------------------
Unsec. Notes,
6.20%, 06/13/17 2,500,000 2,660,625
------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-(CONTINUED)
Unsec. Sub. Notes,
4.75%, 01/02/07 $1,500,000 $ 1,580,670
------------------------------------------------------------------------
6.25%, 02/01/11 3,625,000 4,011,135
------------------------------------------------------------------------
5.25%, 08/01/12 2,500,000 2,580,825
========================================================================
23,961,876
========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-0.72%
Pass Through Ctfs.,
7.50%, 06/15/23 to 01/15/32 1,053,151 1,134,675
------------------------------------------------------------------------
8.50%, 11/15/24 435,664 479,121
------------------------------------------------------------------------
6.50%, 03/15/31 to 07/15/32 1,202,396 1,263,561
------------------------------------------------------------------------
7.00%, 04/15/31 to 08/15/31 369,415 392,415
------------------------------------------------------------------------
6.00%, 12/15/31 to 11/15/32 552,811 576,048
========================================================================
3,845,820
========================================================================
Total U.S. Government Agency Securities
(Cost $32,866,994) 33,889,861
========================================================================
U.S. TREASURY SECURITIES-3.12%
U.S. TREASURY NOTES-1.70%
3.25%, 12/31/03 to 08/15/07 2,145,000 2,182,826
------------------------------------------------------------------------
2.88%, 06/30/04 4,150,000 4,232,336
------------------------------------------------------------------------
4.63%, 05/15/06 1,425,000 1,526,303
------------------------------------------------------------------------
3.50%, 11/15/06 300,000 309,798
------------------------------------------------------------------------
6.13%, 08/15/07 750,000 853,710
========================================================================
9,104,973
========================================================================
U.S. TREASURY BONDS-1.42%
7.25%, 05/15/16 2,900,000 3,679,375
------------------------------------------------------------------------
7.50%, 11/15/16 1,750,000 2,268,157
------------------------------------------------------------------------
6.25%, 08/15/23 1,400,000 1,629,908
========================================================================
7,577,440
========================================================================
Total U.S. Treasury Securities (Cost
$16,658,680) 16,682,413
========================================================================
ASSET-BACKED SECURITIES-4.65%
AIRLINES-2.28%
Air 2 US-Series C, Equipment Trust Ctfs.,
10.13%, 10/01/20 (Acquired 10/28/99; Cost
$3,000,000)(d)(e) 2,924,118 453,238
------------------------------------------------------------------------
Continental Airlines, Inc.
Series 2000-1, Class A-1, Sr. Pass Through
Ctfs., 8.05%, 11/01/20 1,613,306 1,423,742
------------------------------------------------------------------------
Series 2000-2, Class A-1, Sr. Sec. Pass
Through Ctfs., 7.71%, 04/02/21 1,257,120 1,128,266
------------------------------------------------------------------------
Series 974A, Pass Through Ctfs., 6.90%,
01/02/18 2,886,122 2,571,188
------------------------------------------------------------------------
Delta Air Lines, Inc.-Series 93A2, Equipment
Trust Ctfs., 10.50%, 04/30/16 5,000,000 3,268,750
------------------------------------------------------------------------
United Air Lines, Inc.-Series 2000-1, Class
A-2, Pass Through Ctfs., 7.73%, 07/01/10 4,100,000 3,331,250
========================================================================
12,176,434
========================================================================
|
FS-117
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES-2.06%
Citicorp Lease
Series 1999-1, Class A1, Pass Through
Ctfs., 7.22%, 06/15/05 (Acquired
05/08/02-06/19/02; Cost $2,768,495)(d)(e) $2,470,661 $ 2,703,792
------------------------------------------------------------------------
Series 1999-1, Class A2, Pass Through
Ctfs., 8.04%, 12/15/19 (Acquired
06/01/00-01/25/01; Cost $3,603,676)(d)(e) 3,600,000 4,161,096
------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp., Sr. Sec. Global Notes, 6.00%,
05/15/06 1,800,000 1,950,084
------------------------------------------------------------------------
Premium Asset Trust-Series 2001-6, Sec.
Notes, 5.25%, 07/19/04 (Acquired 07/11/01;
Cost $2,097,228)(d)(e) 2,100,000 2,185,115
========================================================================
11,000,087
========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------------------------------------------------
ELECTRIC UTILITIES-0.31%
Beaver Valley II Funding Corp., Sec. Lease
Obligation Bonds, 9.00%, 06/01/17 $1,500,000 $ 1,650,585
========================================================================
Total Asset-Backed Securities (Cost
$29,053,246) 24,827,106
========================================================================
MARKET
SHARES VALUE
MONEY MARKET FUNDS-0.90%
STIC Liquid Assets Portfolio(o) 2,405,660 $ 2,405,660
------------------------------------------------------------------------
STIC Prime Portfolio(o) 2,405,660 2,405,660
========================================================================
Total Money Market Funds (Cost
$4,811,320) 4,811,320
========================================================================
TOTAL INVESTMENTS-100.02% (Cost $529,420,684) 534,247,690
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.02%) (111,949)
========================================================================
NET ASSETS-100.00% $534,135,741
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
CAD - Canadian Dollars Conv. - Convertible Ctfs - Certificates Deb. - Debentures Disc. - Discounted EUR - Euro GBP - British Pound Sterling Gtd. - Guaranteed Jr. - Junior NZD - New Zealand Dollar Pfd. - Preferred RAPS - Redeemable and Putable Securities REIT - Real Estate Investment Trust Sec. - Secured Sr. - Senior Sub. - Subordinated TBA - To Be Announced Unsec. - Unsecured Unsub. - Unsubordinated Wts. - Warrants |
Notes to Schedule of Investments:
(a) Discounted bond at issue. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(b) Defaulted security. Currently, the issuer is in default with respect to
interest payments.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) Security considered to be illiquid. The aggregate market value of securities
considered illiquid at 01/31/03 was $40,174,075 which represented 7.52% of
the Fund's net assets.
(e) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $41,874,813,
which represented 7.84% of the Fund's net assets.
(f) Interest rates are redetermined semi-annually. Rates shown are rates in
effect on 01/31/03.
(g) Interest rates are redetermined quarterly. Rates shown are rates in effect
on 01/31/03.
(h) Interest rates are redetermined monthly. Rates shown are rates in effect on
01/31/03.
(i) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(j) Principal and interest are secured by bond insurance provided by one of the
following companies: Ambac Assurance Corp., Financial Guaranty Insurance
Co., Financial Security Assurance, or MBIA Insurance Co.
(k) Foreign denominated security. Par value is denominated in currency
indicated.
(l) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(m) Non-income producing security.
(n) Security purchased on a forward commitment basis. These securities are
subject to dollar roll transactions. See Note 1 Section C.
(o) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-118
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$529,420,684) $534,247,690
-----------------------------------------------------------
Foreign currencies, at value (cost $156,081) 157,638
-----------------------------------------------------------
Receivables for:
Investments sold 2,372,601
-----------------------------------------------------------
Fund shares sold 1,380,166
-----------------------------------------------------------
Dividends and interest 9,207,407
-----------------------------------------------------------
Investment for deferred compensation plan 54,895
-----------------------------------------------------------
Other assets 40,434
===========================================================
Total assets 547,460,831
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 9,939,803
-----------------------------------------------------------
Fund shares reacquired 2,194,400
-----------------------------------------------------------
Dividends 574,900
-----------------------------------------------------------
Deferred compensation plan 54,895
-----------------------------------------------------------
Accrued distribution fees 285,315
-----------------------------------------------------------
Accrued trustees' fees 1,055
-----------------------------------------------------------
Accrued transfer agent fees 168,681
-----------------------------------------------------------
Accrued operating expenses 106,041
===========================================================
Total liabilities 13,325,090
===========================================================
Net assets applicable to shares outstanding $534,135,741
___________________________________________________________
===========================================================
NET ASSETS:
Class A $283,759,064
___________________________________________________________
===========================================================
Class B $212,723,398
___________________________________________________________
===========================================================
Class C $ 36,565,670
___________________________________________________________
===========================================================
Class R $ 1,087,609
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 44,044,808
___________________________________________________________
===========================================================
Class B 32,972,431
___________________________________________________________
===========================================================
Class C 5,681,106
___________________________________________________________
===========================================================
Class R 168,753
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 6.44
-----------------------------------------------------------
Offering price per share:
(Net asset value of $6.44 divided by
95.25%) $ 6.76
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 6.45
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 6.44
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 6.44
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $17,766,407
-----------------------------------------------------------
Dividends 165,375
-----------------------------------------------------------
Dividends from affiliated money market funds 70,320
===========================================================
Total investment income 18,002,102
===========================================================
EXPENSES:
Advisory fees 1,163,382
-----------------------------------------------------------
Administrative services fees 69,995
-----------------------------------------------------------
Custodian fees 45,978
-----------------------------------------------------------
Distribution fees -- Class A 352,658
-----------------------------------------------------------
Distribution fees -- Class B 1,080,036
-----------------------------------------------------------
Distribution fees -- Class C 184,406
-----------------------------------------------------------
Distribution fees -- Class R 368
-----------------------------------------------------------
Transfer agent fees 680,812
-----------------------------------------------------------
Trustees' fees 5,934
-----------------------------------------------------------
Other 139,847
===========================================================
Total expenses 3,723,416
===========================================================
Less: Fees waived (719)
-----------------------------------------------------------
Expenses paid indirectly (5,645)
===========================================================
Net expenses 3,717,052
===========================================================
Net investment income 14,285,050
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (7,647,601)
-----------------------------------------------------------
Foreign currencies (12,672)
===========================================================
(7,660,273)
===========================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 29,105,153
-----------------------------------------------------------
Foreign currencies 11,461
-----------------------------------------------------------
Foreign currency contracts (23,106)
===========================================================
29,093,508
===========================================================
Net gain from investment securities, foreign
currencies and foreign currency contracts 21,433,235
===========================================================
Net increase in net assets resulting from
operations $35,718,285
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-119
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 14,285,050 $ 37,242,079
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and foreign currency contracts (7,660,273) (55,544,970)
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and foreign
currency contracts 29,093,508 (7,100,770)
============================================================================================
Net increase (decrease) in net assets resulting from
operations 35,718,285 (25,403,661)
============================================================================================
Distributions to shareholders from net investment income:
Class A (8,817,880) (20,406,662)
--------------------------------------------------------------------------------------------
Class B (5,935,761) (13,291,002)
--------------------------------------------------------------------------------------------
Class C (1,015,980) (2,453,982)
--------------------------------------------------------------------------------------------
Class R (4,063) (74)
--------------------------------------------------------------------------------------------
Return of Capital:
Class A -- (994,212)
--------------------------------------------------------------------------------------------
Class B -- (736,149)
--------------------------------------------------------------------------------------------
Class C -- (134,853)
--------------------------------------------------------------------------------------------
Class R -- (32)
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A (8,629,062) (31,273,225)
--------------------------------------------------------------------------------------------
Class B (12,134,972) 4,755,275
--------------------------------------------------------------------------------------------
Class C (2,573,909) (1,919,177)
--------------------------------------------------------------------------------------------
Class R 1,074,542 10,118
============================================================================================
Net increase (decrease) in net assets (2,318,800) (91,847,636)
============================================================================================
NET ASSETS:
Beginning of period 536,454,541 628,302,177
============================================================================================
End of period $534,135,741 $ 536,454,541
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $677,484,184 $ 699,747,585
--------------------------------------------------------------------------------------------
Undistributed net investment income (3,023,221) (1,534,587)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and foreign currency
contracts (145,200,605) (137,540,332)
--------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts 4,875,383 (24,218,125)
============================================================================================
$534,135,741 $ 536,454,541
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-120
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Income Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be 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 achieve a high level of current income consistent with reasonable concern for safety of principal. Companies are listed in the Schedule of Investments based on the country in which they are organized.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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 and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage-backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on
FS-121
the sale, could generate income for the Fund exceeding the yield on the security sold. The Fund will segregate assets to cover its obligations under dollar roll transactions. The difference between the selling price and the future repurchase price is recorded as an adjustment to interest income.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed transaction costs.
D. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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.
E. 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
F. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations.
G. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
H. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the six months ended January 31, 2003, AIM waived fees of $719.
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 six months ended January 31, 2003, AIM was paid $69,995 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. During the six months ended January 31, 2003, AFS retained $349,263 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, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the Class A, Class B, Class C and Class R shares paid $352,658, $1,080,036, $184,406 and $368, respectively.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During six months ended January 31, 2003, AIM Distributors retained $36,623 in front-end sales commissions from the sale of Class A shares and $4,275, $3,081 and $5,325 for Class A, Class B and Class C shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
FS-122
During the six months ended January 31, 2003, the Fund paid legal fees of $2,446 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $4,192 and reductions in custodian fees of $1,453 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $5,645.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the six months ended January
31, 2003, 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
July 31, 2006 $ 1,419,489
----------------------------------------------------------
July 31, 2007 13,740,010
----------------------------------------------------------
July 31, 2008 26,912,929
----------------------------------------------------------
July 31, 2009 2,702,340
----------------------------------------------------------
July 31, 2010 48,306,201
==========================================================
Total capital loss carryforward $93,080,969
__________________________________________________________
==========================================================
|
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $285,700,694 and $293,187,057, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $ 23,534,248 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (20,339,599) =========================================================== Net unrealized appreciation of investment securities $ 3,194,649 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $531,053,041. |
FS-123
NOTE 8--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C shares and Class R shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class A shares and Class R shares are subject to CDSC charges. Class R shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, JULY 31,
2003 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 14,858,231 $ 93,950,282 19,535,050 $ 129,985,397
--------------------------------------------------------------------------------------------------------------------------
Class B 3,033,223 19,133,307 10,824,126 72,286,011
--------------------------------------------------------------------------------------------------------------------------
Class C 1,207,940 7,626,756 2,329,978 15,549,708
--------------------------------------------------------------------------------------------------------------------------
Class R* 166,577 1,070,515 1,531 10,012
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,092,871 6,913,825 2,547,835 16,937,345
--------------------------------------------------------------------------------------------------------------------------
Class B 671,831 4,255,072 1,516,843 10,088,147
--------------------------------------------------------------------------------------------------------------------------
Class C 122,534 774,786 294,792 1,957,101
--------------------------------------------------------------------------------------------------------------------------
Class R* 628 4,027 17 106
==========================================================================================================================
Conversion of Class B shares to Class A shares:**
Class A 380,568 2,403,705 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B (379,175) (2,403,705) -- --
==========================================================================================================================
Reacquired:
Class A (17,757,264) (111,896,874) (26,805,775) (178,195,967)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,254,372) (33,119,646) (11,702,242) (77,618,883)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,746,204) (10,975,451) (2,930,754) (19,425,986)
==========================================================================================================================
(3,602,612) $ (22,263,401) (4,388,599) $ (28,427,009)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Prior to the six months ended January 31, 2003, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reaquired.
FS-124
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, SEVEN MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
JANUARY 31, ------------------------ JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.20 $ 6.91 $ 7.14 $ 7.59 $ 8.38 $ 8.57
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.44(a)(b) 0.53 0.34 0.57 0.57
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.26 (0.70) (0.23) (0.47) (0.81) (0.16)
=================================================================================================================================
Total from investment operations 0.44 (0.26) 0.30 (0.13) (0.24) 0.41
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.20) (0.43) (0.51) (0.25) (0.55) (0.55)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- -- (0.05)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07) -- --
=================================================================================================================================
Total distributions (0.20) (0.45) (0.53) (0.32) (0.55) (0.60)
=================================================================================================================================
Net asset value, end of period $ 6.44 $ 6.20 $ 6.91 $ 7.14 $ 7.59 $ 8.38
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 7.17% (4.05)% 4.42% (1.70)% (2.92)% 4.94%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $283,759 $281,966 $346,967 $346,482 $393,414 $399,701
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.04%(d) 0.96% 0.95% 0.97%(e) 0.91% 0.91%
=================================================================================================================================
Ratio of net investment income to average
net assets 5.69%(d) 6.57%(b) 7.57% 8.03%(e) 7.11% 6.69%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43% 78% 41%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.45 and the ratio of net investment income to average
net assets would have been 6.76%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$279,826,101.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-125
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, YEAR ENDED
ENDED SEVEN MONTHS DECEMBER 31,
JANUARY 31, ------------------------- ENDED JULY --------------------
2003 2002 2001 31, 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.21 $ 6.92 $ 7.14 $ 7.58 $ 8.37 $ 8.55
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16(a) 0.39(a)(b) 0.48 0.31 0.50 0.50
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.25 (0.70) (0.23) (0.47) (0.80) (0.15)
=================================================================================================================================
Total from investment operations 0.41 (0.31) 0.25 (0.16) (0.30) 0.35
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.38) (0.45) (0.21) (0.49) (0.48)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- -- (0.05)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07) -- --
=================================================================================================================================
Total distributions (0.17) (0.40) (0.47) (0.28) (0.49) (0.53)
=================================================================================================================================
Net asset value, end of period $ 6.45 $ 6.21 $ 6.92 $ 7.14 $ 7.58 $ 8.37
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 6.76% (4.76)% 3.67% (2.09)% (3.72)% 4.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $212,723 $216,710 $237,118 $213,926 $244,713 $219,033
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.79%(d) 1.71% 1.71% 1.73%(e) 1.66% 1.66%
=================================================================================================================================
Ratio of net investment income to average
net assets 4.94%(d) 5.82%(b) 6.81% 7.28%(e) 6.36% 5.94%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43% 78% 41%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.40 and the ratio of net investment income to average
net assets would have been 6.01%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$214,246,245.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-126
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, SEVEN MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, ------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.19 $ 6.91 $ 7.13 $ 7.57 $ 8.36 $ 8.54
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16(a) 0.39(a)(b) 0.48 0.31 0.50 0.50
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.26 (0.71) (0.23) (0.47) (0.80) (0.15)
=================================================================================================================================
Total from investment operations 0.42 (0.32) 0.25 (0.16) (0.30) 0.35
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.38) (0.45) (0.21) (0.49) (0.48)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- -- (0.05)
---------------------------------------------------------------------------------------------------------------------------------
Return of capital -- (0.02) (0.02) (0.07) -- --
=================================================================================================================================
Total distributions (0.17) (0.40) (0.47) (0.28) (0.49) (0.53)
=================================================================================================================================
Net asset value, end of period $ 6.44 $ 6.19 $ 6.91 $ 7.13 $ 7.57 $ 8.36
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 6.95% (4.92)% 3.68% (2.09)% (3.71)% 4.21%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $36,566 $37,769 $44,216 $26,821 $28,202 $19,332
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.79%(d) 1.71% 1.71% 1.73%(e) 1.66% 1.66%
=================================================================================================================================
Ratio of net investment income to average net
assets 4.94%(d) 5.82%(b) 6.81% 7.28%(e) 6.36% 5.94%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 55% 70% 83% 43% 78% 41%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.40 and the ratio of net investment income to average
net assets would have been 6.01%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$36,580,634.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-127
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JANUARY 31, JULY 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.20 $ 6.53
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.06(a)(b)
---------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.25 (0.32)
=============================================================================================
Total from investment operations 0.43 (0.26)
=============================================================================================
Less distributions:
Dividends from net investment income (0.19) (0.05)
---------------------------------------------------------------------------------------------
Return of capital -- (0.02)
=============================================================================================
Total distributions (0.19) (0.07)
=============================================================================================
Net asset value, end of period $ 6.44 $ 6.20
_____________________________________________________________________________________________
=============================================================================================
Total return(c) 7.02% (4.01)%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,088 $ 10
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets 1.29%(d) 1.21%(e)
=============================================================================================
Ratio of net investment income to average net assets 5.44%(d) 6.32%(b)(e)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(f) 55% 70%
_____________________________________________________________________________________________
=============================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydown gains
and losses as adjustments to interest income. Had the Fund not amortized
premiums on debt securities or recorded paydown gains and losses as
adjustments to interest income, the net investment income per share
would have been $0.07 and the ratio of net investment income to average
net assets would have been 6.51%. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios prior to
August 1, 2001 have not been restated to reflect this change in
presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $146,037.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 10--SUBSEQUENT EVENT
The Board of Trustees unanimously approved, on February 6, 2003, an Agreement and Plan of Reorganization ("Plan") pursuant to which AIM Strategic Income Fund ("Strategic Income Fund"), a series of AIM Investment Funds ("AIF"), and AIM Global Income Fund ("Global Income Fund"), a series of AIM International Funds, Inc. ("AIFI"), would transfer substantially all of their assets to AIM Income Fund ("Income Fund"), a series of AIM Investment Securities Funds ("AIS"). As a result of the transaction, shareholders of Strategic Income Fund and Global Income Fund would receive shares of Income Fund in exchange for their shares of Strategic Income Fund and Global Income Fund, respectively, and Strategic Income Fund and Global Income Fund would cease operations.
The Plan requires approval of Strategic Income Fund shareholders and Global Income Fund shareholders and will be submitted to the shareholders for their consideration at a meeting to be held on June 4, 2003. If the Plan is approved by shareholders of Strategic Income Fund and shareholders of Global Income Fund and certain conditions required by the Plan are satisfied, the transaction is expected to become effective shortly thereafter.
FS-128
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-86.49%
FEDERAL FARM CREDIT BANK-3.13%
Bonds,
3.88%, 12/15/04 $ 7,410,000 $ 7,689,728
----------------------------------------------------------------------------
4.38%, 04/15/05 7,670,000 8,068,303
----------------------------------------------------------------------------
6.00%, 06/11/08 to 03/07/11 19,000,000 21,314,290
----------------------------------------------------------------------------
Medium Term Notes,
5.75%, 12/07/28 10,000,000 10,368,100
============================================================================
47,440,421
============================================================================
FEDERAL HOME LOAN BANK-4.39%
Unsec. Bonds,
7.36%, 07/01/04 2,800,000 3,024,756
----------------------------------------------------------------------------
6.50%, 11/15/05 2,000,000 2,224,320
----------------------------------------------------------------------------
7.25%, 02/15/07 5,500,000 6,390,065
----------------------------------------------------------------------------
4.88%, 05/15/07 16,000,000 17,121,600
----------------------------------------------------------------------------
5.48%, 01/08/09 1,000,000 1,095,370
----------------------------------------------------------------------------
5.75%, 05/15/12 33,210,000 36,525,022
============================================================================
66,381,133
============================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-28.06%
Pass Through Ctfs.,
9.00%, 12/01/05 to 04/01/25 1,065,813 1,166,028
----------------------------------------------------------------------------
8.00%, 07/01/06 to 10/01/23 3,982,891 4,348,024
----------------------------------------------------------------------------
8.50%, 07/01/07 to 10/01/29 7,973,090 8,624,346
----------------------------------------------------------------------------
7.00%, 11/01/10 to 05/01/32 74,747,180 78,872,099
----------------------------------------------------------------------------
6.50%, 02/01/11 to 09/01/32 122,387,162 127,872,947
----------------------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 2,744,416 3,139,147
----------------------------------------------------------------------------
12.00%, 02/01/13 4,125 4,784
----------------------------------------------------------------------------
10.50%, 08/01/19 to 01/01/21 479,747 548,273
----------------------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 2,405,259 2,678,826
----------------------------------------------------------------------------
7.50%, 09/01/30 1,544,325 1,647,609
----------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.00%, 02/01/33(a) 24,000,000 24,843,080
----------------------------------------------------------------------------
Series 1, Unsec. Medium Term Notes,
3.75%, 12/26/07 10,000,000 10,015,300
----------------------------------------------------------------------------
Unsec. Medium Term Notes,
4.50%, 02/27/06 30,000,000 30,063,600
----------------------------------------------------------------------------
6.00%, 05/25/12 to 06/27/17 36,300,000 37,851,990
----------------------------------------------------------------------------
Unsec. Notes,
4.88%, 03/15/07 30,000,000 32,182,800
----------------------------------------------------------------------------
5.13%, 10/15/08 to 07/15/12 27,000,000 28,864,770
----------------------------------------------------------------------------
5.00%, 07/30/09 31,200,000 31,962,216
============================================================================
424,685,839
============================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-38.81%
Pass Through Ctfs.,
8.50%, 01/01/07 to 04/01/30 $ 26,109,943 $ 28,518,998
----------------------------------------------------------------------------
7.50%, 06/01/10 to 05/01/32 29,427,595 31,381,587
----------------------------------------------------------------------------
7.00%, 05/01/11 to 05/01/32 32,429,194 34,484,708
----------------------------------------------------------------------------
8.00%, 02/01/12 to 06/01/32 110,428,658 119,286,913
----------------------------------------------------------------------------
6.50%, 05/01/13 to 08/01/32 122,728,360 128,793,509
----------------------------------------------------------------------------
6.00%, 10/01/13 to 04/01/24 21,502,620 22,505,090
----------------------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 496,238 553,982
----------------------------------------------------------------------------
10.00%, 12/20/19 to 12/20/21 2,987,411 3,418,718
----------------------------------------------------------------------------
10.30%, 04/20/25 915,460 1,042,436
----------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.00%, 02/01/33(a) 113,500,000 117,498,595
----------------------------------------------------------------------------
Series B, Unsec. Medium Term Notes,
6.88%, 09/10/12 to 09/24/12 24,765,000 27,611,310
----------------------------------------------------------------------------
6.47%, 09/25/12 10,550,000 12,181,769
----------------------------------------------------------------------------
Unsec. Notes,
3.25%, 08/26/05 36,000,000 36,047,520
----------------------------------------------------------------------------
4.25%, 07/15/07 23,000,000 24,049,030
============================================================================
587,374,165
============================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-7.18%
Pass Through Ctfs.,
6.00%, 10/15/08 to 11/15/08 220,419 235,123
----------------------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 416,786 463,026
----------------------------------------------------------------------------
7.00%, 10/15/08 to 06/15/32 8,774,236 9,334,921
----------------------------------------------------------------------------
6.50%, 10/15/08 to 09/15/32 34,172,180 35,914,982
----------------------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 1,616,761 1,820,501
----------------------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 3,493,560 4,007,476
----------------------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 31,848 36,572
----------------------------------------------------------------------------
12.50%, 11/15/10 43,564 51,107
----------------------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 150,356 180,794
----------------------------------------------------------------------------
13.50%, 04/15/11 to 04/15/15 138,229 166,402
----------------------------------------------------------------------------
12.00%, 02/15/13 to 07/15/15 143,896 170,156
----------------------------------------------------------------------------
10.50%, 02/15/16 22,325 25,888
----------------------------------------------------------------------------
8.00%, 01/15/22 to 06/15/27 8,552,410 9,336,371
----------------------------------------------------------------------------
7.50%, 03/15/26 to 08/15/28 2,090,922 2,241,059
----------------------------------------------------------------------------
Pass Through Ctfs., TBA,
6.50%, 01/01/33 15,300,000 16,050,656
----------------------------------------------------------------------------
6.00%, 02/01/33(a) 27,500,000 28,621,280
============================================================================
108,656,314
============================================================================
|
FS-129
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY-1.71%
Series G, Sec. Gtd. Notes,
6.67%, 09/15/09 $ 7,700,000 $ 8,946,322
----------------------------------------------------------------------------
Series J, Sec. Gtd. Notes,
7.65%, 05/15/06 7,000,000 8,097,180
----------------------------------------------------------------------------
Series UU, Sec. Gtd. Notes,
7.95%, 11/01/06 8,000,000 8,779,520
============================================================================
25,823,022
============================================================================
TENNESSEE VALLEY AUTHORITY-3.21%
Putable Bonds,
4.88%, 12/15/06 10,000,000 10,669,100
----------------------------------------------------------------------------
Series A, Bonds,
5.63%, 01/18/11 28,517,000 30,763,569
----------------------------------------------------------------------------
Series G, Bonds,
5.38%, 11/13/08 6,600,000 7,189,710
============================================================================
48,622,379
============================================================================
Total U.S. Government Agency Securities
(Cost $1,279,440,990) 1,308,983,273
============================================================================
U.S. TREASURY SECURITIES-22.14%
U.S. TREASURY NOTES-16.86%
6.75%, 05/15/05 21,500,000 23,838,125
----------------------------------------------------------------------------
4.63%, 05/15/06 29,800,000 31,918,482
----------------------------------------------------------------------------
4.38%, 05/15/07 66,000,000 70,227,960
----------------------------------------------------------------------------
3.25%, 08/15/07 40,700,000 41,342,246
----------------------------------------------------------------------------
4.88%, 02/15/12 25,800,000 27,710,748
----------------------------------------------------------------------------
4.00%, 11/15/12 60,000,000 60,121,800
============================================================================
255,159,361
============================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------------
U.S. TREASURY BONDS--4.57%
7.50%, 11/15/16 to 11/15/24 $ 14,950,000 $ 19,763,428
----------------------------------------------------------------------------
6.25%, 05/15/30 18,890,000 22,431,875
----------------------------------------------------------------------------
5.38%, 02/15/31 25,000,000 27,004,000
============================================================================
69,199,303
============================================================================
U.S. TREASURY STRIPS-0.71%(B)
5.38%, 05/15/06 8,000,000 7,388,720
----------------------------------------------------------------------------
6.79%, 11/15/18 7,750,000 3,436,660
============================================================================
10,825,380
============================================================================
Total U.S. Treasury Securities (Cost
$326,702,351) 335,184,044
============================================================================
SHARES
MONEY MARKET FUND-1.98%
STIT Government & Agency Portfolio (Cost
$29,950,295)(c) 29,950,295 29,950,295
============================================================================
TOTAL INVESTMENTS-110.61% (Cost
$1,636,093,636) 1,674,117,612
============================================================================
OTHER ASSETS LESS LIABILITIES-(10.61%) (160,619,639)
============================================================================
NET ASSETS-100.00% $1,513,497,973
____________________________________________________________________________
============================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Gtd. - Guaranteed Sec. - Secured STRIPS - Separately Traded Registered Interest and Principal Security TBA - To be announced Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Security purchased on forward commitment basis. These securities are subject
to dollar roll transactions. See Note 1 Section C.
(b) STRIPS are traded on a discount basis. In such cases, the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-130
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,636,093,636) $1,674,117,612
------------------------------------------------------------
Receivables for:
Fund shares sold 12,901,072
------------------------------------------------------------
Dividends and interest 13,590,536
------------------------------------------------------------
Principal paydowns 145,897
------------------------------------------------------------
Investment for deferred compensation plan 44,761
------------------------------------------------------------
Other assets 671,505
============================================================
Total assets 1,701,471,383
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 170,254,427
------------------------------------------------------------
Fund shares reacquired 15,553,814
------------------------------------------------------------
Dividends 697,640
------------------------------------------------------------
Deferred compensation plan 44,761
------------------------------------------------------------
Accrued interest expense 1,966
------------------------------------------------------------
Accrued distribution fees 967,424
------------------------------------------------------------
Accrued trustees' fees 1,384
------------------------------------------------------------
Accrued transfer agent fees 343,709
------------------------------------------------------------
Accrued operating expenses 108,285
============================================================
Total liabilities 187,973,410
============================================================
Net assets applicable to shares outstanding $1,513,497,973
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 635,390,383
____________________________________________________________
============================================================
Class B $ 721,806,373
____________________________________________________________
============================================================
Class C $ 155,195,034
____________________________________________________________
============================================================
Class R $ 1,106,183
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 67,180,777
____________________________________________________________
============================================================
Class B 76,086,385
____________________________________________________________
============================================================
Class C 16,419,131
____________________________________________________________
============================================================
Class R 116,935
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 9.46
------------------------------------------------------------
Offering price per share:
(Net asset value of $9.46 divided by
95.25%) $ 9.93
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 9.49
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 9.45
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 9.46
____________________________________________________________
============================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $32,592,365
-----------------------------------------------------------
Dividends from affiliated money market funds 588,801
===========================================================
Total investment income 33,181,166
===========================================================
EXPENSES:
Advisory fees 2,591,356
-----------------------------------------------------------
Administrative services fees 159,747
-----------------------------------------------------------
Custodian fees 79,508
-----------------------------------------------------------
Distribution fees -- Class A 702,630
-----------------------------------------------------------
Distribution fees -- Class B 3,497,201
-----------------------------------------------------------
Distribution fees -- Class C 732,208
-----------------------------------------------------------
Distribution fees -- Class R 789
-----------------------------------------------------------
Interest 69,082
-----------------------------------------------------------
Transfer agent fees 1,336,221
-----------------------------------------------------------
Trustees' fees 7,968
-----------------------------------------------------------
Other 315,503
===========================================================
Total expenses 9,492,213
===========================================================
Less: Fees waived (13,569)
-----------------------------------------------------------
Expenses paid indirectly (10,710)
===========================================================
Net expenses 9,467,934
===========================================================
Net investment income 23,713,232
===========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 10,660,306
-----------------------------------------------------------
Change in net unrealized appreciation of
investment securities 14,814,241
===========================================================
Net gain from investment securities 25,474,547
===========================================================
Net increase in net assets resulting from
operations $49,187,779
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-131
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 23,713,232 $ 34,206,957
----------------------------------------------------------------------------------------------
Net realized gain from investment securities 10,660,306 7,060,161
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 14,814,241 13,327,043
==============================================================================================
Net increase in net assets resulting from operations 49,187,779 54,594,161
==============================================================================================
Distributions to shareholders from net investment income:
Class A (11,700,603) (18,042,169)
----------------------------------------------------------------------------------------------
Class B (12,181,668) (15,743,394)
----------------------------------------------------------------------------------------------
Class C (2,552,130) (3,470,538)
----------------------------------------------------------------------------------------------
Class R (5,433) (135)
----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 153,350,245 162,667,870
----------------------------------------------------------------------------------------------
Class B 96,975,551 336,030,816
----------------------------------------------------------------------------------------------
Class C 25,799,680 65,503,763
----------------------------------------------------------------------------------------------
Class R 1,066,998 33,308
==============================================================================================
Net increase in net assets 299,940,419 581,573,682
==============================================================================================
NET ASSETS:
Beginning of period 1,213,557,554 631,983,872
==============================================================================================
End of period $1,513,497,973 $1,213,557,554
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,505,988,592 $1,228,796,118
----------------------------------------------------------------------------------------------
Undistributed net investment income (2,859,997) (133,395)
----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (27,654,598) (38,314,904)
----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 38,023,976 23,209,735
==============================================================================================
$1,513,497,973 $1,213,557,554
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be 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 achieve a high level of current income consistent with reasonable concern for safety of principal.
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.
FS-132
A. SECURITY VALUATIONS -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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 and commercial paper 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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage-backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold. The Fund will segregate assets to cover its obligations under dollar roll transactions. The difference between the selling price and the future repurchase price is recorded as an adjustment to interest income.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed transaction costs.
D. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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.
E. 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the six months ended January 31, 2003, AIM waived fees of $13,569.
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 six months ended January 31, 2003, AIM was paid $159,747 for such services.
FS-133
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. During the six months ended January 31, 2003, AFS retained $654,322 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, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the Class A, Class B, Class C and Class R shares paid $702,630, $3,497,201, $732,208 and $789, respectively.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended January 31, 2003, AIM Distributors retained $190,026 in front-end sales commissions from the sale of Class A shares and $156,065, $16,644, $47,115 and $0 for Class A, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors. During the six months ended January 31, 2003, the Fund paid legal fees of $3,181 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $10,668 and reductions in
custodian fees of $42 under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $10,710.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund, with an agreement that the Fund will repurchase such securities at an agreed upon price and date. The Fund will use the proceeds of a reverse repurchase agreement (which are considered to be borrowings under the 1940 Act) to purchase other permitted securities either maturing, or under an agreement to resell, at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. The agreements are collateralized by the underlying securities and are carried at the amount at which the securities subsequently will be repurchased as specified in the agreements.
The maximum amount outstanding during the six months ended January 31, 2003 was $89,705,000, while borrowings averaged $13,650,761 per day with a weighted average interest rate of 1.00%.
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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
July 31, 2003 $ 219,350
----------------------------------------------------------
July 31, 2004 3,466,244
----------------------------------------------------------
July 31, 2005 4,686
----------------------------------------------------------
July 31, 2007 25,224,263
----------------------------------------------------------
July 31, 2008 9,400,360
==========================================================
Total capital loss carryforward $38,314,903
__________________________________________________________
==========================================================
|
FS-134
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $1,774,063,977 and $1,374,162,731, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $39,246,560 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (1,222,584) =========================================================================== Net unrealized appreciation of investment securities $38,023,976 ___________________________________________________________________________ =========================================================================== Cost of investments is the same for tax and financial reporting purposes. |
NOTE 8--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C shares and Class R shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class A shares and Class R shares are subject to CDSC charges. Class R shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED
JANUARY 31, YEAR ENDED JULY 31,
2003 2002
---------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 100,527,532 $ 947,626,930 141,358,670 $ 1,293,194,070
-----------------------------------------------------------------------------------------------------------------------------
Class B 25,672,270 242,962,463 54,984,125 507,221,308
-----------------------------------------------------------------------------------------------------------------------------
Class C 10,226,615 96,423,839 17,930,155 164,422,350
-----------------------------------------------------------------------------------------------------------------------------
Class R* 192,564 1,814,199 4,773 43,973
=============================================================================================================================
Issued as reinvestment of dividends:
Class A 1,033,689 9,765,067 1,556,614 14,273,598
-----------------------------------------------------------------------------------------------------------------------------
Class B 1,036,975 9,826,322 1,318,829 12,129,999
-----------------------------------------------------------------------------------------------------------------------------
Class C 216,132 2,040,953 303,088 2,777,727
-----------------------------------------------------------------------------------------------------------------------------
Class R* 507 4,795 15 135
=============================================================================================================================
Conversion of Class B shares to Class A shares:**
Class A 846,311 7,978,931 -- --
-----------------------------------------------------------------------------------------------------------------------------
Class B (842,645) (7,978,931) -- --
=============================================================================================================================
Reacquired:
Class A (86,218,652) (812,020,683) (125,208,629) (1,144,799,798)
-----------------------------------------------------------------------------------------------------------------------------
Class B (15,681,304) (147,834,303) (20,005,120) (183,320,491)
-----------------------------------------------------------------------------------------------------------------------------
Class C (7,730,183) (72,665,112) (11,125,287) (101,696,314)
-----------------------------------------------------------------------------------------------------------------------------
Class R* (79,761) (751,996) (1,163) (10,800)
=============================================================================================================================
29,200,050 $ 277,192,474 61,116,070 $ 564,235,757
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Prior to the six months ended January 31, 2003, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-135
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED YEAR ENDED
ENDED JULY 31, SEVEN MONTHS DECEMBER 31,
JANUARY 31, ----------------------- ENDED --------------------
2003 2002 2001 JULY 31, 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.28 $ 9.08 $ 8.77 $ 8.80 $ 9.58 $ 9.46
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.43(b) 0.50(a) 0.34 0.60 0.62
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 0.23 0.35 (0.03) (0.78) 0.13
=================================================================================================================================
Total from investment operations 0.38 0.66 0.85 0.31 (0.18) 0.75
=================================================================================================================================
Less dividends from net investment income (0.20) (0.46) (0.54) (0.34) (0.60) (0.63)
=================================================================================================================================
Net asset value, end of period $ 9.46 $ 9.28 $ 9.08 $ 8.77 $ 8.80 $ 9.58
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 4.11% 7.39% 9.91% 3.55% (1.87)% 8.17%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $635,390 $473,104 $302,391 $221,636 $238,957 $245,613
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 0.90%(d) 0.94% 1.32% 1.25%(e) 1.08% 1.20%
=================================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 0.89%(d) 0.90% 0.93% 0.98%(e) 0.89% 0.96%
=================================================================================================================================
Ratio of net investment income to average net
assets 3.82%(d) 4.58%(b) 5.61% 6.61%(e) 6.60% 6.43%
=================================================================================================================================
Ratio of interest expense to average net
assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydowns gains and losses adjustments to investment income, the
investment income per share would have been $0.47 and the ratio of net
investment income to average net assets would have been 5.09%. In
accordance with the AICPA Audit and Accounting Guide for investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$557,521,567.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-136
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.31 $ 9.11 $ 8.79 $ 8.82 $ 9.59 $ 9.46
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15(a) 0.37(b) 0.44(a) 0.30 0.53 0.55
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.20 0.22 0.35 (0.04) (0.77) 0.13
=================================================================================================================================
Total from investment operations 0.35 0.59 0.79 0.26 (0.24) 0.68
=================================================================================================================================
Less dividends from net investment income (0.17) (0.39) (0.47) (0.29) (0.53) (0.55)
=================================================================================================================================
Net asset value, end of period $ 9.49 $ 9.31 $ 9.11 $ 8.79 $ 8.82 $ 9.59
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 3.74% 6.58% 9.17% 3.05% (2.56)% 7.40%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $721,806 $613,306 $269,677 $177,032 $228,832 $237,919
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets
(including interest expense) 1.65%(d) 1.69% 2.08% 2.01%(e) 1.85% 1.96%
=================================================================================================================================
Ratio of expenses to average net assets
(excluding interest expense) 1.64%(d) 1.65% 1.69% 1.74%(e) 1.66% 1.72%
=================================================================================================================================
Ratio of net investment income to average net
assets 3.07%(d) 3.83%(b) 4.85% 5.85%(e) 5.83% 5.68%
=================================================================================================================================
Ratio of interest expense to average net
assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydowns gains and losses adjustments to investment income, the
investment income per share would have been $0.40 and the ratio of net
investment income to average net assets would have been 4.35%. In
accordance with the AICPA Audit and Accounting Guide for Investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect the change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$693,738,301.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-137
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, ------------------- JULY 31, ------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.27 $ 9.08 $ 8.77 $ 8.79 $ 9.56 $ 9.44
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15(a) 0.37(b) 0.44(a) 0.30 0.53 0.56
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.20 0.21 0.34 (0.03) (0.77) 0.11
=================================================================================================================================
Total from investment operations 0.35 0.58 0.78 0.27 (0.24) 0.67
=================================================================================================================================
Less dividends from net investment income (0.17) (0.39) (0.47) (0.29) (0.53) (0.55)
=================================================================================================================================
Net asset value, end of period $ 9.45 $ 9.27 $ 9.08 $ 8.77 $ 8.79 $ 9.56
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 3.75% 6.48% 9.08% 3.18% (2.57)% 7.31%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $155,195 $127,114 $59,915 $34,206 $39,011 $38,026
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets (including
interest expense) 1.65%(d) 1.69% 2.08% 2.01%(e) 1.85% 1.96%
=================================================================================================================================
Ratio of expenses to average net assets (excluding
interest expense) 1.64%(d) 1.65% 1.69% 1.74%(e) 1.66% 1.72%
=================================================================================================================================
Ratio of net investment income to average net
assets 3.07%(d) 3.83%(b) 4.85% 5.85%(e) 5.83% 5.68%
=================================================================================================================================
Ratio of interest expense to average net assets 0.01%(d) 0.04% 0.39% 0.27%(e) 0.19% 0.24%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 103% 146% 194% 65% 141% 147%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydowns gains and losses adjustments to investment income, the
investment income per share would have been $0.40 and the ratio of net
investment income to average net assets would have been 4.35%. In
accordance with the AICPA Audit and Accounting Guide for Investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$145,247,773.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-138
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED)
JANUARY 31, TO JULY 31,
2003 2002
--------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.27 $ 9.13
--------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.17(a) 0.07(b)
--------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.14
============================================================================================
Total from investment operations 0.38 0.21
============================================================================================
Less distributions from net investment income (0.19) (0.07)
============================================================================================
Net asset value, end of period $ 9.46 $ 9.27
____________________________________________________________________________________________
============================================================================================
Total return(c) 4.09% 2.34%
____________________________________________________________________________________________
============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,106 $ 34
____________________________________________________________________________________________
============================================================================================
Ratio of expenses to average net assets (including interest
expense) 1.15%(d) 1.19%(e)
============================================================================================
Ratio of expenses to average net assets (excluding interest
expense) 1.14%(d) 1.15%(e)
============================================================================================
Ratio of net investment income to average net assets 3.57%(d) 4.33%(b)(e)
============================================================================================
Ratio of interest expense to average net assets 0.01%(d) 0.04%(e)
____________________________________________________________________________________________
============================================================================================
Portfolio turnover rate(f) 103% 146%
____________________________________________________________________________________________
============================================================================================
|
(a) Calculated using average shares outstanding.
(b) As required, effective August 31, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premiums on debt securities and recording paydowns
gains and losses on asset-backed securities as adjustments to net
investment income. Had the Fund not amortized on debt securities or
recorded paydowns gains and losses adjustments to investment income, the
investment income per share would have remained the same and the ratio
of net investment income to average net assets would have been 4.85%. In
accordance with the AICPA Audit and Accounting Guide for Investment
Companies, per share and ratios for periods prior to August 1, 2001 have
not been restated to reflect this change in presentation.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average daily net assets of $312,930.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-139
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(unaudited)
PAR MARKET
MATURITY (000S) VALUE
-----------------------------------------------------------------------------------------------
U.S. TREASURY NOTES--99.50%
3.00% 02/29/04 $ 60,000 $ 61,040,400
-----------------------------------------------------------------------------------------------
3.63% 03/31/04 60,500 62,088,125
-----------------------------------------------------------------------------------------------
3.38% 04/30/04 60,500 61,984,065
-----------------------------------------------------------------------------------------------
3.25% 05/31/04 60,500 61,946,555
-----------------------------------------------------------------------------------------------
2.88% 06/30/04 60,500 61,700,320
-----------------------------------------------------------------------------------------------
2.25% 07/31/04 60,500 61,180,625
-----------------------------------------------------------------------------------------------
2.13% 08/31/04 60,500 61,076,565
-----------------------------------------------------------------------------------------------
1.88% 09/30/04 60,500 60,830,935
-----------------------------------------------------------------------------------------------
2.13% 10/31/04 60,500 61,057,810
-----------------------------------------------------------------------------------------------
2.00% 11/30/04 60,300 60,705,216
-----------------------------------------------------------------------------------------------
1.75% 12/31/04 60,000 60,084,600
-----------------------------------------------------------------------------------------------
1.63% 01/31/05 59,900 59,796,972
===============================================================================================
Total U.S. Treasury Notes (Cost $724,808,390) 733,492,188
===============================================================================================
TOTAL INVESTMENTS--99.50% 733,492,188
===============================================================================================
OTHER ASSETS LESS LIABILITIES--0.50% 3,677,548
===============================================================================================
NET ASSETS--100.00% $737,169,736
_______________________________________________________________________________________________
===============================================================================================
|
See Notes to Financial Statements.
FS-140
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$724,808,390) $733,492,188
-----------------------------------------------------------
Cash 93,582
-----------------------------------------------------------
Receivables for:
Fund shares sold 2,473,578
-----------------------------------------------------------
Interest 4,103,135
-----------------------------------------------------------
Investment for deferred compensation plan 41,646
-----------------------------------------------------------
Other assets 80,499
===========================================================
Total assets 740,284,628
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 2,662,571
-----------------------------------------------------------
Dividends 194,602
-----------------------------------------------------------
Deferred compensation plan 41,646
-----------------------------------------------------------
Accrued distribution fees 128,814
-----------------------------------------------------------
Accrued trustees' fees 863
-----------------------------------------------------------
Accrued transfer agent fees 82,682
-----------------------------------------------------------
Accrued operating expenses 3,714
===========================================================
Total liabilities 3,114,892
===========================================================
Net assets applicable to shares outstanding $737,169,736
___________________________________________________________
===========================================================
NET ASSETS:
Class A $700,247,785
___________________________________________________________
===========================================================
Class A3 $ 34,478,355
___________________________________________________________
===========================================================
Institutional Class $ 2,443,596
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 66,823,706
___________________________________________________________
===========================================================
Class A3 3,290,865
___________________________________________________________
===========================================================
Institutional Class 233,231
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.48
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.48 divided by
99.00%) $ 10.59
___________________________________________________________
===========================================================
Class A3:
Net asset value and offering price per
share $ 10.48
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 10.48
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $ 9,940,681
===========================================================
EXPENSES:
Advisory fees 710,967
-----------------------------------------------------------
Administrative services fees 83,520
-----------------------------------------------------------
Custodian fees 8,060
-----------------------------------------------------------
Distribution fees -- Class A 547,253
-----------------------------------------------------------
Distribution fees -- Class A3 14,042
-----------------------------------------------------------
Transfer agent fees 451,785
-----------------------------------------------------------
Transfer agent fees -- Institutional Class 852
-----------------------------------------------------------
Trustees' fees 6,262
-----------------------------------------------------------
Other 101,486
===========================================================
Total expenses 1,924,227
===========================================================
Less: Expenses paid indirectly (5,555)
===========================================================
Net expenses 1,918,672
===========================================================
Net investment income 8,022,009
===========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain from investment securities 5,099,203
-----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (1,832,003)
===========================================================
Net gain from investment securities 3,267,200
===========================================================
Net increase in net assets resulting from
operations $11,289,209
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-141
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 8,022,009 $ 19,243,725
------------------------------------------------------------------------------------------------
Net realized gain from investment securities 5,099,203 12,398,048
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (1,832,003) 4,356,374
================================================================================================
Net increase in net assets resulting from operations 11,289,209 35,998,147
================================================================================================
Distributions to shareholders from net investment income:
Class A (7,917,527) (19,170,139)
------------------------------------------------------------------------------------------------
Class A3 (70,759) --
------------------------------------------------------------------------------------------------
Institutional Class (33,723) (70,078)
------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (7,010,173) --
------------------------------------------------------------------------------------------------
Class A3 (129,528) --
------------------------------------------------------------------------------------------------
Institutional Class (24,193) --
------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 7,764,904 171,767,941
------------------------------------------------------------------------------------------------
Class A3 34,586,739 --
------------------------------------------------------------------------------------------------
Institutional Class (513,376) 1,091,152
================================================================================================
Net increase in net assets 37,941,573 189,617,023
================================================================================================
NET ASSETS:
Beginning of period 699,228,163 509,611,140
================================================================================================
End of period $737,169,736 $699,228,163
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $723,426,740 $681,588,473
------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 5,059,198 7,123,889
------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 8,683,798 10,515,801
================================================================================================
$737,169,736 $699,228,163
________________________________________________________________________________________________
================================================================================================
|
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(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 statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management company consisting of nine separate series portfolios each having an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. 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 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.
FS-142
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 above method are valued based upon quotes furnished by independent sources and are valued at 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 and commercial paper 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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 six months ended January 31, 2003, AIM was paid $83,520 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. During the six months ended January 31, 2003, AFS retained $193,966 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, Class A3 shares and the Institutional Class shares of the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares and Class A3 shares (collectively the "Plans"). The Fund, pursuant to the Plan, pays AIM Distributors compensation at the annual rates of 0.15% of the Fund's average daily net assets of Class A shares and 0.35% of the average daily net assets of Class A3 shares. Of these amounts, the Fund may pay a service fee of 0.15% of the average daily net assets of Class A shares and 0.25% of the average daily net assets of Class A3 shares 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, Class A and Class A3 shares paid $547,253 and $14,042, respectively.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended January 31, 2003, AIM Distributors retained $77,275 in front-end sales commissions from the sale of Class A shares and $14,472 and $0 for Class A and Class A3 shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS, and/or AIM Distributors.
During the six months ended January 31, 2003, the Fund paid legal fees of $2,615 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 six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $5,555 under an expense offset arrangement which resulted in a reduction of the Fund's net expenses of $5,555.
FS-143
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the six months ended January
31, 2003, 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $504,132,490 and $466,059,571, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 was as follows:
Aggregate unrealized appreciation of investment securities $8,713,105 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (89,206) =========================================================== Net unrealized appreciation of investment securities $8,623,899 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $724,868,289. |
NOTE 8--SHARE INFORMATION
The Fund currently consists of three different classes of shares: Class A shares, Class A3 shares and Institutional Class shares. Class A shares were sold with a front-end sales charge. Under some circumstances, Class A shares are subject to contingent deferred sales charge ("CDSC"). Class A3 shares and Institutional Class shares are sold at net asset value. As of the close of business on October 30, 2002, Class A shares were closed to new investors.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, JULY 31,
2003 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 22,321,810 $ 235,370,318 75,803,443 $ 786,911,782
--------------------------------------------------------------------------------------------------------------------------
Class A3* 3,638,776 38,246,673 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 6,127 64,610 184,259 1,912,257
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 1,224,852 12,869,334 1,557,231 16,184,908
--------------------------------------------------------------------------------------------------------------------------
Class A3* 17,442 182,638 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 240 2,518 238 2,477
==========================================================================================================================
Reacquired:
Class A (22,819,431) (240,474,748) (60,767,295) (631,328,749)
--------------------------------------------------------------------------------------------------------------------------
Class A3* (365,353) (3,842,572) -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (55,092) (580,504) (79,249) (823,582)
==========================================================================================================================
3,969,371 $ 41,838,267 16,698,627 $ 172,859,093
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class A3 shares commenced sales on October 31, 2002.
FS-144
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, --------------------------------------------------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.53 $ 10.26 $ 9.96 $ 10.03 $ 10.07 $ 10.07
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12 0.33(a) 0.52(b) 0.51 0.47 0.53
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.05 0.27 0.31 (0.07) (0.04) --
=================================================================================================================================
Total from investment operations 0.17 0.60 0.83 0.44 0.43 0.53
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.12) (0.33) (0.53) (0.51) (0.47) (0.53)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.10) -- -- -- -- --
=================================================================================================================================
Total distributions (0.22) (0.33) (0.53) (0.51) (0.47) (0.53)
=================================================================================================================================
Net asset value, end of period $ 10.48 $ 10.53 $ 10.26 $ 9.96 $ 10.03 $ 10.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.61% 5.89% 8.53% 4.50% 4.32% 5.42%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $700,248 $696,259 $507,799 $300,058 $390,018 $345,355
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.52%(d) 0.48% 0.56% 0.54% 0.54% 0.54%
=================================================================================================================================
Ratio of net investment income to average net
assets 2.17%(d) 3.12%(a) 5.15% 5.07% 4.61% 5.29%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 64% 149% 137% 122% 184% 133%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.34 and the ratio of net investment income to
average net assets would have been 3.29%. In accordance with the AICPA
Audit and Accounting Guide for Investment Companies, per share and
ratios for periods prior to August 1, 2001 have not been restated to
reflect this change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$723,722,536.
(e) Not annualized for periods less than one year.
FS-145
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS A3
--------------------
OCTOBER 31,
2002
(DATE SALES
COMMENCED) TO
JANUARY 31,
2003
----------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.59
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05
----------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.01)
==================================================================================
Total from investment operations 0.04
==================================================================================
Less distributions:
Dividends from net investment income (0.05)
----------------------------------------------------------------------------------
Distributions from net realized gains (0.10)
==================================================================================
Total distributions (0.15)
==================================================================================
Net asset value, end of period $ 10.48
__________________________________________________________________________________
==================================================================================
Total return(a) 0.41%
__________________________________________________________________________________
==================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $34,478
__________________________________________________________________________________
==================================================================================
Ratio of expenses to average net assets 0.72%(b)
==================================================================================
Ratio of net investment income to average net assets 1.97%(b)
__________________________________________________________________________________
==================================================================================
Portfolio turnover rate(c) 64%
__________________________________________________________________________________
==================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$15,745,569.
(c) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JULY 31,
JANUARY 31, ------------------------------------------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.53 $10.26 $ 9.96 $10.03 $ 10.07 $ 10.07
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13 0.34(a) 0.54(b) 0.54 0.49 0.56
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.05 0.27 0.31 (0.07) (0.04) --
=================================================================================================================================
Total from investment operations 0.18 0.61 0.85 0.47 0.45 0.56
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.13) (0.34) (0.55) (0.54) (0.49) (0.56)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.10) -- -- -- -- --
=================================================================================================================================
Total distributions (0.23) (0.34) (0.55) (0.54) (0.49) (0.56)
=================================================================================================================================
Net asset value, end of period $10.48 $10.53 $10.26 $ 9.96 $ 10.03 $ 10.07
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 1.72% 6.05% 8.80% 4.78% 4.55% 5.66%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,444 $2,970 $1,812 $2,455 $17,131 $50,609
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.31%(d) 0.34% 0.33%(e) 0.29% 0.31% 0.32%
=================================================================================================================================
Ratio of net investment income to average net assets 2.38%(d) 3.26%(a) 5.38% 5.31% 4.84% 5.51%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 64% 149% 137% 122% 184% 133%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and the Accounting Guide for Investment
Companies and began amortizing premiums on debt securities. Had the Fund
not amortized premiums on debt securities, the net investment income per
share would have been $0.35 and the ratio of net investment income to
average assets would have been 3.43%. In accordance with the AICPA Audit
and Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$2,800,291.
(e) Includes expense reimbursement. Ratio of expenses to average net assets
excluding reimbursement is 0.41%.
(f) Not annualized for periods less than one year.
FS-146
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
COMMERCIAL PAPER-25.73%(a)
ASSET-BACKED SECURITIES-COMMERCIAL
LOANS/LEASES-4.52%
Atlantis One Funding Corp. (Rabobank-ABS
Program Sponsor)
(Acquired 10/01/02; Cost $19,852,483)
1.59%(b) 03/17/03 $ 20,000 $ 19,961,133
-----------------------------------------------------------------------------------
(Acquired 01/02/03; Cost $69,792,722)
1.30%(b) 03/25/03 70,000 69,868,555
===================================================================================
89,829,688
===================================================================================
ASSET-BACKED SECURITIES-CONSUMER
RECEIVABLES-2.11%
Thunder Bay Funding Inc. (Royal Bank of
Canada-ABS Program Sponsor)(Acquired
01/21/03; Cost $42,006,149)
1.28%(b) 04/21/03 42,141 42,022,631
===================================================================================
ASSET-BACKED SECURITIES-MULTI-PURPOSE-5.74%
Edison Asset Securitization, LLC (GE Capital
Corp.-ABS Program Sponsor)(Acquired
10/01/02; Cost $31,814,444)
1.67%(b) 02/03/03 32,000 31,997,031
-----------------------------------------------------------------------------------
Falcon Asset Securitization Corp. (Bank One
N.A.-ABS Program Sponsor)
(Acquired 01/24/03; Cost $37,958,443)
1.27%(b) 02/24/03 38,000 37,969,167
-----------------------------------------------------------------------------------
Preferred Receivables Funding Corp. (Bank One
N.A.-ABS Program Sponsor)
(Acquired 12/11/02; Cost $19,105,552)
1.33%(b) 03/12/03 19,170 19,142,379
-----------------------------------------------------------------------------------
Windmill Funding Corp. (ABN AMRO Bank,
N.V.-ABS Program Sponsor)
(Acquired 10/28/02; Cost $24,821,736)
1.70%(b) 03/28/03 25,000 24,935,069
===================================================================================
114,043,646
===================================================================================
ASSET-BACKED SECURITIES-TRADE
RECEIVABLES-9.38%
Bills Securitisation Ltd. (Germany) (Deutsche
Bank A.G.-ABS Program Sponsor) (Acquired
01/22/03; Cost $49,729,778)
1.28%(b) 06/23/03 50,000 49,747,556
-----------------------------------------------------------------------------------
Blue Ridge Asset Funding Corp. (Wachovia Bank
N.A.-ABS Program Sponsor)
(Acquired 01/07/03; Cost $62,212,248)
1.30%(b) 02/19/03 62,309 62,268,499
-----------------------------------------------------------------------------------
Eureka Securitization, Inc. (Citibank
N.A.-ABS Program Sponsor) (Acquired
01/22/03; Cost $29,454,898)
1.28%(b) 03/06/03 29,500 29,465,387
-----------------------------------------------------------------------------------
|
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
ASSET-BACKED SECURITIES-TRADE RECEIVABLES-(CONTINUED)
FCAR Owner Trust-Series II (Ford Motor Credit
Co.-ABS Program Sponsor) (Acquired
11/05/02; Cost $24,819,500)
1.52%(b) 04/25/03 $ 25,000 $ 24,912,389
-----------------------------------------------------------------------------------
New Center Asset Trust (General Motors
Acceptance Corp.-ABS Program Sponsor)
(Acquired 10/30/02; Cost $19,863,083)
1.59%(b) 04/03/03 20,000 19,946,117
===================================================================================
186,339,948
===================================================================================
DIVERSIFIED FINANCIAL SERVICES-3.98%
General Electric Capital Corp.
1.58% 04/03/03 40,000 39,892,911
-----------------------------------------------------------------------------------
Morgan Stanley, Floating Rate,
1.39%(c) 02/21/03 14,200 14,200,000
-----------------------------------------------------------------------------------
National Australia Funding (Delaware) Inc.
2.09% 02/07/03 25,000 24,991,292
===================================================================================
79,084,203
===================================================================================
Total Commercial Paper (Cost
$511,320,116) 511,320,116
===================================================================================
U.S. GOVERNMENT AGENCY SECURITIES-12.02%
FEDERAL HOME LOAN BANK-4.45%
Unsec. Bonds,
1.61% 12/08/03 40,000 40,000,000
-----------------------------------------------------------------------------------
1.70% 12/08/03 30,000 30,000,000
-----------------------------------------------------------------------------------
3.75% 02/13/04 18,000 18,433,882
===================================================================================
88,433,882
===================================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-3.76%
Disc. Notes,
1.29%(a) 04/25/03 75,000 74,776,938
===================================================================================
OVERSEAS PRIVATE INVESTMENT CORP.-3.81%(d)(e)
Gtd. Floating Rate Participation Ctfs.,
1.36% 07/15/03 18,000 18,000,000
-----------------------------------------------------------------------------------
1.24% 01/15/15 3,700 3,700,000
-----------------------------------------------------------------------------------
1.24% 05/15/15 53,900 53,900,000
===================================================================================
75,600,000
===================================================================================
Total U.S. Government Agency Securities
(Cost $238,810,820) 238,810,820
===================================================================================
MASTER NOTE AGREEMENTS-7.55%(f)
Merrill Lynch Mortgage Capital, Inc.
1.47%(g) 08/18/03 70,000 70,000,000
-----------------------------------------------------------------------------------
|
FS-147
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
MASTER NOTE AGREEMENTS-(CONTINUED)
Morgan Stanley
1.38%(d)(h) 03/17/03 $ 80,000 $ 80,000,000
===================================================================================
Total Master Note Agreements (Cost
$150,000,000) 150,000,000
===================================================================================
VARIABLE RATE DEMAND NOTES-5.96%
CORPORATE GUARANTEED-0.50%
Mississippi (State of) Business Finance Corp.
(GE Plastics Project); IDR,
1.36%(d)(i)(j) 02/01/23 10,000 10,000,000
===================================================================================
INSURED-0.32%
Michigan (State of) Housing Development
Authority; Series C RB,
1.34%(d)(k) 12/01/20 6,405 6,405,000
===================================================================================
LETTER OF CREDIT GUARANTEED-5.14%(D)(E)(L)
Capital One Funding Corp., Floating Rate
Notes (LOC-Bank One N.A.),
1.40% 05/01/26 7,600 7,600,000
-----------------------------------------------------------------------------------
Colorado (State of) Health Facilities
Authority (National Benevolent
Association); Series E RB (LOC-KBC Bank
N.V.),
1.40% 03/01/30 9,650 9,650,000
-----------------------------------------------------------------------------------
Family Express Corp., LLC-Series A, Loan
Program Notes (LOC-First of America Bank
N.A.),
1.39% 04/01/28 9,070 9,070,000
-----------------------------------------------------------------------------------
Health Midwest Ventures-Series 94-A, Floating
Rate Notes (LOC-Bank of America N.A.),
2.08% 08/01/19 16,330 16,330,000
-----------------------------------------------------------------------------------
KBL Capital Fund Inc.-Series A, Loan Program
Notes (LOC-National City Bank),
1.39% 05/01/27 16,730 16,730,000
-----------------------------------------------------------------------------------
Miami-Dade (County of) Industrial Development
Authority (Dolphins Stadium); IDR
(LOC-Societe Generale),
1.40% 07/01/22 100 100,000
-----------------------------------------------------------------------------------
Mississippi (State of) Business Finance Corp.
(Telepak Inc. Project); IDR (LOC-Wachovia
Bank N.A.),
1.34% 09/01/15 20,000 20,000,000
-----------------------------------------------------------------------------------
Mississippi (State of) Business Finance Corp.
(Viking Range Corp. Project); IDR (LOC-Bank
of America N.A.),
1.41% 06/01/15 15,230 15,230,000
-----------------------------------------------------------------------------------
Port Blakely Communities; Series C RB
(LOC-Bank of America N.A.),
1.35% 02/15/21 7,500 7,500,000
===================================================================================
102,210,000
===================================================================================
Total Variable Rate Demand Notes (Cost
$118,615,000) 118,615,000
===================================================================================
|
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
ASSET-BACKED NOTES-5.80%
FULLY BACKED-0.82%
Capital One Auto Finance Trust- Series
2002-B, Class A1
1.76%(k) 09/15/03 $ 16,247 $ 16,247,429
===================================================================================
STRUCTURED INVESTMENT VEHICLES-4.78%
Beta Finance Inc., Floating Rate
(Citibank International PLC-ABS Program
Sponsor)(b)(c)
(Acquired 10/24/02; Cost $50,000,000)
1.37% 10/07/03 50,000 50,000,000
-----------------------------------------------------------------------------------
(Acquired 10/03/02; Cost $45,000,000)
1.37% 10/14/03 45,000 45,000,000
===================================================================================
95,000,000
===================================================================================
TRADE RECEIVABLES-0.20%
World Omni Auto Receivables Trust- Series
2002-A, Class A1
1.87% 07/15/03 4,018 4,017,971
===================================================================================
Total Asset-Backed Notes (Cost
$115,265,400) 115,265,400
===================================================================================
PROMISSORY NOTES-4.93%
Goldman Sachs Group, Inc. (The)(c)
1.50% 03/05/03 48,000 48,000,000
-----------------------------------------------------------------------------------
1.53% 03/21/03 50,000 50,000,000
===================================================================================
Total Promissory Notes (Cost $98,000,000) 98,000,000
===================================================================================
CERTIFICATES OF DEPOSIT-4.23%
Danske Bank A/S (Denmark)
2.00% 08/01/03 11,000 11,000,000
-----------------------------------------------------------------------------------
Lloyds Bank TSB Bank PLC-New York (United
Kingdom)
2.15% 02/10/03 32,000 32,000,000
-----------------------------------------------------------------------------------
Svenska Handelsbanken A.G. (Sweden)
1.77% 02/28/03 41,000 41,000,000
===================================================================================
Total Certificates of Deposit (Cost
$84,000,000) 84,000,000
===================================================================================
MEDIUM TERM NOTES-2.52%
M-Market Trust Lilly-Series 2002B, Floating
Rate Notes, (Acquired 12/03/02; Cost
$50,000,000)
1.43% (Cost $50,000,000)(b)(i) 12/03/03 50,000 50,000,000
===================================================================================
Total Investments (excluding Repurchase
Agreements) (Cost $1,366,011,336) 1,366,011,336
===================================================================================
|
FS-148
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-33.34%(m)
BNP Paribas Securities Corp. (France)
1.34%(n) 02/03/03 $312,640 $ 312,639,950
-----------------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
1.34%(o) 02/03/03 87,000 87,000,000
-----------------------------------------------------------------------------------
Morgan Stanley
1.33%(p) 02/03/03 175,000 175,000,000
-----------------------------------------------------------------------------------
|
PAR
MATURITY (000) VALUE
-----------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-(CONTINUED)
Salomon Smith Barney Inc.
1.34%(q) 02/03/03 $ 88,000 $ 88,000,000
===================================================================================
Total Repurchase Agreements (Cost
$662,639,950) 662,639,950
===================================================================================
TOTAL INVESTMENTS-102.08% (Cost
$2,028,651,286)(r) 2,028,651,286
===================================================================================
OTHER ASSETS LESS LIABILITIES-(2.08%) (41,315,549)
===================================================================================
NET ASSETS-100.00% $1,987,335,737
___________________________________________________________________________________
===================================================================================
|
Investment Abbreviations:
ABS - Asset Backed Security Ctfs. - Certificates Disc. - Discounted Gtd. - Guaranteed IDR - Industrial Development Revenue Bonds LOC - Letter of Credit RB - Revenue Bonds Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Security is traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.
(b) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $577,235,913,
which represented 29.05% of the Fund's net assets.
(c) Interest rates are redetermined daily. Rate shown is the rate in effect on
01/31/03.
(d) Demand securities; payable upon demand by the Fund with usually no more than
seven calendar days' notice.
(e) Interest rates are redetermined weekly. Rates shown are rates in effect on
01/31/03.
(f) The investments in master note agreements are through participation in joint
accounts with other mutual funds, private accounts, and certain
non-registered investment companies managed by the investment advisor or its
affiliates.
(g) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon one or two business day's notice based on the timing
of the demand. Interest rates on master notes are redetermined periodically.
Rate shown is the rate in effect on 01/31/03.
(h) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon one business day's oral notice for up to 10% of
outstanding amount, otherwise, upon seven business day's notice for more
than 10% outstanding balance. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 01/31/03.
(i) Interest rates are redetermined monthly. Rates shown are rates in effect on
01/31/03.
(j) Principal and interest payments are guaranteed by the corporate guarantor.
(k) Principal and interest payments are secured by bond insurance provided by
MBIA Insurance Co.
(l) Principal and interest payments are guaranteed by letter of credit
agreement.
(m) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(n) Joint repurchase agreement entered into 01/31/03 with a maturing value of
$1,500,167,500. Collateralized by $1,435,763,000 U.S. Government
obligations, 0% to 9.80% due 02/03/03 to 07/15/32 with an aggregate market
value at 01/31/03 of $1,530,001,170.
(o) Joint repurchase agreement entered into 01/31/03 with a maturing value of
$500,055,833. Collateralized by $522,946,566 U.S. Government obligations, 0%
to 9.38% due 04/15/03 to 02/01/33 with an aggregate market value at 01/31/03
of $510,005,577.
(p) Joint repurchase agreement entered into 01/31/03 with a maturing value of
$500,055,417. Collateralized by $488,214,008 U.S. Government obligations,
5.50% to 6.50% due 05/01/16 to 01/01/33 with an aggregate market value at
01/31/03 of $510,000,000.
(q) Joint repurchase agreement entered into 01/31/03 with a maturing value of
$500,055,833. Collateralized by $501,936,317 U.S. Government obligations,
5.00% to 7.50% due 01/01/16 to 08/01/32 with an aggregate market value at
01/31/03 of $523,699,154.
(r) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-149
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, excluding repurchase agreements
at value (amortized cost) $1,366,011,336
------------------------------------------------------------
Repurchase agreements 662,639,950
------------------------------------------------------------
Receivables for:
Fund shares sold 13,995,045
------------------------------------------------------------
Interest 1,951,751
------------------------------------------------------------
Investment for deferred compensation plan 71,741
------------------------------------------------------------
Other assets 472,611
============================================================
Total assets 2,045,142,434
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 56,009,944
------------------------------------------------------------
Dividends 31,925
------------------------------------------------------------
Deferred compensation plan 71,741
------------------------------------------------------------
Accrued distribution fees 897,336
------------------------------------------------------------
Accrued trustees' fees 1,371
------------------------------------------------------------
Accrued transfer agent fees 322,411
------------------------------------------------------------
Accrued operating expenses 471,969
============================================================
Total liabilities 57,806,697
============================================================
Net assets applicable to shares outstanding $1,987,335,737
____________________________________________________________
============================================================
NET ASSETS:
AIM Cash Reserve Shares $1,188,726,767
____________________________________________________________
============================================================
Class B $ 673,939,447
____________________________________________________________
============================================================
Class C $ 117,100,349
____________________________________________________________
============================================================
Class R $ 7,569,174
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
AIM Cash Reserve Shares 1,188,740,482
____________________________________________________________
============================================================
Class B 673,899,311
____________________________________________________________
============================================================
Class C 117,100,755
____________________________________________________________
============================================================
Class R 7,569,398
____________________________________________________________
============================================================
Net asset value and offering price per share
for each class $ 1.00
____________________________________________________________
============================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $16,966,409
===========================================================
EXPENSES:
Advisory fees 5,175,262
-----------------------------------------------------------
Administrative services fees 194,095
-----------------------------------------------------------
Custodian fees 40,514
-----------------------------------------------------------
Distribution fees -- AIM Cash Reserve Shares 1,435,959
-----------------------------------------------------------
Distribution fees -- Class B 3,487,305
-----------------------------------------------------------
Distribution fees -- Class C 607,946
-----------------------------------------------------------
Distribution fees -- Class R 3,665
-----------------------------------------------------------
Transfer agent fees 1,857,123
-----------------------------------------------------------
Trustees' fees 9,731
-----------------------------------------------------------
Other 370,484
===========================================================
Total expenses 13,182,084
===========================================================
Less: Fees waived and expenses reimbursed (698,562)
-----------------------------------------------------------
Expenses paid indirectly (15,304)
===========================================================
Net expenses 12,468,218
===========================================================
Net investment income 4,498,191
===========================================================
Net realized gain from investment securities 39,947
===========================================================
Net increase in net assets resulting from
operations $ 4,538,138
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-150
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,498,191 $ 19,419,288
----------------------------------------------------------------------------------------------
Net realized gain from investment securities 39,947 1,145
==============================================================================================
Net increase in net assets resulting from operations 4,538,138 19,420,433
==============================================================================================
Distributions to shareholders from net investment income:
AIM Cash Reserve Shares (4,172,856) (15,341,349)
----------------------------------------------------------------------------------------------
Class B (273,250) (3,410,961)
----------------------------------------------------------------------------------------------
Class C (49,529) (666,967)
----------------------------------------------------------------------------------------------
Class R (2,556) (11)
----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
AIM Cash Reserve Shares (35,589) --
----------------------------------------------------------------------------------------------
Class B (20,896) --
----------------------------------------------------------------------------------------------
Class C (3,549) --
----------------------------------------------------------------------------------------------
Class R (38) --
----------------------------------------------------------------------------------------------
Share transactions-net:
AIM Cash Reserve Shares 66,887,801 184,349,260
----------------------------------------------------------------------------------------------
Class B (44,050,664) 278,519,026
----------------------------------------------------------------------------------------------
Class C (1,844,105) 32,062,975
----------------------------------------------------------------------------------------------
Class R 7,559,388 10,010
==============================================================================================
Net increase in net assets 28,532,295 494,942,416
==============================================================================================
NET ASSETS:
Beginning of period 1,958,803,442 1,463,861,026
==============================================================================================
End of period $1,987,335,737 $1,958,803,442
______________________________________________________________________________________________
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,987,291,126 $1,958,738,706
----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 44,611 64,736
==============================================================================================
$1,987,335,737 $1,958,803,442
______________________________________________________________________________________________
==============================================================================================
|
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Money Market Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be 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 provide as high a level of current income as is consistent with the preservation of capital and liquidity. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
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
FS-151
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 -- The Fund's securities are valued on the basis of amortized cost which approximates market value as permitted under Rule 2a-7 of the 1940 Act. This method values a security at its cost on the date of purchase and, thereafter, assumes a constant amortization to maturity of any premiums or accretion of discount.
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 premiums and accretion of discounts on investments, is recorded on the accrual basis from settlement date.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DISTRIBUTIONS -- It is the policy of the Fund to declare dividends from net investment income daily and pay dividends monthly. Distributions from net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date.
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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.55% on the first $1 billion of the Fund's average daily net assets, plus 0.50% on the Fund's average daily net assets in excess of $1 billion. AIM and/or A I M Distributors, Inc. ("AIM Distributors") voluntarily waived fees and/or reimbursed expenses in order to maintain a minimum yield. The minimum yield may be changed from time to time. During periods of voluntarily fee waivers or reimbursements, AIM and AIM Distributors will retain their ability to be reimbursed for such fee waivers and reimbursements prior to the end of the fiscal year. During the six months ended January 31, 2003, AIM waived advisory fees of $260,906 and AIM Distributors reimbursed $437,656 of Class B and Class C Rule 12b-1 Plan fees.
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 six months ended January 31, 2003, AIM was paid $194,095 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. During the six months ended January 31, 2003, AFS retained $1,117,743 for such services.
The Trust has entered into master distribution agreements with AIM Distributors to serve as the distributor for the AIM Cash Reserve Shares, Class B, Class C and Class R shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's AIM Cash Reserve Shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of AIM Cash Reserve shares, 1.00% of the average daily net assets of Class B and C shares and 0.50% of the average daily net assets of Class R shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the AIM Cash Reserve Shares, Class B, Class C or Class R shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the AIM Cash Reserve Shares, Class B, Class C and Class R shares paid $1,435,959, $3,112,353, $545,242, and $3,665, respectively, after reimbursements.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During six months ended January 31, 2003, AIM Distributors retained $1,877,527, $22,968, $187,696 and $0 for AIM Cash Reserve Shares, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the six months ended January 31, 2003, the Fund paid legal fees of $3,973 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
FS-152
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $15,304 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $15,304.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
NOTE 7--SHARE INFORMATION
The Fund currently offers four different classes of shares: AIM Cash Reserve Shares, Class B shares, Class C shares and Class R shares. AIM Cash Reserve shares and Class R shares are sold at net asset value. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class R shares are subject to CDSC charges. Generally, Class B shares will automatically convert to Cash Reserve shares eight years after the end of the calendar month of purchase.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, JULY 31,
2003 2002
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------------------------
Sold:
AIM Cash Reserve Shares 2,616,220,492 $ 2,616,220,492 7,239,176,762 $ 7,239,176,762
---------------------------------------------------------------------------------------------------------------------------------
Class B 298,049,710 298,049,710 920,671,959 920,671,959
---------------------------------------------------------------------------------------------------------------------------------
Class C 260,928,048 260,928,048 492,311,444 492,311,444
---------------------------------------------------------------------------------------------------------------------------------
Class R* 14,602,505 14,602,505 14,201 14,201
=================================================================================================================================
Issued as reinvestment of dividends:
AIM Cash Reserve Shares 3,628,401 3,628,401 12,953,250 12,953,250
---------------------------------------------------------------------------------------------------------------------------------
Class B 265,378 265,378 3,021,507 3,021,507
---------------------------------------------------------------------------------------------------------------------------------
Class C 44,861 44,861 550,550 550,550
---------------------------------------------------------------------------------------------------------------------------------
Class R* 2,457 2,457 5 5
=================================================================================================================================
Conversion of Class B Shares to AIM Cash Reserve
Shares**:
AIM Cash Reserve Shares 10,178,608 10,178,608 -- --
---------------------------------------------------------------------------------------------------------------------------------
Class B (10,178,608) (10,178,608) -- --
=================================================================================================================================
Reacquired:
AIM Cash Reserve Shares (2,563,139,700) (2,563,139,700) (7,067,780,752) (7,067,780,752)
---------------------------------------------------------------------------------------------------------------------------------
Class B (332,187,144) (332,187,144) (645,174,440) (645,174,440)
---------------------------------------------------------------------------------------------------------------------------------
Class C (262,817,014) (262,817,014) (460,799,019) (460,799,019)
---------------------------------------------------------------------------------------------------------------------------------
Class R* (7,045,574) (7,045,574) (4,196) (4,196)
=================================================================================================================================
28,552,420 $ 28,552,420 494,941,271 $ 494,941,271
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Class R shares commenced sales on June 3, 2002.
** Prior to the six months ended January 31, 2003, conversion of Class B shares to AIM Cash Reserve shares were included in AIM Cash Reserve shares sold and Class B shares reacquired.
FS-153
NOTE 8--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CASH RESERVE
----------------------------------------------------------------------------------
SIX MONTHS SEVEN MONTHS YEAR ENDED DECEMBER
ENDED YEAR ENDED JULY 31, ENDED 31,
JANUARY 31, ---------------------- JULY 31, ----------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.0036 0.0141 0.0467 0.0300(a) 0.0414 0.0453
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income (0.0036) (0.0141) (0.0467) (0.0300) (0.0414) (0.0453)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.37% 1.42% 4.77% 3.03% 4.22% 4.62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,188,727 $1,121,879 $937,532 $912,042 $989,478 $1,179,072
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets(c) 1.00%(d) 1.01% 1.06% 1.07%(e) 1.04% 0.99%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to average net
assets 0.72%(d) 1.40% 4.61% 5.15%(e) 4.16% 4.53%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.03% for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $1,139,401,811.
(e) Annualized.
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, ----------------------- JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0004 0.0065 0.0392 0.0256(a) 0.0339 0.0371
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment
income (0.0004) (0.0065) (0.0392) (0.0256) (0.0339) (0.0371)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.04% 0.66% 3.99% 2.59% 3.45% 3.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $673,939 $717,967 $439,445 $289,327 $404,911 $310,534
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets(c) 1.65%(d) 1.76% 1.81% 1.82%(e) 1.79% 1.81%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to average
net assets() 0.08%(d) 0.65% 3.86% 4.40%(e) 3.41% 3.71%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.78% for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $691,775,145.
(e) Annualized.
FS-154
NOTE 8--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SEVEN MONTHS YEAR ENDED
ENDED JULY 31, ENDED DECEMBER 31,
JANUARY 31, -------------------- JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0004 0.0065 0.0393 0.0256(a) 0.0339 0.0371
---------------------------------------------------------------------------------------------------------------------------------
Less distributions from net investment income (0.0004) (0.0065) (0.0393) (0.0256) (0.0339) (0.0371)
=================================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.04% 0.66% 4.00% 2.59% 3.44% 3.78%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $117,100 $118,947 $ 86,884 $ 45,457 $ 56,636 $ 27,391
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets(c) 1.65%(d) 1.76% 1.81% 1.82%(e) 1.79% 1.81%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income to average net
assets 0.08%(d) 0.65% 3.86% 4.40%(e) 3.41% 3.71%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) After fee waivers and/or reimbursements. Ratio of expenses to average
net assets prior to fee waivers and/or expense reimbursements was 1.78%
for the six months ended January 31, 2003.
(d) Ratios are annualized and based on average net assets of $120,598,012.
(e) Annualized.
CLASS R
-------------------------------
JUNE 3, 2002
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JANUARY 31, JULY 31,
2003 2002
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.0023 0.0010
---------------------------------------------------------------------------------------------
Less distributions from net investment income (0.0023) (0.0010)
=============================================================================================
Net asset value, end of period $ 1.00 $ 1.00
_____________________________________________________________________________________________
=============================================================================================
Total return(a) 0.23% 0.10%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 7,569 $ 10
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets(b) 1.25%(c) 1.26%(d)
_____________________________________________________________________________________________
=============================================================================================
Ratio of net investment income to average net assets 0.47%(c) 1.15%(d)
_____________________________________________________________________________________________
=============================================================================================
|
(a) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.28% for the six months ended January 31, 2003.
(c) Ratios are annualized and based on average net assets of $1,454,153.
(d) Annualized.
FS-155
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
ALABAMA-1.37%
Alabama (State of) Public School & College
Authority; Capital Improvement Series 1999
C RB
5.75%, 07/01/17 AA Aa3 $1,400 $ 1,561,897
---------------------------------------------------------------------------------------
Birmingham (City of) Special Care Facilities
Financing Authority (Children's Hospital of
Alabama); Health Care Facility Series 2002
RB
5.38%, 06/01/23(b) AAA Aaa 1,500 1,562,955
---------------------------------------------------------------------------------------
Courtland (City of) Industrial Development
Board (Champion International Corp.
Project); Refunding Environmental
Improvement Series 1996 RB
6.40%, 11/01/26(c) -- Baa2 2,315 2,396,557
---------------------------------------------------------------------------------------
Jefferson (County of); Capital Improvement
Sewer Series 2001 A RB Wts.
5.00%, 02/01/41(b) AAA Aaa 1,000 988,250
=======================================================================================
6,509,659
=======================================================================================
ALASKA-0.23%
Alaska (State of) Housing Finance Corp.;
Collateralized First Veterans' Home
Mortgage Series 1992 A-2 RB
6.75%, 12/01/24(c) AAA Aaa 1,065 1,076,683
=======================================================================================
AMERICAN SAMOA-0.30%
American Samoa (Territory of); Refunding
Unlimited Tax Series 2000 GO
6.00%, 09/01/08(b) A -- 1,280 1,436,557
=======================================================================================
ARIZONA-0.97%
Pima (County of) Industrial Development
Authority (Radisson City Center Project);
Refunding Development Series 2002 RB
6.50%, 12/01/09(d) -- -- 365 365,197
---------------------------------------------------------------------------------------
6.70%, 12/01/10(d) -- -- 390 390,304
---------------------------------------------------------------------------------------
6.70%, 12/01/11(d) -- -- 415 415,440
---------------------------------------------------------------------------------------
Pima (County of) Unified School District No.
10; Unlimited Tax School Improvement Series
1992 E GO
6.50%, 07/01/05 A+ A2 3,100 3,445,619
=======================================================================================
4,616,560
=======================================================================================
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
ARKANSAS-0.58%
Jefferson (County of) (Regional Medical
Center Project); Refunding & Improvement
Hospital Series 2001 RB
5.85%, 06/01/26 A -- $ 500 $ 516,570
---------------------------------------------------------------------------------------
University of Arkansas (Fayetteville Campus
Facilities); University Series 2002 RB
5.00%, 12/01/27(b) -- Aaa 1,155 1,162,045
---------------------------------------------------------------------------------------
Van Buren (County of); Refunding &
Construction Sales & Use Tax Series 2000 RB
5.60%, 12/01/25(b) -- Aaa 1,000 1,061,630
=======================================================================================
2,740,245
=======================================================================================
CALIFORNIA-2.09%
Abag Financing Authority for Non-Profit
Corps. (Lincoln Glen Manor for Sr.
Citizens); Series 2000 COP 6.10%, 02/15/25 A -- 1,000 1,079,260
---------------------------------------------------------------------------------------
Abag Financing Authority for Non-Profit
Corps. (Lytton Gardens Inc.); Series 1999
COP
6.00%, 02/15/19 A -- 2,085 2,183,454
---------------------------------------------------------------------------------------
Abag Financing Authority for Non-Profit
Corps. (Old Fellows Home of California);
Series 1999 COP 6.00%, 08/15/24 A -- 1,000 1,080,500
---------------------------------------------------------------------------------------
California (State of) Department of Water
Resources; Power Supply Series 2002 A RB
5.38%, 05/01/22 BBB+ A3 1,000 1,018,440
---------------------------------------------------------------------------------------
California (State of) Educational Facilities
Authority (Fresno Pacific University);
Series 2000 A RB
6.05%, 03/01/11 -- Baa3 1,350 1,500,957
---------------------------------------------------------------------------------------
Foothill/Eastern Corridor Agency (California
Toll Road Project); Sr. Lien Series 1995 A
RB
6.00%, 01/01/10(e)(f) AAA Aaa 400 469,700
---------------------------------------------------------------------------------------
Los Angeles (County of); Series 2001 RB
5.15%, 02/12/06
(Acquired 03/29/01;
Cost $329,954)(d)(g) -- -- 328 347,558
---------------------------------------------------------------------------------------
Sacramento (City of) Cogeneration Authority
(Proctor & Gamble Project); Series 1995 RB
7.00%, 07/01/04 BBB -- 500 536,860
---------------------------------------------------------------------------------------
|
FS-156
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
CALIFORNIA-(CONTINUED)
Sacramento City Financing Authority
(Convention Center Hotel); Sr. Series 1999
A RB
6.25%, 01/01/30(d) -- -- $ 750 $ 735,030
---------------------------------------------------------------------------------------
Whittier (City of) Utility Authority; Water
Series 2003 RB
5.00%, 06/01/33(b) AAA Aaa 1,000 1,001,130
=======================================================================================
9,952,889
=======================================================================================
COLORADO-3.26%
Aurora (City of); Public Improvement Series
2000 COP
5.50%, 12/01/30(b) AAA Aaa 3,230 3,382,198
---------------------------------------------------------------------------------------
Broomfield (City of); Refunding & Improvement
Sales & Use Tax Series 2002 A RB
5.00%, 12/01/31(b) -- Aaa 1,000 1,009,210
---------------------------------------------------------------------------------------
Colorado (State of) E-470 Public Highway
Authority; Sr. Series 2000 A RB
5.75%, 09/01/35(b) AAA Aaa 1,000 1,090,330
---------------------------------------------------------------------------------------
Colorado (State of) Educational & Cultural
Facilities Authority (Student
Housing-University of Colorado Foundation
Project); Series 2002 RB
5.00%, 07/01/22(b) AAA Aaa 1,000 1,035,290
---------------------------------------------------------------------------------------
Colorado (State of) Health Facilities
Authority (Exempla Inc.); Series 2002 A RB
5.50%, 01/01/23 A A1 3,500 3,507,735
---------------------------------------------------------------------------------------
5.63%, 01/01/33 A A1 2,000 2,008,180
---------------------------------------------------------------------------------------
El Paso (County of) School District No. 2
(Harrison); Unlimited Tax Series 2001 GO
5.25%, 12/01/26(b) -- Aaa 1,435 1,477,777
---------------------------------------------------------------------------------------
Meridian Metropolitan District; Refunding &
Improvement Unlimited Tax Series 2001 B GO
5.00%, 12/01/25 AA -- 1,000 993,200
---------------------------------------------------------------------------------------
Northwest Parkway Public Highway Authority;
Sr. Series 2001 A RB
5.25%, 06/15/41(b) AAA Aaa 1,000 1,021,580
=======================================================================================
15,525,500
=======================================================================================
CONNECTICUT-5.10%
Brooklyn (City of); Unlimited Tax Series 1995
GO
5.50%, 05/01/05(e)(f) AAA Aaa 250 277,650
---------------------------------------------------------------------------------------
5.70%, 05/01/05(e)(f) AAA Aaa 250 278,750
---------------------------------------------------------------------------------------
Connecticut (State of) (Bradley International
Airport); Special Obligation Parking Series
2000 A RB
6.60%, 07/01/24(b)(c) A -- 1,250 1,309,162
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
CONNECTICUT-(CONTINUED)
Connecticut (State of) (Transportation
Infrastructure); Special Obligation Tax
Series 1991 B RB
6.50%, 10/01/10 AA- Aa3 $ 530 $ 641,088
---------------------------------------------------------------------------------------
6.50%, 10/01/12 AA- Aa3 1,500 1,828,770
---------------------------------------------------------------------------------------
Connecticut (State of) Area Cooperative
Educational Services (Staff
Development/Administration Facilities);
Unlimited Tax Series 1999 GO
5.63%, 07/15/19(b) A -- 1,060 1,117,558
---------------------------------------------------------------------------------------
Connecticut (State of) Clean Water Fund;
Series 1991 RB
7.00%, 01/01/11(e)(f) AAA Aaa 25 25,175
---------------------------------------------------------------------------------------
Connecticut (State of) Development Authority
(Pfizer Inc. Project); Series 1982 PCR
6.55%, 02/15/13 AAA Aaa 250 263,032
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (Bridgeport Hospital);
Series 1992 A RB
6.63%, 07/01/18(b) AAA Aaa 500 510,800
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (Danbury Hospital);
Series 1999 G RB
5.63%, 07/01/25(b) AAA Aaa 250 265,647
---------------------------------------------------------------------------------------
Unrefunded Series 1991 E RB
6.50%, 07/01/14(b) AAA Aaa 110 111,807
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (Loomis Chaffee
School); Series 2001 D RB
5.25%, 07/01/31 -- A2 1,500 1,528,920
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (Stamford Hospital);
Series 1996 F RB
5.40%, 07/01/09(b) AAA Aaa 1,000 1,102,060
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (William W. Backus
Hospital); Series 1997 D RB
5.75%, 07/01/27(b) AAA Aaa 1,000 1,071,660
---------------------------------------------------------------------------------------
Connecticut (State of) Health & Educational
Facilities Authority (Windham Community
Memorial Hospital); Series 1996 C RB
5.75%, 07/01/11(b) A Baa3 740 790,564
---------------------------------------------------------------------------------------
Connecticut (State of) Housing Finance
Authority (Group Home Mortgage); Special
Obligation
Series 2000 GH-5 RB
5.85%, 06/15/30(b) AAA Aaa 500 525,615
---------------------------------------------------------------------------------------
|
FS-157
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
CONNECTICUT-(CONTINUED)
Connecticut (State of) Housing Finance
Authority (Housing Mortgage Finance
Program);
Series 1993 E-1 RB
6.00%, 05/15/17 AAA Aaa $ 675 $ 675,837
---------------------------------------------------------------------------------------
Series 1996 C-1 RB
6.30%, 11/15/17 AAA Aaa 1,270 1,344,003
---------------------------------------------------------------------------------------
Series 1996 C-2 RB
6.25%, 11/15/18 AAA Aaa 750 792,577
---------------------------------------------------------------------------------------
Series 1996 G RB
6.00%, 11/15/27(c) AAA Aaa 1,000 1,037,370
---------------------------------------------------------------------------------------
Series 1998 C RB
5.50%, 11/15/35(c) AAA Aaa 1,775 1,808,175
---------------------------------------------------------------------------------------
Series 1998 D-2 RB
5.45%, 11/15/24(c) AAA Aaa 250 255,242
---------------------------------------------------------------------------------------
Series 2001 A-1 RB
5.25%, 11/15/28 AAA Aaa 550 554,119
---------------------------------------------------------------------------------------
Sub-Series 1996 E-1 RB
5.95%, 05/15/17 AAA Aaa 500 522,770
---------------------------------------------------------------------------------------
Sub-Series 1997 C-2 RB
5.85%, 11/15/28(c) AAA Aaa 400 412,352
---------------------------------------------------------------------------------------
Sub-Series 1998 E-1 RB
5.13%, 05/15/21 AAA Aaa 445 448,640
---------------------------------------------------------------------------------------
Sub-Series 2000 B-2 RB
5.85%, 05/15/31(c) AAA Aaa 860 882,618
---------------------------------------------------------------------------------------
Manchester (City of) Eighth Utilities
District; Unlimited Tax Series 1991 GO
6.75%, 08/15/06 -- Aa3 180 209,450
---------------------------------------------------------------------------------------
Mansfield (City of); Unlimited Tax Series
1990 GO
6.00%, 06/15/07 -- Aa3 100 115,446
---------------------------------------------------------------------------------------
6.00%, 06/15/08 -- Aa3 100 116,256
---------------------------------------------------------------------------------------
6.00%, 06/15/09 -- Aa3 100 116,936
---------------------------------------------------------------------------------------
New Britain (City of); Unlimited Tax Series
1992 GO
6.00%, 02/01/11(b) AAA Aaa 400 467,044
---------------------------------------------------------------------------------------
North Canaan (City of); Unlimited Tax Series
1991 GO
6.50%, 01/15/08 -- A3 125 146,404
---------------------------------------------------------------------------------------
6.50%, 01/15/09 -- A3 125 147,760
---------------------------------------------------------------------------------------
6.50%, 01/15/10 -- A3 125 148,871
---------------------------------------------------------------------------------------
6.50%, 01/15/11 -- A3 125 150,137
---------------------------------------------------------------------------------------
Somers (City of); Unlimited Tax Series 1990
GO
6.00%, 12/01/10 -- A1 190 224,099
---------------------------------------------------------------------------------------
University of Connecticut; Student Fee Series
2000 A RB
6.00%, 11/15/10(e)(f) AA- Aa3 1,325 1,576,829
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
CONNECTICUT-(CONTINUED)
Westbrook (City of); Unlimited Tax Series
1992 GO
6.40%, 03/15/10(b) AAA Aaa $ 380 $ 453,576
=======================================================================================
24,254,769
=======================================================================================
DELAWARE-0.06%
Delaware (State of) Economic Development
Authority (Osteopathic Hospital
Association); Series 1993 A RB
6.75%, 01/01/13(e)(f) NRR Aaa 250 305,975
=======================================================================================
DISTRICT OF COLUMBIA-0.45%
District of Columbia (George Washington
University); Series 2001 A RB
5.13%, 09/15/31(b) AAA Aaa 1,000 1,010,000
---------------------------------------------------------------------------------------
District of Columbia (Gonzaga College High
School); Series 1999 RB
5.38%, 07/01/19(b) AAA Aaa 1,055 1,121,032
=======================================================================================
2,131,032
=======================================================================================
FLORIDA-2.22%
Crossings at Fleming Island Community
Development District; Refunding Special
Assessment Series 2000 B RB
5.80%, 05/01/16(b) AAA Aaa 1,000 1,126,320
---------------------------------------------------------------------------------------
Escambia (County of) (Champion International
Corp. Project); Series 1994 PCR
6.90%, 08/01/22(c) BBB Baa2 1,125 1,168,132
---------------------------------------------------------------------------------------
Escambia (County of) Health Facilities
Authority (Health Care Facility Loan-
Veterans Hospital Project); Series 2000 RB
5.95%, 07/01/20(b) -- Aaa 1,000 1,096,020
---------------------------------------------------------------------------------------
Jacksonville (City of) Electric Authority;
Water & Sewer Series 2000 A RB
5.30%, 10/01/30 A+ Aa3 1,000 1,017,250
---------------------------------------------------------------------------------------
Jacksonville (City of) Health Facilities
Authority (Ascension Health Credit Group);
Series 2002 A RB
5.25%, 11/15/32 AA Aa2 2,000 1,973,140
---------------------------------------------------------------------------------------
Miami-Dade (County of) (Miami International
Airport); Series 2000 B RB
5.75%, 10/01/29(b) AAA Aaa 2,000 2,154,280
---------------------------------------------------------------------------------------
Orlando (City of) Utilities Commission;
Refunding Water & Electric Series 2002 C RB
5.00%, 10/01/27 AA- Aa2 1,000 1,009,860
---------------------------------------------------------------------------------------
Sunrise (City of) Utility System; Refunding
Series 1998 RB
5.00%, 10/01/28(b) AAA Aaa 1,000 1,021,770
=======================================================================================
10,566,772
=======================================================================================
|
FS-158
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
GEORGIA-0.73%
Athens-Clarke (County of) Unified Government
Development Authority (Catholic Health
East); Series 2002 RB
5.50%, 11/15/32 A A2 $ 500 $ 499,955
---------------------------------------------------------------------------------------
Floyd (County of) Hospital Authority (Floyd
Medical Center Project); Series 2002 RAC
5.25%, 07/01/29(b) -- Aaa 1,510 1,551,706
---------------------------------------------------------------------------------------
Georgia (State of) Housing & Finance
Authority (Home Ownership Opportunity
Program); Series 1992 C RB
6.50%, 12/01/11 AA+ Aa2 390 398,440
---------------------------------------------------------------------------------------
Griffin (City of); Combined Public Utility
Refunding & Improvement Series 2002 RB
5.00%, 01/01/32(b) AAA Aaa 1,000 1,008,890
=======================================================================================
3,458,991
=======================================================================================
GUAM-0.03%
Guam (Territory of) Power Authority; Series
1993 A RB
5.25%, 10/01/23 BBB -- 125 126,224
=======================================================================================
ILLINOIS-8.68%
Bellwood (City of); Unlimited Tax Series 2002
GO
5.25%, 12/01/25(b) -- Aaa 1,000 1,031,680
---------------------------------------------------------------------------------------
Chicago (City of);
Project & Refunding Unlimited Tax Series
2000 C GO
5.50%, 01/01/40(b) AAA Aaa 1,750 1,828,908
---------------------------------------------------------------------------------------
Project & Refunding Unlimited Tax Series
2001 A GO
5.25%, 01/01/33(b) AAA Aaa 3,940 4,038,382
---------------------------------------------------------------------------------------
Special Transportation Series 2001 RB
5.25%, 01/01/31(b) AAA Aaa 1,000 1,022,790
---------------------------------------------------------------------------------------
Chicago (City of) (Cottage View Terrace
Apartments); FHA/GNMA Collateralized
Multi-Family Housing Series 2000 A RB
6.13%, 02/20/42(c) AAA -- 1,580 1,638,223
---------------------------------------------------------------------------------------
Chicago (City of) Parks District; Unlimited
Tax Series 2001 D GO
5.00%, 01/01/29(b) AAA Aaa 3,000 3,003,930
---------------------------------------------------------------------------------------
Freeport (City of); Unlimited Tax Sewer
Improvement Series 2000 GO
6.00%, 12/01/29(b) AAA Aaa 1,000 1,118,300
---------------------------------------------------------------------------------------
Illinois (State of) Development Finance
Authority (Adventist Health Systems
Project); Series 1997 A RB
6.00%, 11/15/11(b) AAA Aaa 2,500 2,902,350
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
ILLINOIS-(CONTINUED)
Illinois (State of) Development Finance
Authority (CPC International Inc. Project);
Refunding Series 1992 PCR 6.75%, 05/01/16 -- A1 $2,000 $ 2,038,820
---------------------------------------------------------------------------------------
Illinois (State of) Development Finance
Authority (Evanston Northwestern Healthcare
Corp.); VRD Series 2001 C RB
1.15%, 05/01/31(h) AA+ Aa2 10,000 10,000,000
---------------------------------------------------------------------------------------
Illinois (State of) Educational Facilities
Authority (Northwestern University);
Adjustable Rate Medium Term Series 1997 RB
5.25%, 11/01/14(f) AA+ Aa1 1,000 1,112,160
---------------------------------------------------------------------------------------
Illinois (State of) Educational Facilities
Authority (Robert Morris College); Series
2000 RB
5.80%, 06/01/30(b) -- Aaa 1,000 1,086,390
---------------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Blessing Hospital); Series 1999
A RB
6.00%, 11/15/19(b) AAA Aaa 1,000 1,110,750
---------------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Evangelical Hospital Corp.);
Refunding Series 1992 A RB
6.25%, 04/15/22(e)(f) AA- Aaa 1,000 1,154,990
---------------------------------------------------------------------------------------
Series 1992 C RB
6.25%, 04/15/22(e)(f) AA- A1 1,150 1,328,239
---------------------------------------------------------------------------------------
Illinois (State of) Health Facilities
Authority (Franciscan Sisters Health Care);
Series 1992 RB
6.40%, 09/01/04(e)(f) AAA Aaa 2,000 2,162,780
---------------------------------------------------------------------------------------
Illinois State University Auxiliary
Facilities System; Series 1993 RB
5.75%, 04/01/14(b) AAA Aaa 1,000 1,026,490
---------------------------------------------------------------------------------------
Metropolitan Pier & Exposition Authority
(McCormick Place Expansion); Dedicated
State Tax Series 2002 A RB
5.25%, 06/15/42(b) AAA Aaa 1,000 1,022,400
---------------------------------------------------------------------------------------
6.00%, 12/15/29(b)(i) AAA Aaa 1,500 340,245
---------------------------------------------------------------------------------------
6.02%, 06/15/30(b)(i) AAA Aaa 1,000 220,070
---------------------------------------------------------------------------------------
Rockford (City of) School District No. 205;
Unlimited Tax Series 2001 GO
5.00%, 02/01/17(b) -- Aaa 500 537,050
---------------------------------------------------------------------------------------
Tazewell (County of) Community High School
District No. 303 (Pekin); Unlimited Tax
Series 1996 GO
5.63%, 01/01/14(b) AAA Aaa 1,435 1,563,963
=======================================================================================
41,288,910
=======================================================================================
|
FS-159
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
INDIANA-2.83%
Carmel (City of) (Beverly Enterprises Inc.
Project); Refunding Retirement Rental
Housing Series 1992 RB
8.75%, 12/01/08(d) -- -- $ 75 $ 77,322
---------------------------------------------------------------------------------------
East Allen (City of) Multi-School Building
Corp.; First Mortgage Series 2000 RB
5.75%, 01/15/10(e)(f) AAA Aaa 735 844,949
---------------------------------------------------------------------------------------
Indiana (State of) Bond Bank; Special Program
Series 2000 A RB
5.90%, 02/01/14(b) AAA Aaa 1,000 1,138,820
---------------------------------------------------------------------------------------
Indiana (State of) Housing Finance Authority;
Single Family Mortgage Series 1995 B-1 RB
6.15%, 07/01/17 -- Aaa 100 103,612
---------------------------------------------------------------------------------------
Indiana (State of) Transportation Finance
Authority;
Highway Series 2000 RB
5.38%, 12/01/25 AA Aa2 2,000 2,082,060
---------------------------------------------------------------------------------------
Unrefunded Airport Facilities Lease Series
1992 A RB
6.25%, 11/01/16 AA A1 105 107,546
---------------------------------------------------------------------------------------
Indianapolis (City of) (Lake Nora & Fox Club
Project); Multifamily Series 1999 A RB
5.90%, 10/01/19(b) -- Aaa 1,795 1,902,072
---------------------------------------------------------------------------------------
Indianapolis (City of) Local Public
Improvement Bond Bank (Waterworks Project);
Series 2002 A RB
5.25%, 07/01/33(b) AAA Aaa 1,000 1,025,320
---------------------------------------------------------------------------------------
Indianapolis (City of) Thermal Energy System;
Series 2001 A RB
5.00%, 10/01/11(b) AAA Aaa 1,500 1,645,560
---------------------------------------------------------------------------------------
Lafayette (City of); Sewer Series 2002 RB
5.15%, 07/01/24(b) AAA Aaa 1,000 1,020,720
---------------------------------------------------------------------------------------
Petersburg (City of) (Indiana Power &
Lighting Project); Refunding Convertible
Series 1991 PCR 5.75%, 08/01/21 BB+ A3 2,500 2,409,125
---------------------------------------------------------------------------------------
Wa-Nee Middle School Building Corp.;
Unlimited Tax First Mortage Series 2001 GO
5.50%, 01/15/20(b) AAA Aaa 1,000 1,112,600
=======================================================================================
13,469,706
=======================================================================================
KANSAS-0.30%
Newton (City of) (Newton Healthcare Corp.);
Hospital Series 1994 A RB
7.38%, 11/15/04(e)(f) NRR NRR 250 280,570
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
KANSAS-(CONTINUED)
Overland Park (City of) Development Corp.
(First Tier-Overland Park Project); Series
2001 A RB
7.38%, 01/01/32(d) -- -- $1,135 $ 1,156,156
=======================================================================================
1,436,726
=======================================================================================
KENTUCKY-0.98%
Jefferson (County of) (Beverly Enterprises
Project); Refunding Health Facilities
Series 1999 RB
5.88%, 05/01/08(d) -- -- 595 586,224
---------------------------------------------------------------------------------------
Mount Sterling (City of) (Kentucky League
Cities); Lease Funding Series 1993 A RB
6.15%, 03/01/13 -- Aa3 3,000 3,069,540
---------------------------------------------------------------------------------------
Russell (City of) (Bon Secours-St. Francis
Medical Center Inc.); Series 2002 A RB
5.63%, 11/15/30 A- A3 1,000 996,420
=======================================================================================
4,652,184
=======================================================================================
LOUISIANA-5.44%
Lafayette (City of); Public Improvement Sales
Tax Series 2000 A RB
5.50%, 03/01/23(b) AAA Aaa 1,360 1,437,778
---------------------------------------------------------------------------------------
Louisiana (State of) Local Government
Environmental Facilities & Community
Development Authority; Capital Projects &
Equipment Acquisitions Series 2000 RB
6.55%, 09/01/25(b) A -- 6,040 6,744,808
---------------------------------------------------------------------------------------
Capital Projects & Equipment Acquisitions
Series 2000 A RB
6.30%, 07/01/30(b) AAA Aaa 3,000 3,558,120
---------------------------------------------------------------------------------------
Louisiana (State of) Local Government
Environmental Facilities & Community
Development Authority (BRCC Facilities
Corp. Project); Series 2002 RB
5.00%, 12/01/26(b) AAA Aaa 1,000 1,006,880
---------------------------------------------------------------------------------------
5.00%, 12/01/32(b) AAA Aaa 2,000 2,007,560
---------------------------------------------------------------------------------------
Louisiana (State of) Local Government
Environmental Facilities & Community
Development Authority (Parking Facilities
Corp. Garage Project); Series 2001 A RB
5.20%, 10/01/20(b) AAA Aaa 1,000 1,040,930
---------------------------------------------------------------------------------------
Louisiana (State of) Public Facilities
Authority (Ochsner Clinic Foundation
Project); Series 2002 B RB
5.50%, 05/15/32 -- A3 1,250 1,233,763
---------------------------------------------------------------------------------------
|
FS-160
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
LOUISIANA-(CONTINUED)
Louisiana (State of) Public Facilities
Authority (Tulane University); Series 1996
RB
6.00%, 10/01/16(b) AAA Aaa $2,500 $ 2,861,775
---------------------------------------------------------------------------------------
Series 2002 A RB
5.13%, 07/01/27(b) AAA Aaa 2,100 2,130,429
---------------------------------------------------------------------------------------
Series 2002 D RB
5.00%, 02/15/26(b) AAA Aaa 500 503,240
---------------------------------------------------------------------------------------
Ouachita (Parish of) Hospital Service
District No. 1 (Glenwood Regional Medical
Center); Refunding Hospital Series 1996 RB
5.70%, 05/15/16(b) AAA Aaa 1,000 1,095,780
---------------------------------------------------------------------------------------
St. John Baptist (Parish of) Sales Tax
District; Series 1987 RB
7.60%, 01/01/08(e)(f) NRR NRR 500 612,210
---------------------------------------------------------------------------------------
7.60%, 01/01/09(e)(f) NRR NRR 500 620,300
---------------------------------------------------------------------------------------
West Feliciana (Parish of) (Gulf States
Utilities); Series 1992 A PCR 7.50%,
05/01/15 BB+ -- 1,000 1,019,720
=======================================================================================
25,873,293
=======================================================================================
MAINE-0.33%
Maine (State of) Housing Authority; Mortgage
Series 1999 E-1 RB
5.85%, 11/15/20 AA+ Aa1 1,500 1,564,530
=======================================================================================
MARYLAND-0.83%
Maryland (State of) Health & Higher
Educational Facilities Authority (Johns
Hopkins University); Refunding Series 2001
B RB
5.00%, 07/01/41 AA Aa2 1,000 1,001,990
---------------------------------------------------------------------------------------
Maryland (State of) Health & Higher
Educational Facilities Authority
(University of Maryland Medical System);
Series 2001 RB
5.25%, 07/01/28 A Baa1 1,000 995,780
---------------------------------------------------------------------------------------
5.25%, 07/01/34 A Baa1 2,000 1,942,980
=======================================================================================
3,940,750
=======================================================================================
MASSACHUSETTS-1.24%
Massachusetts (State of) Health & Educational
Facilities Authority (Winchester Hospital);
Series 1994 D RB
5.80%, 07/01/09(b) AAA -- 1,000 1,073,000
---------------------------------------------------------------------------------------
Massachusetts (State of) Housing Finance
Agency; Single Family Housing Series 1994
RB
6.60%, 12/01/26(c) AA Aa3 1,250 1,294,525
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
MASSACHUSETTS-(CONTINUED)
Massachusetts (State of) Water Resources
Authority; Series 2002 B RB
5.13%, 08/01/27(b) AAA Aaa $2,000 $ 2,038,200
---------------------------------------------------------------------------------------
Series 2002 J RB
5.00%, 08/01/42 AA Aa3 1,500 1,482,150
=======================================================================================
5,887,875
=======================================================================================
MICHIGAN-6.42%
Almont (City of) Community Schools; Refunding
Unlimited Tax School Building & Site Series
2002 GO
5.00%, 05/01/27 AAA Aaa 1,580 1,589,575
---------------------------------------------------------------------------------------
Anchor Bay School District; Refunding
Unlimited Tax Series 2001 GO
5.00%, 05/01/29 AAA Aaa 1,000 1,005,960
---------------------------------------------------------------------------------------
Bullock Creek School District; Unlimited Tax
Series 2000 GO
5.50%, 05/01/22 AAA Aaa 1,000 1,052,290
---------------------------------------------------------------------------------------
Chippewa Valley Schools; Refunding Unlimited
Tax Series 2002 GO
5.13%, 05/01/27 AAA Aaa 1,000 1,015,000
---------------------------------------------------------------------------------------
Detroit (City of) School District; Unlimited
Tax Series 2001 A GO
5.13%, 05/01/31(b) AAA Aaa 1,000 1,013,510
---------------------------------------------------------------------------------------
Detroit (City of) Water Supply System; Sr.
Lien Series 2001 A RB
5.00%, 07/01/30(b) AAA Aaa 6,000 6,016,080
---------------------------------------------------------------------------------------
5.25%, 07/01/33(b) AAA Aaa 3,500 3,585,820
---------------------------------------------------------------------------------------
Garden City Hospital Finance Authority
(Garden City Hospital); Refunding Hospital
Series 1998 A RB
5.63%, 09/01/10 -- B1 850 711,161
---------------------------------------------------------------------------------------
Grand Rapids (City of) Building Authority;
Series 2002 A RB
5.00%, 10/01/22(b) AAA Aaa 1,660 1,696,902
---------------------------------------------------------------------------------------
Lake Orion Community School District;
Refunding Unlimited Tax Series 1994 GO
7.00%, 05/01/05(e)(f) AAA Aaa 2,500 2,831,675
---------------------------------------------------------------------------------------
Lincoln Park (City of) School District;
Unlimited Tax Series 1996 GO
6.00%, 05/01/06(e)(f) AAA Aaa 1,210 1,380,985
---------------------------------------------------------------------------------------
Michigan (State of) Municipal Bond Authority
(Drinking Water Revolving Fund); Series
2000 RB
5.50%, 10/01/10(e)(f) AAA Aaa 1,000 1,150,370
---------------------------------------------------------------------------------------
Michigan (State of) Public Power Agency
(Combustion Turbine No. 1); Series 2001 A
RB
5.25%, 01/01/24(b) AAA Aaa 2,500 2,587,975
---------------------------------------------------------------------------------------
|
FS-161
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
MICHIGAN-(CONTINUED)
Ypsilanti (City of) School District;
Refunding Unlimited Tax Series 1996 GO
5.75%, 05/01/07(e)(f) AAA Aaa $4,275 $ 4,883,974
=======================================================================================
30,521,277
=======================================================================================
MINNESOTA-0.39%
Minneapolis (City of); Unlimited Tax Parking
Ramp Series 2000 A GO
5.90%, 12/01/20 AAA Aa1 1,000 1,112,280
---------------------------------------------------------------------------------------
Minneapolis & St. Paul (Cities of)
Metropolitan Airports Commission (Northwest
Airlines Inc.); Special Facilities Series
2001 A RB
7.00%, 04/01/25(c)(d) -- -- 1,000 757,740
=======================================================================================
1,870,020
=======================================================================================
MISSISSIPPI-1.09%
Mississippi (State of) Higher Education
Assistance Corp.; Sub-Series 1994 C RB
7.50%, 09/01/09(c) -- A2 5,000 5,188,000
=======================================================================================
MISSOURI-0.85%
Kansas City Industrial Development Authority
(General Motors Corp. Project); Series 1984
PCR 6.05%, 04/01/06 BBB A3 170 170,700
---------------------------------------------------------------------------------------
Missouri (State of) Environmental Improvement
& Energy Resources Authority (State
Revolving Fund); Prerefunded Water
Pollution Series 1995 C RB
5.85%, 01/01/05(e)(f) NRR Aaa 730 797,970
---------------------------------------------------------------------------------------
Unrefunded Water Pollution Series 1995 C RB
5.85%, 01/01/10 -- Aaa 270 292,467
---------------------------------------------------------------------------------------
Missouri (State of) Health & Educational
Facilities Authority (Washington University
Project); Educational Facilities Series
2001 A RB
5.13%, 06/15/41 AA+ Aa1 2,750 2,778,710
=======================================================================================
4,039,847
=======================================================================================
NEBRASKA-0.22%
Omaha (City of) Public Power District;
Electric Series 2002 A RB
5.20%, 02/01/22 AA Aa2 1,000 1,027,690
=======================================================================================
NEVADA-3.23%
Boulder (City of) (Boulder City Hospital Inc.
Project); Refunding Hospital Series 1998 RB
5.85%, 01/01/22(d) -- -- 500 430,350
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
NEVADA-(CONTINUED)
Clark (County of); Airport Lien Sub-Series
2001 B RB
5.25%, 07/01/34(b) AAA Aaa $3,000 $ 3,038,490
---------------------------------------------------------------------------------------
Clark (County of) (Nevada Power Company
Project); Series 1992 C IDR 7.20%, 10/01/22 BB Ba2 1,500 1,498,695
---------------------------------------------------------------------------------------
Clark (County of) Bond Bank; Limited Tax
Series 2001 GO
5.00%, 06/01/31(b) AAA Aaa 5,000 5,019,900
---------------------------------------------------------------------------------------
Humboldt (County of) (Sierra Pacific
Project); Refunding Series 1987 PCR 6.55%,
10/01/13(b) AAA Aaa 3,000 3,145,500
---------------------------------------------------------------------------------------
Reno (City of) Redevelopment Agency;
Refunding Sub-Series 1995 A TAN 6.00%,
06/01/10 -- Baa3 1,185 1,239,202
---------------------------------------------------------------------------------------
Truckee Meadows Water Authority; Water Series
2001 A RB
5.13%, 07/01/30(b) AAA Aaa 1,000 1,009,130
=======================================================================================
15,381,267
=======================================================================================
NEW JERSEY-2.42%
New Jersey (State of) Economic Development
Authority (Continental Airlines, Inc.
Project);
Special Facility Series 1999 RB
6.25%, 09/15/29(c) B+ B3 6,300 4,446,477
---------------------------------------------------------------------------------------
6.40%, 09/15/23(c) B+ B3 1,000 720,770
---------------------------------------------------------------------------------------
Special Facility Series 2000 RB
7.00%, 11/15/30(c) B+ B3 4,000 2,943,120
---------------------------------------------------------------------------------------
New Jersey (State of) Health Care Facilities
Financing Authority (Raritan Bay Medical
Center); Series 1994 RB
7.25%, 07/01/27(d) -- -- 250 250,350
---------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp.;
Asset-Backed Series 2002 RB
5.75%, 06/01/32 A A1 2,500 2,243,750
---------------------------------------------------------------------------------------
6.13%, 06/01/42 A A1 1,000 891,690
=======================================================================================
11,496,157
=======================================================================================
NEW MEXICO-1.05%
Las Cruces (City of) South Central Solid
Waste Authority; Environmental Services
Series 1995 RB
5.65%, 06/01/09 -- A3 575 604,411
---------------------------------------------------------------------------------------
Los Alamos (County of) Utility System;
Refunding Series 1994 A RB
6.00%, 07/01/15(b) AAA Aaa 2,000 2,157,080
---------------------------------------------------------------------------------------
Santa Fe (City of); Series 1994 RB
6.25%, 06/01/04(e)(f) AAA Aaa 2,100 2,239,818
=======================================================================================
5,001,309
=======================================================================================
|
FS-162
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
NEW YORK-3.15%
Metropolitan Transportation Authority;
Dedicated Tax Fund Series 2000 A RB
5.88%, 04/01/10(e)(f) AAA Aaa $1,500 $ 1,757,865
---------------------------------------------------------------------------------------
Refunding Series 2002 A RB
5.13%, 01/01/29 AA- A3 1,000 1,004,030
---------------------------------------------------------------------------------------
New York (City of);
Prerefunded Unlimited Tax
Series 1994 B1 GO
7.38%, 08/15/04(e)(f) A Aaa 500 552,645
---------------------------------------------------------------------------------------
Prerefunded Unlimited Tax Series 1996 A GO
6.25%, 08/01/06(e)(f) A A2 2,540 2,961,996
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1991 B GO
7.00%, 02/01/18(e)(f) AAA Aaa 40 40,579
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1992 D GO
7.70%, 03/07/03(e)(f) A A2 15 15,230
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1996 A GO
6.25%, 08/01/17 A A2 495 577,239
---------------------------------------------------------------------------------------
New York (City of) Industrial Development
Agency (University of Staten Island
Hospital Project); Civic Facilities Series
2001 B RB
6.38%, 07/01/31 -- Baa3 600 602,688
---------------------------------------------------------------------------------------
New York (City of) Municipal Water Finance
Authority;
Water & Sewer System Series 1996 A RB
5.50%, 06/15/24(b) AAA Aaa 1,000 1,041,650
---------------------------------------------------------------------------------------
Water & Sewer System Series 1997 B RB
5.75%, 06/15/29 AA Aa2 3,850 4,173,516
---------------------------------------------------------------------------------------
New York (State of) Dormitory Authority
(State University Educational Facilities);
Series 1995 A RB
6.50%, 05/15/06 AA- A3 1,000 1,138,290
---------------------------------------------------------------------------------------
New York (State of) Environmental Facilities
Corp. (State Water Revolving Project);
Unrefunded Series 1991 E PCR
6.88%, 06/15/10 AAA Aaa 1,100 1,116,500
=======================================================================================
14,982,228
=======================================================================================
NORTH CAROLINA-1.23%
North Carolina (State of) Eastern Municipal
Power Agency; Power System Series 1993 A RB
6.13%, 01/01/10(e)(f) AAA Aaa 1,500 1,757,700
---------------------------------------------------------------------------------------
North Carolina (State of) Housing Finance
Agency; Single Family Series 1996 II RB
6.20%, 03/01/16 AA Aa2 440 460,992
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
NORTH CAROLINA-(CONTINUED)
North Carolina (State of) Municipal Power
Agency (No. 1 Catawba Electric Project);
Prerefunded Series 1990 RB
6.50%, 01/01/10(e)(f) AAA Aaa $ 260 $ 308,240
---------------------------------------------------------------------------------------
Refunding Series 1992 RB
7.25%, 01/01/07 BBB+ Baa1 2,890 3,310,668
=======================================================================================
5,837,600
=======================================================================================
NORTH DAKOTA-0.11%
Fargo (City of) Health System (Meritcare
Medical Group); Series 2002 A RB
5.13%, 06/01/27(b) AAA Aaa 500 508,305
=======================================================================================
OHIO-1.91%
Fairfield (City of) School District;
Unlimited Tax Series 1995 GO
6.10%, 12/01/05(e)(f) AAA Aaa 1,000 1,126,620
---------------------------------------------------------------------------------------
Findlay (City of); Limited Tax Series 1996 GO
5.88%, 07/01/17 AA- Aa3 1,000 1,120,870
---------------------------------------------------------------------------------------
Lake Ohio School District (Stark County
School District); Unlimited Tax Series 2000
GO
5.75%, 12/01/26(b) AAA Aaa 2,500 2,712,550
---------------------------------------------------------------------------------------
Montgomery (County of) (Grandview Hospital &
Medical Center); Refunding Hospital Series
1997 RB
5.50%, 12/01/09(e)(f) BBB+ NRR 1,000 1,141,890
---------------------------------------------------------------------------------------
Ohio (State of) Department of Transportation
(Panhandle Rail Line Project); Series 1992
COP 6.50%, 04/15/12(b) AAA Aaa 1,100 1,121,681
---------------------------------------------------------------------------------------
University of Cincinnati; Series 2002 F RB
5.00%, 06/01/22 AA Aa3 820 835,244
---------------------------------------------------------------------------------------
5.00%, 06/01/23 AA Aa3 1,000 1,014,070
=======================================================================================
9,072,925
=======================================================================================
OKLAHOMA-1.97%
Mustang (City of) Improvement Authority;
Utility Series 1999 RB
5.70%, 10/01/19(b) -- Aaa 1,500 1,670,670
---------------------------------------------------------------------------------------
Oklahoma (State of) Development Finance
Authority (St. John Health System);
Refunding Series 1999 RB
5.75%, 02/15/18 AA Aa3 675 718,382
---------------------------------------------------------------------------------------
5.75%, 02/15/25 AA Aa3 1,750 1,848,158
---------------------------------------------------------------------------------------
Oklahoma (State of) Water Resource Board;
State Loan Program Series 2003 A RB
5.00%, 10/01/22 AA -- 1,000 1,015,850
---------------------------------------------------------------------------------------
|
FS-163
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
OKLAHOMA-(CONTINUED)
Tulsa (City of) Industrial Authority (St.
John's Medical Center Project); Hospital
Series 1994 RB
6.25%, 02/15/06(e)(f) AA Aa3 $2,000 $ 2,261,740
---------------------------------------------------------------------------------------
Tulsa (City of) Industrial Authority (Tulsa
Regional Medical Center); Hospital Series
1992 RB
7.20%, 06/01/03(e)(f) AAA NRR 500 519,820
---------------------------------------------------------------------------------------
Tulsa (City of) Public Facilities Authority;
Capital Improvement Series 1988 B RB
6.00%, 03/01/08 A+ -- 1,305 1,334,389
=======================================================================================
9,369,009
=======================================================================================
OREGON-0.72%
Cow Creek Band Umpqua Tribe of Indians;
Series 1998 B RB 5.10%, 07/01/12
(Acquired 08/18/98;
Cost $997,470)(b)(g) AAA Aaa 1,000 1,040,260
---------------------------------------------------------------------------------------
Portland (City of) Sewer System; Series 1994
A RB
6.20%, 06/01/04(e)(f) AAA A1 1,200 1,290,924
---------------------------------------------------------------------------------------
6.25%, 06/01/04(e)(f) AAA A1 1,000 1,076,420
=======================================================================================
3,407,604
=======================================================================================
PENNSYLVANIA-2.69%
Allegheny (County of) Higher Education
Building Authority (Carnegie Mellon
University); Series 2002 RB
5.25%, 03/01/32 AA- -- 1,500 1,541,340
---------------------------------------------------------------------------------------
Allegheny (County of) Port Authority; Special
Transportation Series 1999 RB
6.13%, 03/01/09(e)(f) AAA Aaa 1,000 1,179,400
---------------------------------------------------------------------------------------
Benton Area School District; Unlimited Tax
Series 2002 B GO
5.13%, 06/01/31(b) -- Aaa 1,000 1,016,610
---------------------------------------------------------------------------------------
Chester (County of) Industrial Development
Authority (Westtown School Project);
Educational Facilities Series 2002 RB
5.00%, 01/01/31(b) AAA Aaa 1,000 1,007,100
---------------------------------------------------------------------------------------
Clarion (County of) Industrial Development
Authority (Beverly Enterprises Inc.
Project); Refunding Series 2001 RB
7.38%, 12/01/08(d) -- -- 1,450 1,476,854
---------------------------------------------------------------------------------------
Montgomery (County of) Industrial Development
Authority (Pennsburg Nursing &
Rehabilitation Center); Series 1993 RB
7.63%, 03/31/04(e)(f) NRR Aaa 100 110,135
---------------------------------------------------------------------------------------
Pennsylvania (State of); Unlimited Tax Third
Series 1994 GO
6.75%, 11/15/04(e)(f) AAA Aaa 1,250 1,388,575
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
PENNSYLVANIA-(CONTINUED)
Pennsylvania (State of) Economic Financing
Authority (Colver Project); Resource
Recovery Series 1994 D RB
7.05%, 12/01/10(c) BBB- -- $2,900 $ 3,023,540
---------------------------------------------------------------------------------------
Pennsylvania (State of) Public School
Building Authority (Lehigh Career &
Technical Institution); Series 2001 RB
5.00%, 10/01/26(b) -- Aaa 1,000 1,010,440
---------------------------------------------------------------------------------------
Spring-Ford Area School District; Unlimited
Tax Series 2002 GO
5.00%, 04/01/23(b) -- Aaa 1,025 1,039,975
=======================================================================================
12,793,969
=======================================================================================
PUERTO RICO-0.64%
Children's Trust Fund (Tobacco Settlement);
Asset-Backed Series 2000 RB
5.38%, 05/15/33 A A1 1,250 1,206,250
---------------------------------------------------------------------------------------
Sr. Series 2000 RB
6.00%, 07/01/10(e)(f) AAA Aa3 1,000 1,178,230
---------------------------------------------------------------------------------------
Puerto Rico (Commonwealth of); Unlimited Tax
Public Improvement Series 2000 GO
6.00%, 07/01/05(e)(f) A- Baa1 500 557,150
---------------------------------------------------------------------------------------
Puerto Rico (Commonwealth of) Highway &
Transportation Authority; Transportation
Series 2000 B RB
6.00%, 07/01/10(e)(f) A Baa1 100 118,973
=======================================================================================
3,060,603
=======================================================================================
RHODE ISLAND-1.03%
Rhode Island (State of) Housing & Mortgage
Finance Corp.; Homeownership Opportunity
Series 1994 15-B RB
6.00%, 10/01/04 AA+ Aa2 1,000 1,044,750
---------------------------------------------------------------------------------------
Tobacco Settlement Financing Corp.;
Asset-Backed Series 2002 A RB
6.00%, 06/01/23 A A1 4,000 3,870,200
=======================================================================================
4,914,950
=======================================================================================
SOUTH CAROLINA-1.37%
Piedmont Municipal Power Agency; Refunding
Electric Series 1986 A RB
5.75%, 01/01/24 BBB- Baa3 1,150 1,133,429
---------------------------------------------------------------------------------------
South Carolina (State of) Jobs Economic
Development Authority (Bon Secours-St.
Francis Medical Center Inc.); Economic
Development Series 2002 A RB
5.50%, 11/15/23 A- A3 1,000 995,010
---------------------------------------------------------------------------------------
|
FS-164
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
SOUTH CAROLINA-(CONTINUED)
South Carolina (State of) Jobs Economic
Development Authority (Palmetto Health
Alliance); Hospital Facilities Improvement
Series 2000 A RB
7.13%, 12/15/15 BBB Baa2 $1,000 $ 1,104,050
---------------------------------------------------------------------------------------
South Carolina (State of) Jobs Economic
Development Authority (South Carolina
Electric & Gas Co. Project); Series 2002 A
IDR 5.20%, 11/01/27(b) AAA Aaa 1,000 1,015,190
---------------------------------------------------------------------------------------
South Carolina (State of) Public Service
Authority; Series 2002 B RB
5.13%, 01/01/32(b) AAA Aaa 1,250 1,275,475
---------------------------------------------------------------------------------------
South Carolina (State of) Transportation
Infrastructure Bank; Series 2001 A RB
5.00%, 10/01/29(b) -- Aaa 1,000 1,011,850
=======================================================================================
6,535,004
=======================================================================================
SOUTH DAKOTA-0.46%
Aberdeen (City of) School District No. 6-1;
Unlimited Tax Series 2000 GO
5.45%, 01/01/26(b) AAA Aaa 2,000 2,083,260
---------------------------------------------------------------------------------------
South Dakota (State of) Health & Educational
Facilities Authority (Huron Regional
Medical Center); Series 1994 RB
7.25%, 04/01/20 BBB -- 100 103,346
=======================================================================================
2,186,606
=======================================================================================
TENNESSEE-1.32%
Clarksville (City of) Public Building
Authority (Tennessee Municipal Bond Fund);
VRD Pooled Financing Series 1997 RB
(LOC-Bank of America N.A.) 1.15%,
11/01/27(h)(j) -- Aa1 537 537,000
---------------------------------------------------------------------------------------
Franklin (City of) Industrial Development
Board (Landings Apartment Project);
Refunding Multifamily Housing Series 1996 A
RB
5.75%, 04/01/10(b) AAA Aaa 820 877,015
---------------------------------------------------------------------------------------
Putnam (County of); Refunding Unlimited Tax
Series 2001 GO
5.25%, 04/01/17(b) -- Aaa 2,500 2,760,925
---------------------------------------------------------------------------------------
Robertson & Somner (Counties of) White House
Utility District; Water & Sewer Series 2000
RB
6.00%, 01/01/10(e)(f) NRR Aaa 1,000 1,164,140
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TENNESSEE-(CONTINUED)
Shelby (County of) Health Educational &
Housing Facilities Board (Kirby Pines
Retirement Community); Health Care
Facilities Series 1997 A RB
6.25%, 11/15/16(d) -- -- $1,000 $ 919,310
---------------------------------------------------------------------------------------
Tennessee (State of) Housing Development
Agency; Homeownership Progressive Series
1992 RB
6.80%, 07/01/17 AA Aa2 20 20,205
=======================================================================================
6,278,595
=======================================================================================
TEXAS-22.27%
Allen (City of) Independent School District;
Refunding Unlimited Tax Series 2000 GO
5.95%, 02/15/25 AAA Aaa 1,600 1,743,456
---------------------------------------------------------------------------------------
Arlington (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1995 GO
5.75%, 02/15/05(e)(f) NRR Aaa 705 766,095
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1995 GO
5.75%, 02/15/21 -- Aaa 295 312,635
---------------------------------------------------------------------------------------
Austin (City of); Refunding Hotel Occupancy
Tax Sub. Lien Series 1999 RB
5.80%, 11/15/29(b) AAA Aaa 1,000 1,081,200
---------------------------------------------------------------------------------------
Austin (City of) Community College District;
Refunding Combined Fee Series 1995 RB
6.10%, 02/01/05(e)(f) AAA Aaa 1,115 1,217,435
---------------------------------------------------------------------------------------
Austin (City of) Water & Wastewater System;
Refunding
Series 2001 A&B RB
5.25%, 05/15/31(b) AAA Aaa 1,750 1,785,158
---------------------------------------------------------------------------------------
Bellville (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1995 GO
6.13%, 02/01/06(e)(f) NRR Aaa 535 602,201
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1995 GO
6.13%, 02/01/20 -- Aaa 295 326,780
---------------------------------------------------------------------------------------
Bexar (County of) Housing Finance Corp.
(Dymaxion & Morrach Park Apartments);
Multifamily Housing Series 2000 A RB
6.10%, 08/01/30(b) -- Aaa 1,000 1,049,170
---------------------------------------------------------------------------------------
Bexar (County of) Metropolitan Water
District; Lease Purchase Series 2001 RB
5.53%, 07/20/06
(Acquired 07/27/01;
Cost $606,807)(d)(g) -- -- 601 635,477
---------------------------------------------------------------------------------------
|
FS-165
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TEXAS-(CONTINUED)
Brazos (County of) Health Facilities
Development Corp. (Franciscan Services
Corp.); Series 1997 A RB
5.38%, 01/01/22(b) AAA Aaa $1,250 $ 1,284,325
---------------------------------------------------------------------------------------
Carroll (City of) Independent School
District; Refunding Unlimited Tax Series
2001 GO
5.25%, 02/15/33 AAA Aaa 1,350 1,377,432
---------------------------------------------------------------------------------------
Carrollton (City of); Limited Tax Series 1996
GO
5.75%, 08/15/06(e)(f) AA Aa2 1,000 1,132,960
---------------------------------------------------------------------------------------
Cisco (City of) Jr. College District;
Refunding Consolidated Series 2002 RB
5.25%, 07/01/26(b) -- Aaa 1,000 1,026,080
---------------------------------------------------------------------------------------
Cleveland (City of) Independent School
District; Unlimited Tax Series 2001 GO
5.13%, 02/01/31 AAA Aaa 2,000 2,018,900
---------------------------------------------------------------------------------------
Comal (County of) Independent School
District;
Refunding Unlimited Tax Series 1999 GO
5.75%, 08/01/28 -- Aaa 1,000 1,084,280
---------------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2001 GO
5.25%, 02/01/28 -- Aaa 1,000 1,023,570
---------------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2002 GO
5.00%, 02/01/28 -- Aaa 1,500 1,500,975
---------------------------------------------------------------------------------------
DeSoto (City of) Independent School District;
Refunding Unlimited Tax Series 1998 GO
5.13%, 08/15/17 AAA -- 1,000 1,000,590
---------------------------------------------------------------------------------------
Georgetown (City of) Utility System; Series
1995 A RB
6.20%, 08/15/05(e)(f) AAA Aaa 1,500 1,676,205
---------------------------------------------------------------------------------------
Grapevine (City of); Limited Tax Series 2000
GO Ctfs.
5.88%, 08/15/26(b) AAA Aaa 1,610 1,755,367
---------------------------------------------------------------------------------------
Harris (County of); Refunding Limited Tax
Series 2002 GO
5.13%, 08/15/31 AA+ Aa1 1,000 1,006,350
---------------------------------------------------------------------------------------
Harris (County of) Health Facilities
Development Corp. (Memorial Hermann Health
Care Project); Hospital Series 2001 A RB
6.38%, 06/01/29 A A2 750 793,928
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TEXAS-(CONTINUED)
Harris (County of) Health Facilities
Development Corp. (St. Luke's Episcopal
Hospital Project); Series 1991 RB
6.70%, 02/15/03(e)(f) AAA Aa3 $1,000 $ 1,001,560
---------------------------------------------------------------------------------------
Series 2001 A RB
5.38%, 02/15/26 AA- -- 1,000 1,005,070
---------------------------------------------------------------------------------------
Series 2002 RB
5.13%, 02/15/32 AA- -- 1,000 978,550
---------------------------------------------------------------------------------------
Harris (County of) Health Facilities
Development Corp. (Texas Children's
Hospital Project); Hospital Series 1999 A
RB
5.25%, 10/01/29 AA Aa2 2,000 2,015,080
---------------------------------------------------------------------------------------
Harris (County of) Houston Sports Authority;
Refunding Jr. Lien Series 2001 B RB
5.25%, 11/15/40(b) AAA Aaa 3,000 3,039,750
---------------------------------------------------------------------------------------
Harris (County of) Mental Health & Mental
Retardation Authority; Refunding Series
1992 RB
6.25%, 09/15/10(b) AAA Aaa 4,500 4,523,310
---------------------------------------------------------------------------------------
Houston (City of) Airport System; Sub. Lien
Series 2000 B RB
5.50%, 07/01/30(b) AAA Aaa 1,000 1,035,580
---------------------------------------------------------------------------------------
Houston (City of) Water & Sewer System; Jr.
Lien Series 1997 C RB
5.38%, 12/01/27(b) AAA Aaa 2,495 2,585,593
---------------------------------------------------------------------------------------
Hurst-Euless-Bedford Independent School
District;
Prerefunded Unlimited Tax Series 1994 GO
6.50%, 08/15/04(e)(f) AAA Aaa 640 691,603
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1994 GO
6.50%, 08/15/24 AAA Aaa 360 385,780
---------------------------------------------------------------------------------------
Katy (City of) Independent School District;
Limited Tax Series 1999 GO
6.13%, 02/15/32 AAA Aaa 1,500 1,655,700
---------------------------------------------------------------------------------------
Unlimited Tax Series 2001 B GO
5.00%, 02/15/32 AAA Aaa 3,000 2,990,820
---------------------------------------------------------------------------------------
Keller (City of) Independent School District;
Refunding Unlimited Tax Series 2001 GO
5.25%, 08/15/26 AAA Aaa 2,000 2,053,900
---------------------------------------------------------------------------------------
Keller (City of) Independent School District;
Series 1994 COP
6.00%, 08/15/05(b) AAA Aaa 770 854,007
---------------------------------------------------------------------------------------
Laredo (City of) Community College District;
Limited Tax Series 2002 GO
5.25%, 08/01/32(b) AAA Aaa 1,000 1,022,490
---------------------------------------------------------------------------------------
|
FS-166
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TEXAS-(CONTINUED)
Little Elm (City of) Independent School
District;
Refunding Unlimited Tax Series 1999 GO
6.00%, 08/15/35 AAA -- $2,500 $ 2,760,575
---------------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2000 GO
6.13%, 08/15/35 AAA -- 1,000 1,115,610
---------------------------------------------------------------------------------------
Lockhart (City of) Tax and Utility Systems;
Limited Tax Series 1996 GO Ctfs.
5.85%, 08/01/11(b) AAA Aaa 605 676,178
---------------------------------------------------------------------------------------
5.90%, 08/01/06(e)(f) AAA Aaa 1,100 1,252,251
---------------------------------------------------------------------------------------
Matagorda (County of) Navigation District
No.1 (Reliant Energy Project); Refunding
Series 1999 B RB
5.95%, 05/01/30(c) BBB- Ba1 2,000 1,632,160
---------------------------------------------------------------------------------------
Nacogdoches (City of) Independent School
District; Refunding Unlimited Tax Series
2001 GO
5.30%, 02/15/25 AAA Aaa 1,765 1,818,444
---------------------------------------------------------------------------------------
North Texas Higher Education Authority Inc.;
Student Loan Series 1993 C RB
6.10%, 04/01/08(c) -- Aa2 1,000 1,023,090
---------------------------------------------------------------------------------------
Student Loan Series 1993 D RB
6.30%, 04/01/09(c) -- A2 500 511,400
---------------------------------------------------------------------------------------
Northside Independent School District;
Unlimited Tax Series 1999 A GO
5.50%, 08/15/24 AAA Aaa 1,000 1,049,090
---------------------------------------------------------------------------------------
Pasadena (City of); Limited Tax Series 2002
GO Ctfs.
5.25%, 04/01/32(b) AAA Aaa 2,000 2,041,080
---------------------------------------------------------------------------------------
Pflugerville (City of) Independent School
District; Unlimited Tax Series 2000 GO
5.50%, 08/15/23 AAA Aaa 1,615 1,708,686
---------------------------------------------------------------------------------------
Plano (City of); Limited Tax Series 2000 GO
5.88%, 09/01/19 AAA Aaa 850 947,334
---------------------------------------------------------------------------------------
Richardson (City of);
Limited Tax Series 2000 A GO Ctfs.
5.75%, 02/15/21(b) AAA Aaa 2,000 2,167,960
---------------------------------------------------------------------------------------
Limited Tax Series 2001 GO Ctfs.
5.00%, 02/15/19 AA+ Aa1 1,720 1,762,243
---------------------------------------------------------------------------------------
Richardson (City of) Hospital Authority
(Richardson Medical Center); Unrefunded
Hospital Series 1993 RB
6.50%, 12/01/12 BBB+ Baa1 785 815,144
---------------------------------------------------------------------------------------
6.75%, 12/01/23 BBB+ Baa1 1,000 1,030,490
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TEXAS-(CONTINUED)
San Angelo (City of) Waterworks & Sewer
System; Refunding & Improvement Series 2001
RB
5.25%, 04/01/19(b) AAA Aaa $1,000 $ 1,049,270
---------------------------------------------------------------------------------------
San Antonio (City of) Independent School
District; Unlimited Tax Series 1999 GO
5.50%, 08/15/24 AAA Aaa 3,500 3,671,815
---------------------------------------------------------------------------------------
Schertz-Cibolo-Universal City Independent
School District; Refunding Unlimited Tax
Building Series 2001 GO
5.13%, 08/01/25 -- Aaa 1,535 1,559,806
---------------------------------------------------------------------------------------
Refunding Unlimited Tax Series 2002 GO
5.00%, 08/01/23 -- Aaa 750 756,188
---------------------------------------------------------------------------------------
Spring Branch Independent School District;
Limited Tax Series 2000 GO
5.75%, 02/01/24 AAA Aaa 1,700 1,836,782
---------------------------------------------------------------------------------------
Texas (State of) (Veteran's Land); Unlimited
Tax Series 1994 GO
6.40%, 12/01/24(c) AA Aa1 2,000 2,155,500
---------------------------------------------------------------------------------------
Texas (State of) (Water Development);
Refunding Unlimited Tax Series 2001 A GO
5.25%, 08/01/35 AA Aa1 1,840 1,876,598
---------------------------------------------------------------------------------------
Texas (State of) (Water Financial
Assistance); Unlimited Tax Series 2002 GO
5.00%, 08/01/23 AA Aa1 1,000 1,006,760
---------------------------------------------------------------------------------------
Texas (State of) Department of Housing &
Community Affairs (Asmara Affordable
Housing Inc. Project); Multifamily Housing
Series 1996 A RB
6.30%, 01/01/16 A -- 310 317,294
---------------------------------------------------------------------------------------
Texas (State of) Public Property Finance
Corp. (Mental Health & Mental Retardation);
Series 1996 RB
6.20%, 09/01/16 BBB+ -- 735 739,072
---------------------------------------------------------------------------------------
Texas (State of) Turnpike Authority; First
Tier Turnpike System Series 2002 A RB
5.50%, 08/15/39(b) AAA Aaa 1,000 1,052,230
---------------------------------------------------------------------------------------
Town Center Improvement District; Sales &
Hotel Occupancy Tax Series 2001 RB
5.13%, 03/01/23(b) AAA Aaa 1,000 1,015,480
---------------------------------------------------------------------------------------
5.25%, 03/01/27(b) AAA Aaa 2,800 2,862,720
---------------------------------------------------------------------------------------
5.50%, 03/01/13(b) AAA Aaa 1,725 1,901,951
---------------------------------------------------------------------------------------
Tyler (City of) Health Facilities Development
Corp. (Mother Frances Hospital); Hospital
Series 1997 A RB
5.63%, 07/01/13 -- Baa1 1,000 1,000,700
---------------------------------------------------------------------------------------
|
FS-167
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
TEXAS-(CONTINUED)
United Independent School District; Unlimited
Tax Series 2000 GO
5.13%, 08/15/26 AAA Aaa $1,000 $ 1,016,190
---------------------------------------------------------------------------------------
University of Texas Financing System; Series
1999 B RB
5.70%, 08/15/09(e)(f) AAA Aaa 1,000 1,157,690
---------------------------------------------------------------------------------------
Victoria (County of) (Citizens Medical
Center); Hospital Series 1994 RB
6.20%, 01/01/10(b) AAA Aaa 1,000 1,058,250
---------------------------------------------------------------------------------------
Waxahachie (City of) Independent School
District; Refunding Unlimited Tax Series
2002 GO
5.25%, 08/15/26 -- Aaa 2,000 2,053,900
---------------------------------------------------------------------------------------
5.38%, 08/15/27 -- Aaa 1,000 1,039,130
---------------------------------------------------------------------------------------
Weatherford (City of) Independent School
District;
Prerefunded Unlimited Tax Series 1994 GO
6.40%, 02/15/05(e)(f) NRR Aaa 900 989,649
---------------------------------------------------------------------------------------
Unrefunded Unlimited Tax Series 1994 GO
6.40%, 02/15/12 -- Aaa 100 108,554
---------------------------------------------------------------------------------------
Ysleta (City of) Independent School District
Public Facility Corp.; Refunding Lease
Series 2001 RB
5.38%, 11/15/24(b) AAA Aaa 1,300 1,335,035
=======================================================================================
105,911,661
=======================================================================================
UTAH-1.72%
Intermountain Power Agency;
Power Supply Series 1995 B RB
5.00%, 07/01/16(e)(f) A+ A1 2,000 2,008,240
---------------------------------------------------------------------------------------
Unrefunded Power Supply Series 1995 B RB
5.00%, 07/01/16 A+ A1 1,150 1,153,255
---------------------------------------------------------------------------------------
Salt Lake (County of) (Westminster College
Project); Series 1997 RB
5.75%, 10/01/27 BBB -- 1,000 1,022,150
---------------------------------------------------------------------------------------
South Jordan (City of); Sales Tax Series 2001
RB
5.20%, 08/15/26(b) AAA Aaa 1,500 1,527,900
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
UTAH-(CONTINUED)
Utah (State of) Housing Finance Agency;
Single Family Mortgage Sub-Series 1994 C RB
6.05%, 07/01/06 AA- Aa3 $ 90 $ 95,492
---------------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 1994 E-1
RB
6.30%, 07/01/06 AA- Aa3 60 63,878
---------------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 1994 G-1
RB
7.15%, 07/01/06 AA- Aa3 20 20,727
---------------------------------------------------------------------------------------
Single Family Mortgage Sub-Series 2000 B-1
RB
6.00%, 07/01/10(c) AA- Aa3 665 698,749
---------------------------------------------------------------------------------------
Sr. Single Family Mortgage Series 1995 G-2
RB
6.45%, 07/01/27(c) AAA Aaa 480 497,261
---------------------------------------------------------------------------------------
Utah (State of) Transit Authority; Sales Tax
Series 2002 A RB
5.00%, 06/15/25(b) AAA Aaa 1,105 1,110,061
=======================================================================================
8,197,713
=======================================================================================
VERMONT-0.24%
Vermont (State of) Educational & Health
Buildings Financing Agency (Fletcher Allen
Health Care); Hospital Series 2000 A RB
6.00%, 12/01/23(b) AAA Aaa 1,000 1,121,840
=======================================================================================
VIRGIN ISLANDS-0.11%
Virgin Islands (Territory of) Public Finance
Authority (Gross Receipts Taxes Loan
Notes); Series 1999 A RB
6.13%, 10/01/29(b) A -- 500 538,800
=======================================================================================
VIRGINIA-0.90%
Fauquier (County of) Industrial Development
Authority (Fauquier Hospital Foundation,
Inc.); Hospital Series 2002 RB
5.25%, 10/01/31 AA -- 1,000 1,017,390
---------------------------------------------------------------------------------------
Fredericksburg (City of) Industrial
Development Authority (Medicorp. Health
System); Series 2002 B RB
5.13%, 06/15/33 -- A3 250 245,638
---------------------------------------------------------------------------------------
Henrico (County of) Economic Development
Authority (Virginia United Methodist Homes
Inc.); Refunding Residential Care Facility
Series 2002 A RB
6.50%, 06/01/22(d) -- -- 1,000 978,800
---------------------------------------------------------------------------------------
Norton (City of) Industrial Development
Authority (Norton Community Hospital);
Refunding & Improvement Hospital Series
2001 RB
6.00%, 12/01/22(b) A -- 1,000 1,057,940
---------------------------------------------------------------------------------------
|
FS-168
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
VIRGINIA-(CONTINUED)
Virginia (State of) Resources Authority
(Tuckahoe Creek Service District Project);
Water & Sewer System Series 2002 RB
5.00%, 11/01/35 AA Aa2 $1,000 $ 998,320
=======================================================================================
4,298,088
=======================================================================================
WASHINGTON-1.69%
Clark (County of) School District No. 117;
Unlimited Tax Series 1995 GO
6.00%, 12/01/05(e)(f) AAA Aaa 1,000 1,120,920
---------------------------------------------------------------------------------------
King (County of);
Sewer Series 1999 RB
5.50%, 01/01/22(b) AAA Aaa 1,000 1,047,340
---------------------------------------------------------------------------------------
Unlimited Tax Series 1969 GO
5.50%, 07/01/07(e)(f) AAA Aaa 490 557,311
---------------------------------------------------------------------------------------
Pend Oreille (County of) Public Utility
District No. 1; Electric Series 1996 B RB
6.30%, 01/01/17 BBB+ A3 1,400 1,503,180
---------------------------------------------------------------------------------------
Washington (State of) Health Care Facilities
Authority (Providence Health System
Project); Series 2001 RB
5.25%, 10/01/21(b) AAA Aaa 1,000 1,030,790
---------------------------------------------------------------------------------------
Washington (State of) Public Power Supply
System (Nuclear Project No. 1); Refunding
Series 1996 A RB
5.75%, 07/01/12(b) AAA Aaa 2,000 2,249,040
---------------------------------------------------------------------------------------
West Richland (City of); Water & Sewer Series
1994 RB
7.00%, 12/01/04(e)(f) AAA Aaa 500 551,530
=======================================================================================
8,060,111
=======================================================================================
WISCONSIN-1.41%
Ladysmith-Hawkins School District; Refunding
Unlimited Tax Series 2002 GO
4.50%, 04/01/19(b) -- Aaa 1,350 1,319,598
---------------------------------------------------------------------------------------
|
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
---------------------------------------------------------------------------------------
WISCONSIN-(CONTINUED)
Muskego-Norway School District; Refunding
Unlimited Tax Series 2002 GO
5.00%, 04/01/21(b) -- Aaa $1,000 $ 1,015,350
---------------------------------------------------------------------------------------
Wisconsin (State of) Health & Educational
Facilities Authority (Sinai Samaritan
Medical Center Inc.); Series 1996 RB
5.75%, 08/15/16(b) AAA Aaa 1,500 1,651,860
---------------------------------------------------------------------------------------
Wisconsin (State of) Health & Educational
Facilities Authority (Sisters of the
Sorrowful Mother Ministry Corp.); Series
1997 A RB
5.90%, 08/15/24(b) AAA Aaa 2,500 2,703,075
=======================================================================================
6,689,883
=======================================================================================
WYOMING-0.50%
Laramie (County of) (Memorial Hospital
Project); Hospital Series 1992 RB
6.70%, 05/01/12(b) AAA Aaa 250 256,155
---------------------------------------------------------------------------------------
Natrona (County of) (Wyoming Medical Center
Project); Hospital Series 1995 RB
6.00%, 09/15/11(b) AAA Aaa 1,000 1,109,540
---------------------------------------------------------------------------------------
Sweetwater (County of) (Idaho Power Co.
Project); Refunding Series 1996 A PCR
6.05%, 07/15/26 BBB+ A3 1,000 1,026,010
=======================================================================================
2,391,705
=======================================================================================
TOTAL INVESTMENTS-99.13% (Cost $446,474,757) 471,498,596
=======================================================================================
OTHER ASSETS LESS LIABILITIES-0.87% 4,124,629
=======================================================================================
NET ASSETS-100.00% $475,623,225
_______________________________________________________________________________________
=======================================================================================
|
Investment Abbreviations:
COP - Certificate of Participation Ctfs. - Certificates FHA - Federal Housing Administration GNMA - Government National Mortgage Association GO - General Obligation Bonds IDR - Industrial Development Revenue Bonds Jr. - Junior LOC - Letter of Credit PCR - Pollution Control Revenue Bonds RAC - Revenue Anticipation Certificates RB - Revenue Bonds Sr. - Senior Sub. - Subordinated TAN - Tax Allocation Notes VRD - Variable Rate Demand Wts. - Warrants |
FS-169
Notes to Schedule of Investments:
(a) Ratings assigned by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). NRR indicates a security that is not
re-rated subsequent to funding of an escrow fund (consisting of U.S.
Treasury obligations); this funding is pursuant to an advance refunding of
this security.
(b) Principal and interest payments are secured by bond insurance provided by
one of the following companies: Ambac Assurance Corp., American Capital
Access Corp., Financial Guaranty Insurance Co., Financial Security
Assurance, or MBIA Insurance Co.
(c) Security subject to the alternative minimum tax.
(d) Determined by the investment advisor to be of comparable quality to the
rated securities in which the Fund may invest pursuant to guidelines for the
determination of quality adopted by the Board of Trustees and followed by
the investment advisor.
(e) Advance refunded; secured by an escrow fund of U.S. Treasury obligations.
(f) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(g) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $475,623,225,
which represented 0.43% of the Fund's net assets. These securities are
considered illiquid.
(h) Demand securities; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined weekly. Rates
shown are rates in effect on 01/31/03.
(i) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(j) Principal and interest payments are guaranteed by a letter of credit
agreement.
See Notes to Financial Statements
FS-170
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$446,474,757) $471,498,596
-----------------------------------------------------------
Receivables for:
Fund shares sold 557,283
-----------------------------------------------------------
Interest 6,785,298
-----------------------------------------------------------
Investment for deferred compensation plan 78,344
-----------------------------------------------------------
Other assets 37,624
===========================================================
Total assets 478,957,145
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 996,820
-----------------------------------------------------------
Fund shares reacquired 1,239,018
-----------------------------------------------------------
Dividends 736,811
-----------------------------------------------------------
Deferred compensation plan 78,344
-----------------------------------------------------------
Accrued distribution fees 218,073
-----------------------------------------------------------
Accrued trustees' fees 1,028
-----------------------------------------------------------
Accrued transfer agent fees 13,113
-----------------------------------------------------------
Accrued operating expenses 50,713
===========================================================
Total liabilities 3,333,920
===========================================================
Net assets applicable to shares outstanding $475,623,225
___________________________________________________________
===========================================================
NET ASSETS:
Class A $342,010,220
___________________________________________________________
===========================================================
Class B $106,973,053
___________________________________________________________
===========================================================
Class C $ 26,639,952
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 42,220,183
___________________________________________________________
===========================================================
Class B 13,183,625
___________________________________________________________
===========================================================
Class C 3,289,473
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 8.10
-----------------------------------------------------------
Offering price per share:
(Net asset value of $8.10 divided by
95.25%) $ 8.50
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 8.11
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 8.10
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $12,903,711
===========================================================
EXPENSES:
Advisory fees 1,058,214
-----------------------------------------------------------
Administrative services fees 59,159
-----------------------------------------------------------
Custodian fees 9,105
-----------------------------------------------------------
Distribution fees -- Class A 429,314
-----------------------------------------------------------
Distribution fees -- Class B 537,321
-----------------------------------------------------------
Distribution fees -- Class C 138,905
-----------------------------------------------------------
Transfer agent fees 136,573
-----------------------------------------------------------
Trustees' fees 5,771
-----------------------------------------------------------
Other 80,240
===========================================================
Total expenses 2,454,602
===========================================================
Less: Expenses paid indirectly (3,572)
===========================================================
Net expenses 2,451,030
===========================================================
Net investment income 10,452,681
===========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 551,800
-----------------------------------------------------------
Change in net unrealized appreciation of
investment securities 1,860,654
===========================================================
Net gain from investment securities 2,412,454
===========================================================
Net increase in net assets resulting from
operations $12,865,135
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-171
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the year ended July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 10,452,681 $ 21,138,440
------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 551,800 (210,205)
------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 1,860,654 (392,841)
================================================================================================
Net increase in net assets resulting from operations 12,865,135 20,535,394
================================================================================================
Distributions to shareholders from net investment income:
Class A (7,951,107) (16,156,773)
------------------------------------------------------------------------------------------------
Class B (2,090,093) (3,770,131)
------------------------------------------------------------------------------------------------
Class C (541,191) (953,868)
------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 776,209 17,431,346
------------------------------------------------------------------------------------------------
Class B 2,356,583 17,606,047
------------------------------------------------------------------------------------------------
Class C (2,661,638) 11,286,232
================================================================================================
Net increase in net assets 2,753,898 45,978,247
================================================================================================
NET ASSETS:
Beginning of period 472,869,327 426,891,080
================================================================================================
End of period $475,623,225 $472,869,327
________________________________________________________________________________________________
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $461,326,317 $460,855,163
------------------------------------------------------------------------------------------------
Undistributed net investment income 190,114 319,824
------------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (10,917,045) (11,468,845)
------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 25,023,839 23,163,185
================================================================================================
$475,623,225 $472,869,327
________________________________________________________________________________________________
================================================================================================
|
See Notes to Financial Statements.
FS-172
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Municipal Bond Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be 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 achieve a high level of current income exempt from federal income taxes, consistent with the preservation of principal.
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 -- Portfolio securities are valued on the basis of prices provided by an independent pricing service approved by the Board of Trustees. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices and may reflect appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Portfolio securities for which prices are not provided by the pricing service are valued at the mean between the last available bid and asked prices, unless the Board of Trustees, or persons designated by the Board of Trustees, determines that the mean between the last available bid and asked prices does not accurately reflect the current market value of the security. Securities for which market quotations either 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 demand feature exercisable within one to seven days are valued at par. Notwithstanding the above, short-term obligations with maturities of 60 days or less and commercial paper 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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.40% on the next $300 million of the Fund's average daily net assets, plus 0.35% on the next $500 million of the Fund's average daily net assets, plus 0.30% on the Fund's average daily net assets in excess of $1 billion.
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 six months ended January 31, 2003, AIM was paid $59,159 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. During the six months ended January 31, 2003, AFS retained $85,959 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, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class
FS-173
B or Class C shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges, that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the Class A, Class B and Class C shares paid $429,314, $537,321 and $138,905, respectively.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended January 31, 2003, AIM Distributors retained $31,472 in front-end sales commissions from the sale of Class A shares and $38,562, $1,510 and $52,695 for Class A, Class B shares and Class C shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the six months ended January 31, 2003, the Fund paid legal fees of $2,355 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $3,572 under an expense offset arrangement which resulted in a reduction of the Fund's total expenses of $3,572.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the six months ended January
31, 2003, 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
July 31, 2003 $ 728,546
----------------------------------------------------------
July 31, 2004 92,144
----------------------------------------------------------
July 31, 2007 1,947,609
----------------------------------------------------------
July 31, 2008 8,431,875
==========================================================
Total capital loss carryforward $11,200,174
__________________________________________________________
==========================================================
|
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $54,062,722 and $57,723,907, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $29,039,718 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (3,983,187) =========================================================== Net unrealized appreciation of investment securities $25,056,531 ___________________________________________________________ =========================================================== Cost of investments for tax purposes is $446,442,065. |
FS-174
NOTE 8--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class A shares are subject to CDSC charges. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
Changes in shares outstanding during the six months ended January 31, 2003 and the year ended July 31, 2002 were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2003 JULY 31, 2002
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 17,514,398 $ 141,750,955 25,443,792 $ 203,919,132
-----------------------------------------------------------------------------------------------------------------------
Class B 2,205,816 17,924,615 5,648,537 45,438,128
-----------------------------------------------------------------------------------------------------------------------
Class C 1,271,125 10,293,085 3,492,497 27,986,065
=======================================================================================================================
Issued as reinvestment of dividends:
Class A 542,863 4,398,059 1,118,428 8,950,726
-----------------------------------------------------------------------------------------------------------------------
Class B 159,648 1,295,089 281,101 2,253,388
-----------------------------------------------------------------------------------------------------------------------
Class C 47,954 388,410 86,031 687,981
=======================================================================================================================
Issued in connection with acquisitions:*
Class A -- -- 4,890,500 39,744,960
=======================================================================================================================
Conversion of Class B shares to Class A shares:**
Class A 277,349 2,242,090 -- --
-----------------------------------------------------------------------------------------------------------------------
Class B (276,389) (2,242,090) -- --
=======================================================================================================================
Reacquired:
Class A (18,237,759) (147,614,895) (29,353,247) (235,183,472)
-----------------------------------------------------------------------------------------------------------------------
Class B (1,805,196) (14,621,031) (3,758,234) (30,085,469)
-----------------------------------------------------------------------------------------------------------------------
Class C (1,649,837) (13,343,133) (2,179,285) (17,387,814)
=======================================================================================================================
49,972 $ 471,154 5,670,120 $ 46,323,625
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
* As of the close of business September 7, 2001, the Fund acquired all the net assets of AIM Tax-Exempt Bond Fund of Connecticut pursuant to a plan of reorganization approved by AIM Tax-Exempt Bond Fund of Connecticut shareholders on June 13, 2001. The acquisition was accomplished by a tax-free exchange of 4,890,500 shares of the Fund for 3,624,409 shares of AIM Tax-Exempt Bond Fund of Connecticut outstanding as of the close of business on September 7, 2001. AIM Tax-Exempt Bond Fund of Connecticut net assets at that date of $39,744,960, including $2,619,081 of unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $446,100,096. ** Prior to the year ended July 31, 2002, conversion of Class B shares to Class A shares were included in Class A share sold and Class B shares reacquired.
FS-175
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, SEVEN MONTHS YEAR ENDED DECEMBER
ENDED ENDED 31,
JANUARY 31, -------------------- JULY 31, --------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.06 $ 8.06 $ 7.83 $ 7.74 $ 8.35 $ 8.34
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19 0.38(a) 0.40 0.24(b) 0.41 0.42
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.04 0.00 0.23 0.09 (0.61) 0.01
=================================================================================================================================
Total from investment operations 0.23 0.38 0.63 0.33 (0.20) 0.43
=================================================================================================================================
Less dividends from net investment income (0.19) (0.38) (0.40) (0.24) (0.41) (0.42)
=================================================================================================================================
Net asset value, end of period $ 8.10 $ 8.06 $ 8.06 $ 7.83 $ 7.74 $ 8.35
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.86% 4.84% 8.28% 4.32% (2.45)% 5.28%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $342,010 $339,545 $322,437 $283,416 $294,720 $327,705
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.81%(d) 0.81% 0.85% 0.85%(e) 0.84% 0.82%
=================================================================================================================================
Ratio of net investment income to average net
assets 4.58%(d) 4.79%(a) 5.06% 5.32%(e) 5.01% 5.00%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing market discounts on debt securities. Had the Fund not
amortized market discounts on debt securities, the net investment income
per share and the ratio of net investment income to average net assets
would have remained the same. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(d) Ratios are annualized and based on average daily net assets of
$340,651,090.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-176
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, SEVEN MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
JANUARY 31, -------------------- JULY 31, ------------------
2003 2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.07 $ 8.07 $ 7.84 $ 7.75 $ 8.37 $ 8.36
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.32(a) 0.34 0.21(b) 0.35 0.36
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.04 0.00 0.23 0.08 (0.62) 0.01
=================================================================================================================================
Total from investment operations 0.20 0.32 0.57 0.29 (0.27) 0.37
=================================================================================================================================
Less dividends from net investment income (0.16) (0.32) (0.34) (0.20) (0.35) (0.36)
=================================================================================================================================
Net asset value, end of period $ 8.11 $ 8.07 $ 8.07 $ 7.84 $ 7.75 $ 8.37
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 2.48% 4.05% 7.46% 3.84% (3.28)% 4.48%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $106,973 $104,150 $86,565 $67,363 $72,256 $72,723
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.56%(d) 1.56% 1.60% 1.61%(e) 1.59% 1.57%
=================================================================================================================================
Ratio of net investment income to average net
assets 3.83%(d) 4.04%(a) 4.31% 4.56%(e) 4.26% 4.25%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing market discounts on debt securities. Had the Fund not
amortized market discounts on debt securities, the net investment income
per share and the ratio of net investment income to average net assets
would have remained the same. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$106,588,104.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-177
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------------------
SIX MONTHS YEAR ENDED JULY 31, SEVEN MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
JANUARY 31, ------------------- JULY 31, ----------------
2003 2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.06 $ 8.05 $ 7.83 $ 7.74 $ 8.35 $ 8.35
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.32(a) 0.34 0.21(b) 0.35 0.36
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.04 0.01 0.22 0.08 (0.61) 0.00
================================================================================================================================
Total from investment operations 0.20 0.33 0.56 0.29 (0.26) 0.36
================================================================================================================================
Less dividends from net investment income (0.16) (0.32) (0.34) (0.20) (0.35) (0.36)
================================================================================================================================
Net asset value, end of period $ 8.10 $ 8.06 $ 8.05 $ 7.83 $ 7.74 $ 8.35
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) 2.49% 4.19% 7.34% 3.85% (3.16)% 4.36%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,640 $29,175 $17,889 $8,252 $9,652 $9,565
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets 1.56%(d) 1.56% 1.60% 1.61%(e) 1.59% 1.57%
================================================================================================================================
Ratio of net investment income to average net assets 3.83%(d) 4.04%(a) 4.31% 4.56%(e) 4.26% 4.25%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(f) 12% 35% 28% 18% 28% 19%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) As required, effective August 1, 2001, the Fund adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing market discounts on debt securities. Had the Fund not
amortized market discounts on debt securities, the net investment income
per share and the ratio of net investment income to average net assets
would have remained the same. In accordance with the AICPA Audit and
Accounting Guide for Investment Companies, per share and ratios for
periods prior to August 1, 2001 have not been restated to reflect this
change in presentation.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(d) Ratios are annualized and based on average daily net assets of
$27,554,534.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-178
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BORROWINGS
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the period August 30, 2002 (date operations commenced) through January 31, 2003.
NOTE 6--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the period August 30, 2002 (date operations commenced) through January 31, 2003 was $140,212,873 and $16,199,052, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $ 887,360 ---------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (149,881) ========================================================== Net unrealized appreciation of investment securities $ 737,479 __________________________________________________________ ========================================================== Investments have the same costs for tax and financial statement purposes. |
NOTE 7--SHARE INFORMATION
The Fund currently offers Class C shares. Class C shares are sold at net asset value.
Changes in Class C shares outstanding during the period August 30, 2002 (date operations commenced) through January 31, 2003 were as follows:
AUGUST 30, 2002
(DATE OPERATIONS
COMMENCED) TO
JANUARY 31, 2003
--------------------------
SHARES AMOUNT
--------------------------------------------------------------
Sold 15,963,724 $159,980,873
==============================================================
Issued as reinvestment of
dividends 65,216 654,650
==============================================================
Reacquired (3,881,464) (38,865,177)
==============================================================
12,147,476 $121,770,346
______________________________________________________________
==============================================================
|
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
As of January 31, 2003, permanent reclassifications for paydown gains (losses) amounted to $389,739 which may be more or less than the permanent reclassifications for paydown gains (losses) at fiscal year-end.
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding during the period August 30, 2002 (date operations commenced) through January 31, 2003.
CLASS C
---------------------------
AUGUST 30, 2002
(DATE OPERATIONS COMMENCED)
TO JANUARY 31,
2003
-----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.01
-----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a)
-----------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.11
=========================================================================================
Total from investment operations 0.15
=========================================================================================
Less dividends from net investment income (0.12)
=========================================================================================
Net asset value, end of period $ 10.04
_________________________________________________________________________________________
=========================================================================================
Total return(b) 1.46%
_________________________________________________________________________________________
=========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $121,982
_________________________________________________________________________________________
=========================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.20%(c)
-----------------------------------------------------------------------------------------
Without fee waivers 1.78%(c)
=========================================================================================
Ratio of net investment income to average net assets 0.93%(c)
_________________________________________________________________________________________
=========================================================================================
Portfolio turnover rate(d) 27%
_________________________________________________________________________________________
=========================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$65,171,838.
(d) Not annualized for periods less than one year.
FS-179
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
BONDS & NOTES-47.46%
AEROSPACE & DEFENSE-0.37%
Lockheed Martin Corp., Unsec. Gtd. Unsub.
Notes, 7.25%, 05/15/06 $ 150,000 $ 168,790
-----------------------------------------------------------------------
Raytheon Co., Notes, 6.75%, 08/15/07 40,000 43,772
=======================================================================
212,562
=======================================================================
AGRICULTURAL PRODUCTS-0.57%
Archer-Daniels-Midland Co., Unsec. Unsub.
Deb., 6.95%, 12/15/97 300,000 326,439
=======================================================================
AUTOMOBILE MANUFACTURERS-0.46%
DaimlerChrysler N.A. Holding Corp.-Series D,
Gtd. Medium Term Notes, 3.40%, 12/15/04 200,000 201,692
-----------------------------------------------------------------------
General Motors Corp., Unsec. Deb., 8.80%,
03/01/21 60,000 64,095
=======================================================================
265,787
=======================================================================
BANKS-6.04%
Bank One Corp., Sr. Unsec. Unsub. Global
Notes, 7.63%, 08/01/05 250,000 280,032
-----------------------------------------------------------------------
Chase Manhattan Corp., Sub. Deb., 7.88%,
07/15/06 100,000 113,075
-----------------------------------------------------------------------
Citicorp,
Jr. Unsec. Sub. Notes, 6.38%, 01/15/06 100,000 107,872
-----------------------------------------------------------------------
Sub. Global Notes, 6.75%, 08/15/05 150,000 165,022
-----------------------------------------------------------------------
Unsec. Sub. Notes, 7.13%, 09/01/05 200,000 223,064
-----------------------------------------------------------------------
Danske Bank A/S (Denmark), Sub. Yankee Notes,
6.38%, 06/15/08 (Acquired 08/30/02; Cost
$107,346)(a) 100,000 107,062
-----------------------------------------------------------------------
Dresdner Funding Trust I, Bonds, 8.15%,
06/30/31 (Acquired 05/09/02; Cost
$53,049)(a) 50,000 50,668
-----------------------------------------------------------------------
European Investment Bank (Luxembourg),
Global Notes, 4.63%, 03/01/07 200,000 212,904
-----------------------------------------------------------------------
Medium Term Yankee Notes, 4.88%, 09/06/06 250,000 267,536
-----------------------------------------------------------------------
Golden State Bancorp. Inc., Sub. Deb.,
10.00%, 10/01/06 250,000 299,667
-----------------------------------------------------------------------
KeyBank N.A., Sr. Notes, 4.10%, 06/30/05 100,000 103,455
-----------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom), Unsec. Sub.
Floating Rate Euro Notes, 1.69%,
06/29/49(b) 300,000 241,338
-----------------------------------------------------------------------
MBNA America Bank, N.A., Notes, 6.88%,
07/15/04 (Acquired 12/04/02; Cost
$104,633)(a) 100,000 104,984
-----------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Putable Sub.
Deb., 8.25%, 11/01/04 250,000 316,462
-----------------------------------------------------------------------
Santander Financial Issuances (Cayman
Islands), Unsec. Gtd. Sub. Yankee Notes,
7.00%, 04/01/06 100,000 108,690
-----------------------------------------------------------------------
UBS Preferred Funding Trust I, Gtd. Global
Bonds, 8.62%, 10/29/49 300,000 357,000
-----------------------------------------------------------------------
U.S. Bank N.A., Sub. Global Notes, 6.30%,
02/04/14 25,000 27,891
-----------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
BANKS-(CONTINUED)
Union Planters Bank N.A., Unsec. Putable Sub.
Notes, 6.50%, 03/15/08 $ 250,000 $ 278,437
-----------------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes, 6.80%,
06/01/05 100,000 110,003
=======================================================================
3,475,162
=======================================================================
BREWERS-0.13%
Anheuser-Busch Cos., Inc., Sr. Unsec. Deb.,
6.50%, 02/01/43 65,000 72,763
=======================================================================
BROADCASTING & CABLE TV-2.40%
Comcast Cable Communications, Inc., Unsec.
Unsub. Notes, 8.88%, 05/01/17 150,000 178,246
-----------------------------------------------------------------------
Comcast Corp., Sr. Unsec. Gtd. Unsub. Global
Notes, 6.50%, 01/15/15 400,000 400,612
-----------------------------------------------------------------------
Jones Intercable, Inc., Sr. Unsec. Notes,
8.88%, 04/01/07 100,000 106,391
-----------------------------------------------------------------------
TCI Communications, Inc.,
Medium Term Notes, 8.35%, 02/15/05 100,000 108,258
-----------------------------------------------------------------------
Sr. Notes, 8.65%, 09/15/04 400,000 428,500
-----------------------------------------------------------------------
Sr. Unsec. Deb., 7.88%, 02/15/26 50,000 51,948
-----------------------------------------------------------------------
Sr. Unsec. Notes, 8.00%, 08/01/05 50,000 53,812
-----------------------------------------------------------------------
Time Warner Inc., Unsec. Notes, 7.75%,
06/15/05 50,000 53,334
=======================================================================
1,381,101
=======================================================================
COMPUTER HARDWARE-0.22%
International Business Machines Corp., Deb.,
8.38%, 11/01/19 100,000 126,336
=======================================================================
CONSUMER FINANCE-6.01%
CitiFinancial Credit Co.,
Notes, 6.63%, 06/01/15 150,000 168,429
-----------------------------------------------------------------------
Unsec. Notes, 6.75%, 07/01/07 100,000 111,719
-----------------------------------------------------------------------
Countrywide Home Loans, Inc.,
Unsec. Gtd. Global Notes, 6.85%, 06/15/04 598,000 632,343
-----------------------------------------------------------------------
Series K, Medium Term Global Notes, 3.50%,
12/19/05 100,000 100,841
-----------------------------------------------------------------------
Ford Motor Credit Co.,
Global Notes, 7.88%, 06/15/10 60,000 59,733
-----------------------------------------------------------------------
Unsec. Floating Rate Notes, 1.60%,
03/17/03(c) 350,000 349,447
-----------------------------------------------------------------------
Unsec. Global Notes,
6.70%, 07/16/04 250,000 257,125
-----------------------------------------------------------------------
6.88%, 02/01/06 235,000 237,143
-----------------------------------------------------------------------
General Motors Acceptance Corp.,
Global Bonds, 6.85%, 06/17/04 250,000 261,488
-----------------------------------------------------------------------
Medium Term Notes, 5.25%, 05/16/05 300,000 304,833
-----------------------------------------------------------------------
Unsec. Unsub. Notes, 7.63%, 06/15/04 200,000 211,032
-----------------------------------------------------------------------
|
FS-180
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
CONSUMER FINANCE-(CONTINUED)
Household Finance Corp.,
Sr. Unsec. Global Notes,
6.50%, 01/24/06 $ 100,000 $ 107,409
-----------------------------------------------------------------------
8.00%, 05/09/05 600,000 657,714
=======================================================================
3,459,256
=======================================================================
DISTILLERS & VINTNERS-0.42%
Diageo PLC, Sr. Unsec. Gtd. Putable Notes,
7.45%, 04/15/05 200,000 243,264
=======================================================================
DIVERSIFIED FINANCIAL SERVICES-11.58%
American General Finance Corp., Sr. Notes,
6.75%, 11/15/04 200,000 214,650
-----------------------------------------------------------------------
ASIF Global Financing XIX, Sec. Notes, 4.90%,
01/17/13 (Acquired 01/08/03; Cost
$199,374)(a) 200,000 199,464
-----------------------------------------------------------------------
ASIF Global Financing XX, Sec. Notes, 2.65%,
01/17/06 (Acquired 01/08/03; Cost
$149,763)(a) 150,000 149,823
-----------------------------------------------------------------------
Associates Corp. of North America, Sr. Global
Notes, 5.80%, 04/20/04 250,000 262,010
-----------------------------------------------------------------------
Auburn Hills Trust, Unsec. Gtd. Deb., 12.38%,
05/01/20 200,000 303,870
-----------------------------------------------------------------------
CIT Group Inc.,
Sr. Floating Rate Medium Term Global Notes,
2.60%, 11/25/03(d) 100,000 100,063
-----------------------------------------------------------------------
Sr. Global Notes, 7.13%, 10/15/04 40,000 42,454
-----------------------------------------------------------------------
Citigroup Capital II, Jr. Gtd. Sub. Bonds,
7.75%, 12/01/36 350,000 389,379
-----------------------------------------------------------------------
Citigroup Inc., Unsec. Sub. Global Notes,
6.63%, 06/15/32 100,000 110,239
-----------------------------------------------------------------------
Fidelity Investments, Bonds, 7.57%, 06/15/29
(Acquired 05/01/02-07/25/02; Cost
$218,028)(a) 200,000 238,666
-----------------------------------------------------------------------
General Electric Capital Corp.,
Gtd. Sub. Notes, 8.13%, 05/15/12 45,000 54,237
-----------------------------------------------------------------------
Series A, Medium Term Global Notes,
5.00%, 06/15/07 200,000 211,452
-----------------------------------------------------------------------
6.80%, 11/01/05 400,000 444,048
-----------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Global
Bonds, 7.63%, 08/17/05 150,000 168,093
-----------------------------------------------------------------------
Heller Financial, Inc.,
Sr. Unsec. Global Notes,
6.38%, 03/15/06 125,000 136,830
-----------------------------------------------------------------------
8.00%, 06/15/05 400,000 449,428
-----------------------------------------------------------------------
Unsec. Global Notes, 7.38%, 11/01/09 60,000 69,754
-----------------------------------------------------------------------
John Hancock Global Funding II, Notes,
5.00%, 07/27/07 (Acquired 06/12/02;
Cost $99,945)(a) 100,000 103,804
-----------------------------------------------------------------------
6.50%, 03/01/11 (Acquired 07/24/02;
Cost $263,610)(a) 250,000 266,820
-----------------------------------------------------------------------
Lehman Brothers Holdings Inc., Sr. Notes,
8.75%, 03/15/05 $ 250,000 $ 280,825
-----------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Lehman Brothers Inc.,
Sr. Sub. Deb., 11.63%, 05/15/05 250,000 295,418
-----------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 7.63%, 06/01/06 150,000 168,245
-----------------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series B, Medium
Term Notes, 4.54%, 03/08/05 250,000 259,430
-----------------------------------------------------------------------
Morgan Stanley,
Sr. Global Notes, 7.75%, 06/15/05 375,000 418,410
-----------------------------------------------------------------------
Unsec. Notes, 6.30%, 01/15/06 200,000 216,084
-----------------------------------------------------------------------
Regional Diversified Funding, Sr. Notes,
9.25%, 03/15/30 (Acquired 01/10/03; Cost
$166,261)(a) 148,178 171,305
-----------------------------------------------------------------------
Salomon Smith Barney Holdings Inc., Sr.
Unsec. Notes, 6.25%, 06/15/05 100,000 108,001
-----------------------------------------------------------------------
USL Capital Corp., Sr. Global Notes, 5.95%,
10/15/03 265,000 271,455
-----------------------------------------------------------------------
Washington Mutual Financial Corp., Sr. Unsec.
Notes, 8.25%, 06/15/05 400,000 451,372
-----------------------------------------------------------------------
Wells Fargo Financial, Inc., Global Notes,
6.13%, 02/15/06 100,000 108,327
=======================================================================
6,663,956
=======================================================================
ELECTRIC UTILITIES-2.07%
Duke Energy Corp., Bonds, 6.45%, 10/15/32 80,000 78,129
-----------------------------------------------------------------------
Hydro-Quebec (Canada),
Gtd. Euro Notes, 1.94%, 09/29/49 350,000 310,366
-----------------------------------------------------------------------
Gtd. Yankee Bonds, 9.40%, 02/01/21(e) 50,000 71,068
-----------------------------------------------------------------------
Niagara Mohawk Power Corp., First Mortgage
Notes, 8.00%, 06/01/04(e) 210,000 223,509
-----------------------------------------------------------------------
Wisconsin Public Service Corp., Sr. Sec.
Notes, 4.88%, 12/01/12 500,000 506,405
=======================================================================
1,189,477
=======================================================================
GAS UTILITIES-0.47%
Kinder Morgan, Inc., Sr. Notes, 6.80%,
03/01/08 250,000 270,750
=======================================================================
GENERAL MERCHANDISE STORES-0.25%
Wal-Mart Stores, Inc., Unsec. Deb., 8.50%,
09/15/24 125,000 141,089
=======================================================================
INDUSTRIAL MACHINERY-0.18%
Pall Corp., Notes, 6.00%, 08/01/12 (Acquired
08/01/02; Cost $99,949)(a) 100,000 105,156
=======================================================================
INTEGRATED OIL & GAS-2.74%
BP Canada Finance Co. (Canada), Unsec. Gtd.
Unsub. Yankee Bonds, 3.38%, 10/31/07 300,000 300,315
-----------------------------------------------------------------------
Conoco Inc., Sr. Unsec. Global Notes, 5.90%,
04/15/04 350,000 366,961
-----------------------------------------------------------------------
ConocoPhillips, Unsec. Global Notes, 8.50%,
05/25/05 100,000 113,362
-----------------------------------------------------------------------
|
FS-181
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
INTEGRATED OIL & GAS-(CONTINUED)
Occidental Petroleum Corp.,
Sr. Putable Deb., 9.25%, 08/01/04 $ 350,000 $ 457,125
-----------------------------------------------------------------------
Sr. Unsec. Notes,
6.50%, 04/01/05 250,000 269,015
-----------------------------------------------------------------------
7.38%, 11/15/08 60,000 69,138
=======================================================================
1,575,916
=======================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.78%
GTE Hawaiian Telephone Co., Inc.-Series A,
Unsec. Deb., 7.00%, 02/01/06 75,000 81,452
-----------------------------------------------------------------------
Sprint Capital Corp.,
Gtd. Global Notes, 5.88%, 05/01/04 400,000 392,500
-----------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
5.70%, 11/15/03 700,000 697,375
-----------------------------------------------------------------------
6.00%, 01/15/07 100,000 91,125
-----------------------------------------------------------------------
7.13%, 01/30/06 50,000 47,563
-----------------------------------------------------------------------
Sr. Unsec. Gtd. Unsub. Global Notes, 6.13%,
11/15/08 35,000 30,494
-----------------------------------------------------------------------
Verizon Pennsylvania Inc.-Series A, Global
Notes, 5.65%, 11/15/11 250,000 261,253
=======================================================================
1,601,762
=======================================================================
LIFE & HEALTH INSURANCE-0.78%
American General Corp., Unsec. Notes, 7.75%,
04/01/05 280,000 311,114
-----------------------------------------------------------------------
Lincoln National Corp., Unsec. Deb., 9.13%,
10/01/24 120,000 137,467
=======================================================================
448,581
=======================================================================
MOVIES & ENTERTAINMENT-1.26%
AOL Time Warner Inc., Sr. Gtd. Unsub. Global
Notes, 6.13%, 04/15/06 400,000 415,308
-----------------------------------------------------------------------
Walt Disney Co. (The), Medium Term Notes,
5.25%, 11/10/03 300,000 307,200
=======================================================================
722,508
=======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.88%
Amerada Hess Corp., Unsec. Notes,
5.30%, 08/15/04 450,000 469,449
-----------------------------------------------------------------------
7.30%, 08/15/31 300,000 316,776
-----------------------------------------------------------------------
Burlington Resources Finance Co. (Canada),
Sr. Unsec. Gtd. Yankee Notes, 7.40%,
12/01/31 200,000 234,286
-----------------------------------------------------------------------
Canadian Oil Sands Ltd. (Canada), Sr. Yankee
Notes, 7.90%, 09/01/21 (Acquired 07/31/02;
Cost $304,776)(a) 300,000 335,619
-----------------------------------------------------------------------
Devon Energy Corp., Sr. Unsec. Deb., 7.95%,
04/15/32 30,000 35,902
-----------------------------------------------------------------------
Devon Financing Corp. ULC, Unsec. Gtd. Unsub.
Global Deb., 7.88%, 09/30/31 30,000 35,618
-----------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION-(CONTINUED)
Noble Energy, Inc., Sr. Unsec. Notes, 8.00%,
04/01/27 $ 100,000 $ 113,207
-----------------------------------------------------------------------
Norcen Energy Resources Ltd. (Canada), Unsec.
Yankee Deb., 7.38%, 05/15/06 100,000 113,469
=======================================================================
1,654,326
=======================================================================
PHARMACEUTICALS-0.61%
Johnson & Johnson, Unsec. Deb., 8.72%,
11/01/24 300,000 351,894
=======================================================================
PROPERTY & CASUALTY INSURANCE-0.20%
Allstate Corp. (The), Sr. Unsec. Notes,
7.88%, 05/01/05 100,000 111,830
=======================================================================
PUBLISHING-0.92%
News America Inc., Putable Deb., 6.75%,
01/09/10 100,000 103,283
-----------------------------------------------------------------------
Tribune Co., Putable Notes, 6.61%, 09/15/04 400,000 427,840
=======================================================================
531,123
=======================================================================
REAL ESTATE-1.50%
EOP Operating L.P.,
Sr. Unsec. Notes, 6.50%, 06/15/04 110,000 114,598
-----------------------------------------------------------------------
Sr. Unsec. Notes, 7.25%, 02/15/18 30,000 32,683
-----------------------------------------------------------------------
Unsec. Gtd. Notes, 6.75%, 02/15/12 20,000 21,405
-----------------------------------------------------------------------
Unsec. Notes, 6.50%, 01/15/04 420,000 434,288
-----------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub.
Notes, 6.80%, 05/01/04 250,000 261,478
=======================================================================
864,452
=======================================================================
SOFT DRINKS-0.38%
Coca-Cola Enterprises Inc., Putable Notes,
8.00%, 01/04/04 200,000 221,016
=======================================================================
SOVEREIGN DEBT-1.70%
Export Development Canada (Canada), Global
Bonds, 4.00%, 08/01/07 350,000 362,366
-----------------------------------------------------------------------
Japan Bank for International Cooperation
(Japan), Unsec. Gtd. Euro Bonds, 6.50%,
10/06/05 100,000 110,172
-----------------------------------------------------------------------
Region of Lombardy (Italy), Unsec. Global
Bonds, 5.80%, 10/25/32 300,000 310,236
-----------------------------------------------------------------------
United Mexican States (Mexico)-Series A,
Medium Term Global Notes, 6.38%, 01/16/13 200,000 195,500
=======================================================================
978,274
=======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.54%
AT&T Wireless Services Inc., Sr. Unsec.
Unsub. Global Notes, 8.75%, 03/01/31 300,000 310,125
=======================================================================
Total Bonds & Notes (Cost $26,729,605) 27,304,905
=======================================================================
|
FS-182
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
ASSET-BACKED SECURITIES-1.67%
AIRLINES-0.81%
Continental Airlines, Inc., Class A-1,
Series 2000-1, Sr. Pass Through Ctfs.,
8.05%, 11/01/20 $ 161,331 $ 142,374
-----------------------------------------------------------------------
Series 2000-2, Sr. Sec. Pass Through Ctfs.,
7.71%, 04/02/21 253,266 227,306
-----------------------------------------------------------------------
Series 974A, Pass Through Ctfs., 6.90%,
01/02/18 106,107 94,529
=======================================================================
464,209
=======================================================================
DIVERSIFIED FINANCIAL SERVICES-0.86%
Citicorp Lease-Series 1999-1,
Class A1, Pass Through Ctfs., 7.22%,
06/15/05 (Acquired 05/08/02-10/03/02; Cost
$313,955)(a) 295,004 322,841
-----------------------------------------------------------------------
Class A2, Pass Through Ctfs., 8.04%,
12/15/19 (Acquired 08/20/02; Cost
$166,614)(a) 150,000 173,379
=======================================================================
496,220
=======================================================================
Total Asset-Backed Securities (Cost
$975,257) 960,429
=======================================================================
U.S. GOVERNMENT AGENCY SECURITIES-44.12%
FEDERAL HOME LOAN BANK-2.16%
Unsec. Bonds,
4.88%, 04/16/04 to 05/15/07 650,000 691,170
-----------------------------------------------------------------------
5.70%, 03/03/09 500,000 553,445
=======================================================================
1,244,615
=======================================================================
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-11.58%
Pass Through Ctfs.,
6.50%, 05/01/16 to 08/01/32 1,738,846 1,818,040
-----------------------------------------------------------------------
7.00%, 06/01/16 to 06/01/32 783,207 826,381
-----------------------------------------------------------------------
6.00%, 04/01/17 to 05/01/32 706,463 738,003
-----------------------------------------------------------------------
7.50%, 04/01/17 to 03/01/32 426,292 455,027
-----------------------------------------------------------------------
Pass Through Ctfs., TBA,(f)
6.00%, 02/01/33 2,210,000 2,287,634
-----------------------------------------------------------------------
Unsec. Notes,
4.88%, 03/15/07 500,000 536,380
=======================================================================
6,661,465
=======================================================================
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-21.40%
Bonds,
5.88%, 02/02/06 350,000 384,174
-----------------------------------------------------------------------
Pass Through Ctfs.,
7.50%, 11/01/15 to 05/01/32 1,037,971 1,105,336
-----------------------------------------------------------------------
7.00%, 12/01/15 to 09/01/32 1,650,970 1,742,261
-----------------------------------------------------------------------
6.50%, 05/01/16 to 10/01/32 3,788,429 3,956,273
-----------------------------------------------------------------------
6.00%, 01/01/17 to 03/01/22 1,296,113 1,349,773
-----------------------------------------------------------------------
8.00%, 08/01/21 to 04/01/32 2,018,198 2,180,524
-----------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)-(CONTINUED)
Pass Through Ctfs., TBA,(f)
6.00%, 02/01/33(g) $ 675,000 $ 698,780
-----------------------------------------------------------------------
7.00%, 02/01/33 200,000 210,688
-----------------------------------------------------------------------
Unsec. Bonds,
6.63%, 11/15/30 45,000 52,358
-----------------------------------------------------------------------
Unsec. Notes,
6.20%, 06/13/17 150,000 159,638
-----------------------------------------------------------------------
Unsec. Sub. Notes,
4.75%, 01/02/07 150,000 158,067
-----------------------------------------------------------------------
5.25%, 08/01/12 300,000 309,699
=======================================================================
12,307,571
=======================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-7.94%
Pass Through Ctfs.,
7.50%, 06/15/23 to 05/15/32 1,068,855 1,151,036
-----------------------------------------------------------------------
8.50%, 02/15/25 147,670 161,960
-----------------------------------------------------------------------
8.00%, 08/15/25 34,894 38,114
-----------------------------------------------------------------------
7.00%, 04/15/28 to 08/15/31 1,222,776 1,299,312
-----------------------------------------------------------------------
6.50%, 01/15/29 to 07/15/32 1,333,475 1,401,447
-----------------------------------------------------------------------
6.00%, 12/15/31 to 11/15/32 496,857 517,741
=======================================================================
4,569,610
=======================================================================
TENNESSEE VALLEY AUTHORITY-1.04%
Unsec. Bonds,
7.14%, 05/23/12 500,000 596,615
=======================================================================
Total U.S. Government Agency Securities
(Cost $24,927,627) 25,379,876
=======================================================================
U.S. TREASURY SECURITIES-7.68%
U.S. TREASURY NOTES-6.53%
4.63%, 05/15/06 1,500,000 1,606,635
-----------------------------------------------------------------------
6.50%, 10/15/06 150,000 170,789
-----------------------------------------------------------------------
3.50%, 11/15/06 100,000 103,266
-----------------------------------------------------------------------
6.13%, 08/15/07 150,000 170,742
-----------------------------------------------------------------------
4.75%, 11/15/08 1,580,000 1,703,682
=======================================================================
3,755,114
=======================================================================
U.S. TREASURY BONDS-1.15%
7.50%, 11/15/16 150,000 194,413
-----------------------------------------------------------------------
6.25%, 08/15/23 400,000 465,688
=======================================================================
660,101
=======================================================================
Total U.S. Treasury Securities (Cost
$4,380,438) 4,415,215
=======================================================================
|
FS-183
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MONEY MARKET FUNDS-3.77%
STIC Liquid Assets Portfolio(h) 1,083,893 1,083,893
-----------------------------------------------------------------------
STIC Prime Portfolio(h) 1,083,893 1,083,893
=======================================================================
Total Money Market Funds (Cost
$2,167,786) 2,167,786
=======================================================================
TOTAL INVESTMENTS-104.70% (Cost $59,180,713) 60,228,211
=======================================================================
OTHER ASSETS LESS LIABILITIES-(4.70%) (2,701,778)
=======================================================================
NET ASSETS-100.00% $57,526,433
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Deb. - Debentures Gtd. - Guaranteed Jr. - Junior Sec. - Secured Sr. - Senior Sub. - Subordinated TBA - To Be Announced Unsec. - Unsecured Unsub. - Unsubordinated |
Notes to Schedule of Investments:
(a) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $2,329,591,
which represented 4.05% of the Fund's net assets. These securities are
considered to be illiquid.
(b) Interest rates are redetermined semiannually. Rates shown are rates in
effect on 01/31/03.
(c) Interest rates are redetermined quarterly. Rates shown are rates in effect
on 01/31/03.
(d) Interest rates are redetermined monthly. Rates shown are rates in effect on
01/31/03.
(e) Principal and interest payments are secured by bond insurance provided by
one of the following companies: Ambac Assurance Corp. or Financial Security
Assurance.
(f) Security purchased on forward commitment basis.
(g) These securities are subject to dollar roll transactions. See Note 1 Section
C.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-184
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$59,180,713) $60,228,211
-----------------------------------------------------------
Receivables for:
Investments sold 374,959
-----------------------------------------------------------
Fund shares sold 666,876
-----------------------------------------------------------
Dividends and interest 672,759
-----------------------------------------------------------
Amount due from advisor 42,486
-----------------------------------------------------------
Investment for deferred compensation plan 2,765
-----------------------------------------------------------
Other assets 17,044
===========================================================
Total assets 62,005,100
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 4,080,754
-----------------------------------------------------------
Fund shares reacquired 295,614
-----------------------------------------------------------
Dividends 16,493
-----------------------------------------------------------
Deferred compensation plan 2,765
-----------------------------------------------------------
Accrued distribution fees 40,838
-----------------------------------------------------------
Accrued trustees' fees 868
-----------------------------------------------------------
Accrued transfer agent fees 14,922
-----------------------------------------------------------
Accrued operating expenses 26,413
===========================================================
Total liabilities 4,478,667
===========================================================
Net assets applicable to shares outstanding $57,526,433
___________________________________________________________
===========================================================
NET ASSETS:
Class A $18,820,844
___________________________________________________________
===========================================================
Class B $31,407,450
___________________________________________________________
===========================================================
Class C $ 7,298,139
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 1,806,241
___________________________________________________________
===========================================================
Class B 3,014,270
___________________________________________________________
===========================================================
Class C 700,424
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.42
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.42 divided by
95.25%) $ 10.94
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.42
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.42
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the six months ended January 31, 2003
(Unaudited)
INVESTMENT INCOME:
Interest $ 926,061
-----------------------------------------------------------
Dividends from affiliated money market funds 15,942
===========================================================
Total investment income 942,003
===========================================================
EXPENSES:
Advisory fees 106,830
-----------------------------------------------------------
Administrative services fees 25,206
-----------------------------------------------------------
Custodian fees 12,270
-----------------------------------------------------------
Distribution fees -- Class A 25,504
-----------------------------------------------------------
Distribution fees -- Class B 117,748
-----------------------------------------------------------
Distribution fees -- Class C 23,044
-----------------------------------------------------------
Transfer agent fees 63,158
-----------------------------------------------------------
Trustees' fees 4,244
-----------------------------------------------------------
Registration and filing fees 36,513
-----------------------------------------------------------
Other 30,816
===========================================================
Total expenses 445,333
===========================================================
Less: Fees waived and expenses reimbursed (127,013)
-----------------------------------------------------------
Expenses paid indirectly (330)
===========================================================
Net expenses 317,990
===========================================================
Net investment income 624,013
===========================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 104,368
-----------------------------------------------------------
Change in net unrealized appreciation of
investment securities 904,976
===========================================================
Net gain from investment securities 1,009,344
===========================================================
Net increase in net assets resulting from
operations $1,633,357
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-185
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended January 31, 2003 and the period December 31, 2001 (date
operations commenced) to July 31, 2002
(Unaudited)
JANUARY 31, JULY 31,
2003 2002
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 624,013 $ 139,633
-----------------------------------------------------------------------------------------------
Net realized gain from investment securities 104,368 87,097
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 904,976 142,522
===============================================================================================
Net increase in net assets resulting from operations 1,633,357 369,252
===============================================================================================
Distributions to shareholders from net investment income:
Class A (292,084) (77,172)
-----------------------------------------------------------------------------------------------
Class B (384,968) (73,438)
-----------------------------------------------------------------------------------------------
Class C (74,953) (27,624)
-----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (29,365) --
-----------------------------------------------------------------------------------------------
Class B (47,673) --
-----------------------------------------------------------------------------------------------
Class C (8,494) --
-----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 9,233,554 9,251,803
-----------------------------------------------------------------------------------------------
Class B 16,289,788 14,591,873
-----------------------------------------------------------------------------------------------
Class C 4,159,579 3,012,998
===============================================================================================
Net increase in net assets 30,478,741 27,047,692
===============================================================================================
NET ASSETS:
Beginning of period 27,047,692 --
===============================================================================================
End of period $57,526,433 $27,047,692
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $56,510,484 $26,827,563
-----------------------------------------------------------------------------------------------
Undistributed net investment income (129,210) (1,218)
-----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 97,661 78,825
-----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 1,047,498 142,522
===============================================================================================
$57,526,433 $27,047,692
_______________________________________________________________________________________________
===============================================================================================
|
See Notes to Financial Statements.
FS-186
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Total Return Bond Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. Matters affecting each portfolio or class will be 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 achieve maximum total return consistent with preservation of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in the case of debt obligations, 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 and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage-backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage-backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold. The Fund will segregate assets to cover its
FS-187
obligations under dollar roll transactions. The difference between the selling price and the future repurchase price is recorded as an adjustment to interest income.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event that the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. The return earned by the Fund with the proceeds of the dollar roll transaction may not exceed transaction costs.
D. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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.
E. 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
F. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first $500 million of the Fund's average daily net assets, plus 0.45% on the next $500 million of the Fund's average daily net assets, plus 0.40% on the Fund's average daily net assets in excess of $1 billion. A I M Distributors, Inc. ("AIM Distributors") has contractually agreed to waive 0.10% of Rule 12b-1 plan fees of Class A shares. Further, AIM has contractually agreed to waive advisory fees and/or reimburse expenses for Class A, Class B and Class C shares to the extent necessary to limit total annual operating expenses of Class A shares to 1.25% and has voluntarily agreed to waive advisory fees and/or reimburse expenses of Class A, Class B and Class C shares to the extent necessary to limit total annual operating expenses of Class A shares to 1.00%. The expense limitations exclude interest, taxes, dividends on short sales, extraordinary items and increases in expenses to due to expense offset arrangements, if any. Voluntary fee waivers or reimbursements may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reimbursements, to the extent that the annualized expense ratio does not exceed the contractual expense limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. To the extent that the annualized expense ratio does not exceed the contractual expense limitation AIM will retain their ability to be reimbursed for such fee waivers or reimbursements prior to the end of each committed period. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the six months ended January 31, 2003, AIM Distributors waived $7,287 and AIM waived fees of $106,830 and reimbursed expenses of $12,896.
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 six months ended January 31, 2003, AIM was paid $25,206 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. During the six months ended January 31, 2003, AFS retained $63,158 for such services.
The Trust has entered into a master distribution agreement with AIM Distributors to serve as the distributor for the Class A, Class B and Class C shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B or Class C shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the six months ended January 31, 2003, the Class A, Class B and Class C shares paid $18,217, $117,748 and $23,044, respectively after waivers.
Front-end sales commissions and CDSCs are not recorded as expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended January 31, 2003, AIM Distributors retained $23,262 in front-end sales commissions from the sale of Class A shares and $0, $5 and $541 for Class A, Class B shares and Class C shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the six months ended January 31, 2003, the Fund paid $1,761 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
FS-188
NOTE 3--INDIRECT EXPENSES
For the six months ended January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $320 and reductions in custodian fees of $10 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $330.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--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) $500,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the six months ended January
31, 2003, 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.
AIM has established an interfund lending facility for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. The Fund did not borrow or lend under the facility during the six months ended January 31, 2003.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. The tax character of distributions paid during the year and the tax components of distributable earnings will be updated at the Fund's fiscal year-end.
As of January 31, 2003, permanent reclassifications for paydown gains (losses) amounted to $92,078, which may be more or less than the permanent reclassifications for paydown gains (losses) at fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended January 31, 2003 was $61,838,755 and $31,463,657, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of January 31, 2003 is as follows:
Aggregate unrealized appreciation of investment securities $1,128,388 ----------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (80,890) =========================================================== Net unrealized appreciation of investment securities $1,047,498 ___________________________________________________________ =========================================================== Investments have the same costs for tax and financial statement purposes. |
FS-189
NOTE 8--SHARE INFORMATION
The Fund currently offers multiple classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a contingent deferred sales charge ("CDSC"). Under some circumstances, Class A shares are subject to CDSC charges. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
Changes in the shares outstanding during the six months ended January 31, 2003 and the period ended December 31, 2001 (date operations commenced) through July 31, 2002 were as follows:
DECEMBER 31, 2001
(DATE OPERATIONS
SIX MONTHS ENDED COMMENCED)
JANUARY 31, TO JULY 31,
2003 2002
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,509,168 $15,576,252 992,436 $10,034,790
------------------------------------------------------------------------------------------------------------------
Class B 2,104,023 21,739,279 1,538,451 15,590,664
------------------------------------------------------------------------------------------------------------------
Class C 654,516 6,765,178 385,449 3,888,452
==================================================================================================================
Issued as reinvestment of dividends:
Class A 28,751 297,822 7,294 73,755
------------------------------------------------------------------------------------------------------------------
Class B 35,535 368,121 6,117 61,932
------------------------------------------------------------------------------------------------------------------
Class C 7,463 77,326 2,532 25,581
==================================================================================================================
Conversion of Class B shares to Class A shares:
Class A 15,104 156,572 -- --
------------------------------------------------------------------------------------------------------------------
Class B (15,088) (156,572) -- --
==================================================================================================================
Reacquired:
Class A (661,750) (6,797,092) (84,762) (856,742)
------------------------------------------------------------------------------------------------------------------
Class B (550,320) (5,661,040) (104,448) (1,060,723)
------------------------------------------------------------------------------------------------------------------
Class C (260,315) (2,682,925) (89,221) (901,035)
==================================================================================================================
2,867,087 $29,682,921 2,653,848 $26,856,674
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-190
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-----------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JANUARY 31, JULY 31,
2003 2002
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.19 $10.00
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18(a) 0.18(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.28 0.23
=================================================================================================
Total from investment operations 0.46 0.41
=================================================================================================
Less distributions:
Dividends from net investment income (0.21) (0.22)
-------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.02) --
=================================================================================================
Total distributions (0.23) (0.22)
=================================================================================================
Net asset value, end of period $ 10.42 $10.19
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 4.53% 4.09%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $18,821 $9,325
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(c) 1.00%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.66%(c) 3.21%(d)
=================================================================================================
Ratio of net investment income to average net assets 3.41%(c) 3.10%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 78% 215%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include sales charges
and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$14,455,031.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-191
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JANUARY 31, JULY 31,
2003 2002
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.19 $ 10.00
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.14(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.28 0.22
=================================================================================================
Total from investment operations 0.42 0.36
=================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.17)
-------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.02) --
=================================================================================================
Total distributions (0.19) (0.17)
=================================================================================================
Net asset value, end of period $ 10.42 $ 10.19
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 4.14% 3.65%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31,407 $14,678
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.75%(c) 1.75%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.31%(c) 3.86%(d)
=================================================================================================
Ratio of net investment income to average net assets 2.66%(c) 2.35%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 78% 215%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$23,357,504.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-192
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------
DECEMBER 31, 2001
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JANUARY 31, JULY 31,
2003 2002
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.19 $10.00
-------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.14(a)
-------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.28 0.22
=================================================================================================
Total from investment operations 0.42 0.36
=================================================================================================
Less distributions:
Dividends from net investment income (0.17) (0.17)
-------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.02) --
=================================================================================================
Total distributions (0.19) (0.17)
=================================================================================================
Net asset value, end of period $10.42 $10.19
_________________________________________________________________________________________________
=================================================================================================
Total return(b) 4.14% 3.65%
_________________________________________________________________________________________________
=================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,298 $3,045
_________________________________________________________________________________________________
=================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.75%(c) 1.75%(d)
-------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.31%(c) 3.86%(d)
=================================================================================================
Ratio of net investment income to average net assets 2.66%(c) 2.35%(d)
_________________________________________________________________________________________________
=================================================================================================
Portfolio turnover rate(e) 78% 215%
_________________________________________________________________________________________________
=================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are annualized and based on average daily net assets of
$4,571,255.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-193
FINANCIALS
SCHEDULE OF INVESTMENTS
January 31, 2003
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
BONDS & NOTES-42.45%
AEROSPACE & DEFENSE-0.60%
Lockheed Martin Corp., Unsec. Gtd. Unsub.
Notes, 7.25%, 05/15/06 $ 650,000 $ 731,425
=========================================================================
AUTOMOBILE MANUFACTURERS-0.74%
DaimlerChrysler N.A. Holding Corp.-Series D,
Gtd. Medium Term Notes, 3.40%, 12/15/04 900,000 907,614
=========================================================================
BANKS-7.48%
Bank One Corp., Sr. Unsec. Unsub. Global
Notes, 7.63%, 08/01/05 1,400,000 1,568,182
-------------------------------------------------------------------------
Bankers Trust Corp., Unsec. Sub. Notes,
8.25%, 05/01/05 1,200,000 1,349,652
-------------------------------------------------------------------------
Chase Manhattan Corp., Sub. Deb., 7.88%,
07/15/06 400,000 452,300
-------------------------------------------------------------------------
Citicorp,
Jr. Unsec. Sub. Notes, 6.38%, 01/15/06 100,000 107,872
-------------------------------------------------------------------------
Sub. Global Notes, 6.75%, 08/15/05 500,000 550,075
-------------------------------------------------------------------------
Unsec. Sub. Notes, 7.13%, 09/01/05 1,000,000 1,115,320
-------------------------------------------------------------------------
Danske Bank A/S (Denmark), Sub. Yankee Notes,
6.38%, 06/15/08 (Acquired 08/30/02; Cost
$53,673)(a) 50,000 53,531
-------------------------------------------------------------------------
Golden State Bancorp. Inc., Sub. Deb.,
10.00%, 10/01/06 900,000 1,078,803
-------------------------------------------------------------------------
JPMorgan Chase Bank, Sub. Notes, 7.00%,
06/01/05 1,000,000 1,086,900
-------------------------------------------------------------------------
MBNA America Bank, N.A., Notes, 6.88%,
07/15/04 (Acquired 12/04/02; Cost
$1,046,330)(a) 1,000,000 1,049,840
-------------------------------------------------------------------------
Santander Financial Issuances (Cayman
Islands), Unsec. Gtd. Sub. Yankee Notes,
7.00%, 04/01/06 250,000 271,725
-------------------------------------------------------------------------
Union Planters Bank N.A., Unsec. Putable Sub.
Notes, 6.50%, 03/15/08 350,000 389,812
-------------------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes, 6.80%,
06/01/05 50,000 55,001
=========================================================================
9,129,013
=========================================================================
BROADCASTING & CABLE TV-6.78%
Clear Channel Communications, Inc., Sr.
Unsec. Notes, 7.25%, 09/15/03 500,000 513,755
-------------------------------------------------------------------------
Cox Communications, Inc., Unsec, Notes,
7.50%, 08/15/04 2,000,000 2,127,160
-------------------------------------------------------------------------
Jones Intercable, Inc., Sr. Unsec. Notes,
8.88%, 04/01/07 900,000 957,519
-------------------------------------------------------------------------
TCI Communications, Inc.,
Medium Term Notes, 8.35%, 02/15/05 1,337,000 1,447,411
-------------------------------------------------------------------------
Sr. Notes, 8.65%, 09/15/04 2,000,000 2,142,500
-------------------------------------------------------------------------
Sr. Unsec. Notes, 8.00%, 08/01/05 15,000 16,144
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
BROADCASTING & CABLE TV-(CONTINUED)
Time Warner Inc., Unsec. Notes, 7.75%,
06/15/05 $ 1,000,000 $ 1,066,670
=========================================================================
8,271,159
=========================================================================
CONSUMER FINANCE-4.63%
CitiFinancial Credit Co., Unsec. Notes,
6.50%, 06/01/05 1,000,000 1,086,510
-------------------------------------------------------------------------
Countrywide Home Loans, Inc.,
Series K, Medium Term Global Notes, 3.50%,
12/19/05 1,000,000 1,008,410
-------------------------------------------------------------------------
Unsec. Gtd. Global Notes, 6.85%, 06/15/04 575,000 608,022
-------------------------------------------------------------------------
Ford Motor Credit Co., Unsec. Global Notes,
6.70%, 07/16/04 150,000 154,275
-------------------------------------------------------------------------
General Motors Acceptance Corp.,
Medium Term Notes, 5.25%, 05/16/05 1,000,000 1,016,110
-------------------------------------------------------------------------
Unsec. Unsub. Notes, 7.63%, 06/15/04 125,000 131,895
-------------------------------------------------------------------------
Household Finance Corp., Sr. Unsec. Global
Notes,
-------------------------------------------------------------------------
8.00%, 05/09/05 1,400,000 1,534,666
-------------------------------------------------------------------------
6.50%, 01/24/06 100,000 107,409
=========================================================================
5,647,297
=========================================================================
DIVERSIFIED FINANCIAL SERVICES-13.17%
American General Finance Corp., Sr. Notes,
6.75%, 11/15/04 300,000 321,975
-------------------------------------------------------------------------
ASIF Global Financing XX, Sec. Notes, 2.65%,
01/17/06 (Acquired 01/08/03; Cost
$698,894)(a) 700,000 699,174
-------------------------------------------------------------------------
Capital One Bank-Series 4, Sr. Global Notes,
6.50%, 07/30/04 2,100,000 2,093,175
-------------------------------------------------------------------------
CIT Group Inc., Sr. Global Floating Rate
Medium Term Notes, 2.60%, 11/25/03(b) 600,000 600,378
-------------------------------------------------------------------------
General Electric Capital Corp.-Series A,
Medium Term Global Notes, 6.80%, 11/01/05 1,750,000 1,942,710
-------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Global
Bonds, 7.63%, 08/17/05 75,000 84,046
-------------------------------------------------------------------------
Heller Financial, Inc., Sr. Unsec. Global
Notes, 8.00%, 06/15/05 1,750,000 1,966,247
-------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Sr. Notes,
8.75%, 03/15/05 175,000 196,577
-------------------------------------------------------------------------
Lehman Brothers Inc.,
Sr. Sub. Deb., 11.63%, 05/15/05 125,000 147,709
-------------------------------------------------------------------------
Sr. Unsec. Sub. Notes, 7.63%, 06/01/06 700,000 785,141
-------------------------------------------------------------------------
Merrill Lynch & Co., Inc.,
Series B, Medium Term Notes, 4.54%,
03/08/05 250,000 259,430
-------------------------------------------------------------------------
Series E, Medium Term Floating Rate Euro
Notes, 1.62%, 06/28/04(b) 400,000 401,009
-------------------------------------------------------------------------
|
FS-194
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)
Morgan Stanley,
Sr. Global Notes, 7.75%, 06/15/05 $ 1,050,000 $ 1,171,548
-------------------------------------------------------------------------
Unsec. Notes, 6.30%, 01/15/06 300,000 324,126
-------------------------------------------------------------------------
Salomon Smith Barney Holdings Inc., Sr.
Unsec. Notes, 6.25%, 06/15/05 125,000 135,001
-------------------------------------------------------------------------
USL Capital Corp., Sr. Global Notes, 5.95%,
10/15/03 1,535,000 1,572,393
-------------------------------------------------------------------------
Washington Mutual Financial Corp., Sr. Unsec.
Notes, 8.25%, 06/15/05 2,500,000 2,821,075
-------------------------------------------------------------------------
Wells Fargo Financial, Inc., Global Notes,
6.13%, 02/15/06 500,000 541,635
=========================================================================
16,063,349
=========================================================================
ELECTRIC UTILITIES-0.09%
Niagara Mohawk Power Corp., First Mortgage
Notes, 8.00%, 06/01/04(c) 100,000 106,433
=========================================================================
GENERAL MERCHANDISE STORES-0.56%
Wal-Mart Stores, Inc., Unsec. Deb., 8.50%,
09/15/24 600,000 677,226
=========================================================================
INTEGRATED OIL & GAS-1.18%
Conoco Inc., Sr. Unsec. Global Notes, 5.90%,
04/15/04 575,000 602,864
-------------------------------------------------------------------------
ConocoPhillips, Unsec. Global Notes, 8.50%,
05/25/05 75,000 85,022
-------------------------------------------------------------------------
Occidental Petroleum Corp., Sr. Unsec. Notes,
6.50%, 04/01/05 700,000 753,242
=========================================================================
1,441,128
=========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-2.83%
GTE Hawaiian Telephone Co., Inc.-Series A,
Unsec. Deb., 7.00%, 02/01/06 300,000 325,806
-------------------------------------------------------------------------
Sprint Capital Corp.,
Gtd. Global Notes, 5.88%, 05/01/04 1,375,000 1,349,219
-------------------------------------------------------------------------
Sr. Unsec. Gtd. Global Notes,
5.70%, 11/15/03 1,769,000 1,762,366
-------------------------------------------------------------------------
7.13%, 01/30/06 15,000 14,269
=========================================================================
3,451,660
=========================================================================
LIFE & HEALTH INSURANCE-1.15%
American General Corp., Unsec. Notes, 7.75%,
04/01/05 750,000 833,340
-------------------------------------------------------------------------
Lincoln National Corp., Unsec. Deb., 9.13%,
10/01/24 500,000 572,780
=========================================================================
1,406,120
=========================================================================
MOVIES & ENTERTAINMENT-0.89%
AOL Time Warner Inc., Sr. Unsec. Gtd. Unsub.
Global Notes, 6.13%, 04/15/06 750,000 778,702
-------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
MOVIES & ENTERTAINMENT-(CONTINUED)
Walt Disney Co. (The), Medium Term Notes,
5.25%, 11/10/03 $ 300,000 $ 307,200
=========================================================================
1,085,902
=========================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.52%
Amerada Hess Corp., Unsec. Notes, 5.30%,
08/15/04 550,000 573,771
-------------------------------------------------------------------------
Norcen Energy Resources Ltd. (Canada), Unsec.
Yankee Deb., 7.38%, 05/15/06 50,000 56,735
=========================================================================
630,506
=========================================================================
PROPERTY & CASUALTY INSURANCE-0.07%
Allstate Corp. (The), Sr. Unsec. Notes,
7.88%, 05/01/05 75,000 83,873
=========================================================================
REAL ESTATE-1.58%
EOP Operating L.P.,
Sr. Unsec. Notes, 6.50%, 06/15/04 1,200,000 1,250,155
-------------------------------------------------------------------------
Unsec. Notes, 6.50%, 01/15/04 400,000 413,608
-------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Unsub.
Notes, 6.80%, 05/01/04 250,000 261,478
=========================================================================
1,925,241
=========================================================================
SOFT DRINKS-0.11%
Coca-Cola Enterprises Inc., Putable Notes,
8.00%, 01/04/04 125,000 138,135
=========================================================================
SOVEREIGN DEBT-0.07%
Japan Bank for International Cooperation
(Japan), Unsec. Gtd. Euro Bonds, 6.50%,
10/06/05 75,000 82,629
=========================================================================
Total Bonds & Notes (Cost $51,379,317) 51,778,710
=========================================================================
ASSET-BACKED SECURITY-0.73%
DIVERSIFIED FINANCIAL SERVICES-0.73%
Citicorp Lease-Series 1999-1, Class A1, Pass
Through Ctfs., 7.22%, 06/15/05 (Acquired
10/03/02; Cost $878,515)(a) (Cost $870,704) 811,262 887,812
=========================================================================
U.S. GOVERNMENT AGENCY SECURITIES-45.93%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-12.89%
Pass Through Ctfs.,
8.00%, 11/20/12 1,934,823 2,075,427
-------------------------------------------------------------------------
7.50%, 06/01/16 to 07/01/24 1,187,537 1,276,384
-------------------------------------------------------------------------
7.00%, 12/01/16 to 10/25/24 2,825,929 3,007,707
-------------------------------------------------------------------------
8.50%, 02/01/19 to 08/17/26 8,500,875 9,365,354
=========================================================================
15,724,872
=========================================================================
|
FS-195
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)-21.95%
Pass Through Ctfs.,
7.50%, 02/01/15 to 01/01/21 $ 4,632,883 $ 4,950,235
-------------------------------------------------------------------------
7.00%, 04/01/15 to 09/01/31 12,469,220 13,241,584
-------------------------------------------------------------------------
8.00%, 12/01/26 to 08/01/32 7,923,011 8,585,105
=========================================================================
26,776,924
=========================================================================
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)-11.09%
Pass Through Ctfs.,
7.00%, 08/15/17 to 06/15/32 5,940,213 6,330,933
-------------------------------------------------------------------------
7.50%, 06/15/23 to 02/15/28 6,676,779 7,189,389
=========================================================================
13,520,322
=========================================================================
Total U.S. Government Agency Securities
(Cost $55,712,897) 56,022,118
=========================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------
U.S. TREASURY NOTES-7.83%
2.88%, 06/30/04 $ 5,850,000 $ 5,966,064
-------------------------------------------------------------------------
4.63%, 05/15/06 3,350,000 3,588,152
=========================================================================
9,554,216
=========================================================================
Total U.S. Treasury Notes (Cost
$9,542,459) 9,554,216
=========================================================================
SHARES
MONEY MARKET FUNDS-3.32%
STIC Liquid Assets Portfolio(d) 2,028,263 2,028,263
-------------------------------------------------------------------------
STIC Prime Portfolio(d) 2,028,263 2,028,263
=========================================================================
Total Money Market Funds (Cost
$4,056,526) 4,056,526
=========================================================================
TOTAL INVESTMENTS-100.26% (Cost $121,561,903) 122,299,382
=========================================================================
OTHER ASSETS LESS LIABILITIES-(0.26%) (317,553)
=========================================================================
NET ASSETS-100.00% $121,981,829
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Deb. - Debentures Gtd. - Guaranteed Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated |
Notes to Schedule of Investments:
(a) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction); the security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 01/31/03 was $2,690,357,
which represented 2.21% of the Fund's net assets. These securities are
considered to be illiquid.
(b) Interest rates are redetermined monthly. Rate shown is the rate in effect on
01/31/03.
(c) Principal and interest are secured by bond insurance provided by Financial
Security Assurance.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
See Notes to Financial Statements.
FS-196
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2003
(Unaudited)
ASSETS:
Investments, at market value (cost
$121,561,903) $122,299,382
-----------------------------------------------------------
Receivables for:
Investments sold 131,726
-----------------------------------------------------------
Fund shares sold 7,283,391
-----------------------------------------------------------
Dividends and interest 1,234,792
-----------------------------------------------------------
Investment for deferred compensation plan 1,231
-----------------------------------------------------------
Other assets 29,099
===========================================================
Total assets 130,979,621
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 7,873,269
-----------------------------------------------------------
Fund shares reacquired 1,045,669
-----------------------------------------------------------
Dividends 30,377
-----------------------------------------------------------
Deferred compensation plan 1,231
-----------------------------------------------------------
Accrued distribution fees 9,393
-----------------------------------------------------------
Accrued trustees' fees 844
-----------------------------------------------------------
Accrued transfer agent fees 3,083
-----------------------------------------------------------
Accrued operating expenses 33,926
===========================================================
Total liabilities 8,997,792
===========================================================
Net assets applicable to shares outstanding $121,981,829
___________________________________________________________
===========================================================
CLASS C:
Shares outstanding, $0.01 par value per
share 12,147,476
===========================================================
Net asset value and offering price per
share $ 10.04
___________________________________________________________
===========================================================
|
STATEMENT OF OPERATIONS
For the period August 30, 2002 (date operations commenced) through January 31,
2003
(Unaudited)
INVESTMENT INCOME:
Interest $ 551,534
----------------------------------------------------------
Dividends from affiliated money market funds 36,942
==========================================================
Total investment income 588,476
==========================================================
EXPENSES:
Advisory fees 110,703
----------------------------------------------------------
Administrative services fees 21,096
----------------------------------------------------------
Custodian fees 8,411
----------------------------------------------------------
Distribution fees 276,757
----------------------------------------------------------
Transfer agent fees 13,177
----------------------------------------------------------
Trustees' fees 4,983
----------------------------------------------------------
Other 57,530
==========================================================
Total expenses 492,657
==========================================================
Less: Fees waived (160,951)
----------------------------------------------------------
Expenses paid indirectly (610)
==========================================================
Net expenses 331,096
==========================================================
Net investment income 257,380
==========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (13,708)
==========================================================
Change in net unrealized appreciation of
investment securities 737,479
==========================================================
Net gain from investment securities 723,771
==========================================================
Net increase in net assets resulting from
operations $ 981,151
__________________________________________________________
==========================================================
|
See Notes to Financial Statements.
FS-197
STATEMENT OF CHANGES IN NET ASSETS
For the period August 30, 2002 (date operations commenced) through January 31,
2003
(Unaudited)
JANUARY 31,
2003
----------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 257,380
----------------------------------------------------------------------------
Net realized gain (loss) from investment securities (13,708)
----------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 737,479
============================================================================
Net increase in net assets resulting from operations 981,151
============================================================================
Distributions to shareholders from net investment
income-Class C (769,668)
----------------------------------------------------------------------------
Share transactions-net-Class C 121,770,346
============================================================================
Net increase in net assets 121,981,829
============================================================================
NET ASSETS:
Beginning of period --
============================================================================
End of period $121,981,829
____________________________________________________________________________
============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $121,770,346
----------------------------------------------------------------------------
Undistributed net investment income (512,288)
----------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (13,708)
----------------------------------------------------------------------------
Unrealized appreciation of investment securities 737,479
============================================================================
$121,981,829
____________________________________________________________________________
============================================================================
|
NOTES TO FINANCIAL STATEMENTS
January 31, 2003
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Short Term Bond Fund (the "Fund") is a series portfolio of AIM Investment Securities Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine separate portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers one class of shares. The Fund commenced operations on August 30, 2002. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. 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 achieve a high level of current income, consistent with the preservation of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 at the last bid price in the case of equity securities and in
FS-198
the case of debt obligations, 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 and commercial paper are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 is recorded on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
C. DISTRIBUTIONS -- Distributions from income are declared daily and paid monthly. Distributions from net realized capital gain, 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
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 investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.40% of the Fund's average daily net assets. AIM has contractually agreed to waive and/or reimburse expenses (excluding interest, taxes, dividends on short sales, extraordinary items and increases in expenses due to expense offset arrangements, if any) of Class C shares to the extent necessary to limit the total annual fund operating expenses of Class C to 1.20%. To the extent that the annualized expense ratio does not exceed the contractual expense limitation AIM will retain the ability to be reimbursed for such fee waivers or reimbursements prior to the end of the each committed period. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the period August 30, 2002 (date operations commenced) through January 31, 2003, AIM waived fees of $50,248.
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 period August 30, 2002 (date operations commenced) through January 31, 2003, AIM was paid $21,096 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. During the period August 30, 2002 (date operations commenced) through January 31, 2003, AFS retained $7,416 for such services.
The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") pursuant to which AIM Distributors serves as the distributor for the Fund. The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 1.00% of the Fund's average daily net assets of Class C shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average daily net assets of the Class C shares 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 Plans would constitute an asset-based sales charge. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by the Fund. AIM Distributors has contractually agreed to waive 0.40% of the Rule 12b-1 plan fees on Class C shares. Pursuant to the Plans, for the period August 30, 2002 (date operations commenced) through January 31, 2003 the Class C shares paid AIM Distributors $166,054 after plan fees waived by AIM Distributors of $110,703.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the period August 30, 2002 (date operations commenced) through January 31, 2003, the Fund paid legal fees of $795 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the period August 30, 2002 (date operations commenced) through January 31, 2003, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $322 and reductions in custodian fees of $288 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $610.
FS-199
PART C
OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Amended and Restated Agreement and Declaration of
Trust of Registrant, dated May 15, 2002.(14)
- (b) Amendment No. 1, dated June 11, 2002, to the Amended
and Restated Agreement and Declaration of Trust, dated
May 15, 2002.(15)
|
- (c) Amendment No. 2, dated August 8, 2002, to the Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002.(16)
- (d) Amendment No. 3, dated May 14, 2003, to the Amended and Restated Agreement and Declaration of Trust, May 15, 2002.(18)
- (e) Amendment No. 4, dated June 23, 2003, to the Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002.(18)
b - Amended and Restated Bylaws of Registrant, adopted
effective May 15, 2002.(14)
c - Articles II, VI, VII, VIII and IX of the Amended and
Restated Agreement and Declaration of Trust, as amended,
and Articles IV, V and VI of the Amended and Restated
Bylaws define rights of holders of shares.
d (1) - (a) Master Investment Advisory Agreement, dated June 1,
2000, between Registrant and A I M Advisors, Inc.(10)
- (b) Amendment No. 1, dated December 28, 2001, to the
Master Investment Advisory Agreement, dated June 1,
2000.(13)
|
- (c) Amendment No. 2, dated August 29, 2002, to the Master Investment Advisory Agreement, dated June 1, 2002.(18)
- (d) Amendment No. 3, dated June 23, 2003, to the Master Investment Advisory Agreement, dated June 1, 2000.(18)
e (1) - (a) Third Amended and Restated Master Distribution
Agreement, dated November 28, 2000, between the
Registrant (on behalf of its Class A Shares, Class C
Shares, AIM Cash Reserve Shares and Institutional Class
Shares) and A I M Distributors, Inc.(11)
- (b) Amendment No. 1, dated December 28, 2001, to the
Third Amended and Restated Master Distribution Agreement,
dated November 28, 2000 (on behalf of its Class A Shares,
Class C Shares, AIM Cash Reserve Shares and Institutional
Class Shares).(13)
|
- (c) Amendment No. 2, dated June 3, 2002, to the Third Amended and Restated Master Distribution Agreement, dated November 28, 2000 (on behalf of its Class A Shares, Class C Shares, Class R Shares, AIM Cash Reserve Shares and Institutional Class Shares).(15)
- (d) Amendment No. 3, dated August 29, 2002, to the Third Amended and Restated Master Distribution Agreement, dated November 28, 2000 (on behalf of its Class A Shares, Class C Shares, Class R Shares, AIM Cash Reserve Shares and Institutional Class Shares).(17)
- (e) Amendment No. 4, dated October 31, 2002, to the Third Amended and Restated Master Distribution Agreement, dated November 28, 2000 (on behalf of its Class A Shares, Class A3 Shares, Class C Shares, Class R Shares, AIM Cash Reserve Shares and Institutional Class Shares).(17)
- (f) Amendment No. 5, dated June 23, 2003, to the Third Amended and Restated Master Distribution Agreement, dated November 28, 2000 (on behalf of its Class A Shares, Class A3 Shares, Class C Shares, Class R Shares, AIM Cash Reserve Shares and Institutional Class Shares).(18)
- (g) Form of Amendment No. 6, dated ________, 2003, to the Third Amended and Restated Master Distribution Agreement, dated November 28, 2000 (on behalf of its Class A Shares, Class A3 Shares, Class C Shares, Class R Shares, AIM Cash Reserve Shares, and Institutional Class Shares).(18)
(2) - (a) First Amended and Restated Master Distribution
Agreement, dated December 31, 2000, between the
Registrant (on behalf of its Class B Shares) and A I M
Distributors, Inc.(11)
- (b) Amendment No. 1, dated December 28, 2001, to the
First Amended and Restated Master Distribution Agreement,
dated December 31, 2000 (on behalf of its Class B
Shares).(13)
|
- (c) Amendment No. 2, dated June 23, 2003, to First Amended and Restated Master Distribution Agreement, dated December 31, 2000, between the Registrant (on behalf of its Class B Shares) and A I M Distributions, Inc.(18)
(3) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers.(11)
(4) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks.(6)
f (1) - AIM Funds Retirement Plan for Eligible
Directors/Trustees, as restated October 1, 2001.(12)
(2) - Form of AIM Funds Director Deferred Compensation
Agreement, as amended March 7, 2000, September 28, 2001
and September 26, 2002.(18)
g (1) - (a) Second Amended and Restated Custody Agreement, dated
June 16, 1987, between Short-Term Investments Co. (on
behalf of its Limited Maturity Treasury Portfolio) and
The Bank of New York.(3)
|
- (b) Amendment, dated May 17, 1993, to Second Amended and Restated Custody Agreement, dated June 16, 1987, between Short-Term Investments Co. (on behalf of its Limited Maturity Treasury Portfolio) and The Bank of New York.(3)
- (c) Assignment and Acceptance of Assignment of Custody Agreement, dated October 15, 1993, between Registrant (on behalf of its Limited Maturity Treasury Portfolio) and Short-Term Investments Co. (on behalf of its Limited Maturity Treasury Portfolio).(3)
- (d) Letter Agreement, dated June 1, 2000, between Registrant (on behalf of its AIM Municipal Bond Fund) and The Bank of New York.(10)
- (e) Letter Agreement, dated August 30, 2000, between Registrant (on behalf of its AIM Money Market Fund) and The Bank of New York.(10)
(2) - (a) Master Custodian Contract, dated May 1, 2000, between
Registrant (on behalf of AIM High Yield Fund, AIM Income
Fund, AIM Intermediate Government Fund, AIM Short Term
Bond Fund and AIM Total Return Bond Fund) and State
Street Bank and Trust Company.(10)
|
- (b) Amendment, dated May 1, 2000, to Custodian Contract, dated May 1, 2000, between Registrant (on behalf of its AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund) and State Street Bank and Trust Company.(10)
- (c) Amendment, dated June 29, 2001, to the Custodian Contract, dated May 1, 2000, between Registrant (on behalf of its AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund) and State Street Bank and Trust Company.(12)
- (d) Amendment dated April 2, 2002, to the Custodian Contract, dated May 1, 2000, between Registrant (on behalf of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund) and State Street Bank and Trust Company.(15)
(3) - (a) Subcustodian Agreement with Texas Commerce Bank,
dated September 9, 1994, among Texas Commerce Bank
National Association, State Street Bank and Trust
Company, A I M Fund Services, Inc. and Registrant.(3)
|
- (b) Amendment No. 1, dated October 2, 1998, to the Subcustodian Agreement with Texas Commerce Bank, dated September 9, 1994, among Chase Bank of Texas, N.A. (formerly Texas Commerce Bank), State Street Bank and Trust Company, A I M Fund Services, Inc. and Registrant.(8)
- (c) Amendment No. 2, dated March 15, 2002, to the Subcustodian Agreement with Texas Commerce Bank National Association, dated September 9, 1994, among J P Morgan Chase Bank (formerly known as The Chase Manhattan Bank, successor-in-interest by merger to Chase Bank of Texas, N.A.), State Street Bank and Trust Company, A I M Fund Services, Inc. and Registrant.(17)
(4) - Foreign Assets Delegation Agreement, dated May 31, 2002, between A I M Advisors, Inc. and Registrant.(12)
h (1) - (a) Amended and Restated Transfer Agency and Service
Agreement, dated December 29, 1997, between Registrant
and A I M Fund Services, Inc.(5)
|
- (b) Amendment No. 1, dated January 1, 1999, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(7)
- (c) Amendment No. 2, dated July 1, 1999, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(7)
- (d) Amendment No. 3, dated July 1, 2000, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(10)
- (e) Amendment No. 4, dated January 1, 2002, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(14)
- (f) Amendment No. 5, dated March 4, 2002, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(14)
- (g) Amendment No. 6, dated October 31, 2002, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(17)
- (h) Amendment No. 7, dated May 14, 2003, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(18)
- (i) Amendment No. 8, dated June 11, 2003, to the Amended and Restated Transfer Agency and Service Agreement, dated December 29, 1997, between Registrant and A I M Fund Services, Inc.(18)
(2) - (a) Master Administrative Services Agreement, dated June 1, 2000, between Registrant and A I M Advisors, Inc.(10)
- (b) Amendment No. 1, dated May 9, 2001, to the Master Administrative Services Agreement, dated June 1, 2000.(11)
- (c) Amendment No. 2, dated December 28, 2001, to the Master Administrative Services Agreement, dated June 1, 2000.(13)
- (d) Amendment No. 3, dated August 29, 2002, to the Master Administrative Services Agreement, dated June 1, 2000.(18)
- (e) Amendment No. 4, dated June 23, 2003, to the Master Administrative Services Agreement, dated June 1, 2000.(18)
(3) - Memorandum of Agreement, dated June 1, 2000, regarding
securities lending, between Registrant, with respect to
all Funds, and A I M Advisors, Inc.(10)
(4) - Memorandum of Agreement, dated July 1, 2003, regarding
fee waivers, between Registrant and A I M Advisors, Inc.
(on behalf of AIM Short Term Bond Fund and AIM Total
Return Bond Fund).(18)
(5) - Memorandum of Agreement, dated July 1, 2003, between
Registrant and A I M Distributors, Inc. (on behalf of AIM
Short Term Bond Fund and AIM Total Return Bond Fund).(18)
(6) - Memorandum of Agreement, dated July 1, 2003, between
Registrant (on behalf of each Fund's Institutional Class)
and A I M Fund Services, Inc.(18)
|
(7) - Interfund Loan Agreement, dated September 18, 2001, between Registrant and A I M Advisors, Inc.(11)
i (1) - Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP.(18)
(2) - Opinion, dated June 23, 2003, of Ballard Spahr Andrews &
Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM Global Income Fund into AIM Income
Fund.(18)
(3) - Opinion, dated June 23, 2003, of Ballard Spahr Andrews &
Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM Strategic Income Fund into AIM
Income Fund.(18)
(4) - Opinion, dated June 23, 2003, of Ballard Spahr Andrews &
Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM High Yield Fund II into AIM High
Yield Fund.(18)
j (1) - Consent of Ernst & Young, LLP.(18)
(2) - Consent of Dechert, Price & Rhoads.(17)
k - Omitted Financial Statements - None.
l (1) - (a) Initial Capitalization Agreement for Registrant's AIM
High Yield Fund II.(6)
- (b) Initial Capitalization Agreement for Registrant's AIM
Total Return Bond Fund.(13)
- (c) Initial Capitalization Agreement for Registrant's AIM
Short Term Bond Fund.(17)
m (1) - (a) Sixth Amended and Restated Master Distribution Plan,
dated October 31, 2002, for Registrant's Class A Shares,
Class A3 Shares, Class C Shares, Class R Shares and AIM
Cash Reserve Shares.(17)
|
- (b) Amendment No. 1, dated June 23, 2003, to Sixth Amended and Restated Master Distribution Plan, dated October 31, 2002, for Registrant's Class A Shares, Class A3 Shares, Class C Shares, Class R Shares and AIM Cash Reserves Shares.(18)
(2) - Form of Seventh Amended and Restated Master Distribution
Plan, dated __________, 2003, for Registrant's Class A
Shares, Class A3 Shares, Class C Shares, Class R Shares,
AIM Cash Reserve Shares and Investor Class Shares.(18)
(3) - (a) First Amended and Restated Master Distribution Plan,
dated December 31, 2000, for Registrant's Class B
Shares.(11)
- (b) Amendment No. 1, dated December 28, 2001, to the
First Amended and Restated Master Distribution Plan,
dated December 31, 2000, for Registrant's Class B
Shares.(13)
- (c) Amendment No. 2, dated June 23, 2003, to the
First Amended and Restated Master Distribution Plan,
dated December 31, 2000, for Registrant's Class A Shares,
Class A3 Shares, Class C Shares, Class R Shares and AIM
Cash Reserve Shares.(18)
(4) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution
Plans.(11)
(5) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution
Plans.(11)
|
(6) - Form of Agency Pricing Agreement (for the Retail Classes) to be used in connection with Registrant's Master Distribution Plans.(16)
(7) - Forms of Service Agreements for Bank Trust Departments
and for Brokers for Bank Trust Departments to be used in
connection with Registrant's Master Distribution
Plans.(11)
(8) - Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's
Master Distribution Plans.(11)
(9) - Form of Shareholder Service Agreement for Shares of the
AIM Mutual Funds to be used in connection with
Registrant's Master Distribution Plans.(10)
n - Third Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R), as amended and restated March 4,
2002, and further amended and restated October 31, 2002
and as further amended and restated July 21, 2003.(18)
o - Reserved.
p (1) - The A I M Management Group Inc. Code of Ethics adopted
May 1, 1981, as amended September 27, 2002, relating to
A I M Management Group Inc. and A I M Advisors, Inc. and
its wholly owned and indirect subsidiaries.(18)
(2) - The A I M Management Group Inc. Code of Ethics adopted
May 1, 1981, as last amended June 10, 2003, relating to
A I M Management Group Inc. and A I M Advisors, Inc. and
its wholly owned and indirect subsidiaries.(18)
(3) - AIM Funds Code of Ethics of Registrant, effective as
September 23, 2000.(10)
----------
|
(1) Incorporated herein by reference to Post-Effective Amendment No. 5, filed electronically on November 30, 1994.
(2) Incorporated herein by reference to Post-Effective Amendment No. 6,
filed electronically on November 17, 1995.
(3) Incorporated herein by reference to Post-Effective Amendment No. 7,
filed electronically on November 21, 1996.
(4) Incorporated herein by reference to Post-Effective Amendment No. 8,
filed electronically on November 21, 1997.
(5) Incorporated herein by reference to Post-Effective Amendment No. 9,
filed electronically on July 10, 1998.
(6) Incorporated herein by reference to Post-Effective Amendment No. 10,
filed electronically on November 18, 1998.
(7) Incorporated herein by reference to Post-Effective Amendment No. 11,
filed electronically on October 14, 1999.
(8) Incorporated herein by reference to Post-Effective Amendment No. 12,
filed electronically on March 10, 2000.
(9) Incorporated herein by reference to Post-Effective Amendment No. 13,
filed electronically on May 25, 2000.
(10) Incorporated herein by reference to Post-Effective Amendment No. 14,
filed electronically on November 15, 2000.
(11) Incorporated herein by reference to Post-Effective Amendment No. 15,
filed electronically on October 12, 2001.
(12) Incorporated herein by reference to Post-Effective Amendment No. 16,
filed electronically on November 8, 2001.
(13) Incorporated herein by reference to Post-Effective Amendment No. 17,
filed electronically on December 21, 2001.
(14) Incorporated herein by reference to Post-Effective Amendment No. 18,
filed electronically on May 22, 2002.
(15) Incorporated herein by reference to Post-Effective Amendment No. 19, filed electronically on June 13, 2002.
(16) Incorporated herein by reference to Post-Effective Amendment No. 20, filed electronically on August 28, 2002.
(17) Incorporated herein by reference to Post-Effective Amendment No. 21, filed electronically on November 20, 2002.
(18) Filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control With the
Fund
None.
Item 25. Indemnification
The Registrant's Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002, as amended, provides, among other things (i) that trustees and officers of the Registrant, when acting as such, shall not be personally liable for any act, omission or obligation of the Registrant or any trustee or officer (except for liabilities to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of duty); (ii) for the indemnification by the Registrant of the trustees, officers, employees and agents of the Registrant to the fullest extent permitted by the Delaware Statutory Trust Act and Bylaws and other applicable law; (iii) that shareholders of the Registrant shall not be personally liable for the debts, liabilities, obligations or expenses of the Registrant or any portfolio or class; and (iv) for the indemnification by the Registrant, out of the assets belonging to the applicable portfolio, of shareholders and former shareholders of the Registrant in case they are held personally liable solely by reason of being or having been shareholders of the Registrant or any portfolio or class and not because of their acts or omissions or for some other reason.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment companies managed by AIM, their respective officers, trustees, directors and employees (the "Insured Parties") are insured under a joint Mutual Fund and Investment Advisory Professional and Directors and Officers Liability Policy, issued by ICI Mutual Insurance Company, with a $35,000,000 limit of liability.
Section 16 of the Master Investment Advisory Agreement between the Registrant and AIM provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of AIM or any of its officers, directors or employees, that AIM shall not be subject to liability to the Registrant or to any series of the Registrant, or to any shareholder of any series of the Registrant for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. Any liability of AIM to any series of the Registrant shall not automatically impart liability on the part of AIM to any other series of the Registrant. No series of the Registrant shall be liable for the obligations of any other series of the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in connection with the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the shares being registered hereby, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of the Advisor's directors and officers is with the Advisor and its affiliated companies. Reference is also made to the caption "Fund Management - The Advisor" in the Prospectus which comprises Part A of the Registration Statement and to the caption "Investment Advisory and Other Services" of the Statement of Additional Information which comprises Part B of the Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter, also acts as a principal underwriter to the following investment companies:
AIM Advisor Funds AIM Tax-Exempt Funds AIM Equity Funds AIM Variable Insurance Funds AIM Floating Rate Fund INVESCO Bond Funds, Inc. AIM Funds Group INVESCO Combination Stock & Bond Funds, Inc. AIM Growth Series INVESCO Counselor Series Funds, Inc. AIM International Funds, Inc. INVESCO International Funds, Inc. AIM Investment Funds INVESCO Manager Series Funds, Inc. AIM Series Trust INVESCO Money Market Funds, Inc. AIM Special Opportunities Funds INVESCO Sector Funds, Inc. AIM Summit Fund INVESCO Stock Funds, Inc. |
(b) The following table sets forth information with respect to each director, officer or partner of A I M Distributors, Inc.
Name and Principal Positions and Offices with Positions and Offices
Business Address* Underwriter with Registrant
------------------ -------------------------- ---------------------
Michael J. Cemo Chairman, Director, President & None
Chief Executive Officer
Mark H. Williamson Director Trustee & Executive Vice President
Gary T. Crum Director Senior Vice President
Gene L. Needles Executive Vice President None
James L. Salners Executive Vice President None
John S. Cooper Senior Vice President None
Marilyn M. Miller Senior Vice President None
Leslie A. Schmidt Senior Vice President None
James E. Stueve Senior Vice President None
Stephen H. Bitteker First Vice President None
Glenda A. Dayton First Vice President None
Gary K. Wendler First Vice President None
Kevin M. Carome Vice President Senior Vice President
|
Name and Principal Positions and Offices with Positions and Offices
Business Address* Underwriter with Registrant
------------------ -------------------------- ---------------------
Mary A. Corcoran Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel & Assistant Secretary
Assistant Secretary
Kim T. McAuliffe Vice President None
Linda L. Warriner Vice President None
Rebecca Starling-Klatt Assistant Vice President & Chief None
Compliance Officer
Kathleen J. Pflueger Secretary Assistant Secretary
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) Not applicable.
Item 28. Location of Accounts and Records
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, maintains physical possession of each such account, book or other document of the Registrant at its principal executive offices, except for those relating to certain transactions in portfolio securities that are maintained by the Registrant's Custodians, The Bank of New York, 90 Washington Street, 11th Floor, New York, New York 10286, with respect to AIM Limited Maturity Treasury Fund, AIM Money Market Fund and AIM Municipal Bond Fund, and State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, with respect to AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Short Term Bond Fund and AIM Total Return Bond Fund and the Registrant's Transfer Agent and Dividend Paying Agent, A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739.
Item 29. Management Services
None.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 7th day of July, 2003.
REGISTRANT: AIM INVESTMENT SECURITIES FUNDS
By: /s/ ROBERT H. GRAHAM
---------------------------
Robert H. Graham, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ ROBERT H. GRAHAM
---------------------------- Chairman, Trustee & President July 7, 2003
(Robert H. Graham) (Principal Executive Officer)
/s/ FRANK S. BAYLEY
---------------------------- Trustee July 7, 2003
(Frank S. Bayley)
/s/ BRUCE L. CROCKETT
---------------------------- Trustee July 7, 2003
(Bruce L. Crockett)
/s/ ALBERT R. DOWDEN
---------------------------- Trustee July 7, 2003
(Albert R. Dowden)
/s/ EDWARD K. DUNN, JR.
---------------------------- Trustee July 7, 2003
(Edward K. Dunn, Jr.)
/s/ JACK M. FIELDS
---------------------------- Trustee July 7, 2003
(Jack M. Fields)
/s/ CARL FRISCHLING
---------------------------- Trustee July 7, 2003
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS
---------------------------- Trustee July 7, 2003
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK
---------------------------- Trustee July 7, 2003
(Lewis F. Pennock)
/s/ RUTH H. QUIGLEY
---------------------------- Trustee July 7, 2003
(Ruth H. Quigley)
/s/ LOUIS S. SKLAR
---------------------------- Trustee July 7, 2003
(Louis S. Sklar)
/s/ MARK H. WILLIAMSON
---------------------------- Trustee & July 7, 2003
(Mark H. Williamson) Executive Vice President
/s/ DANA R. SUTTON Vice President & Treasurer July 7, 2003
---------------------------- (Principal Financial and
(Dana R. Sutton) Accounting Officer)
|
INDEX
Exhibit Number Description
-------------- -----------
a(1)(d) Amendment No. 3, dated May 14, 2003, to the Amended and
Restated Agreement and Declaration of Trust, dated
May 15, 2002
a(1)(e) Amendment No. 4, dated June 23,2003, to the Amended and
Restated Agreements and Declaration of Trust, dated
May 15, 2002
d(1)(c) Amendment No. 2, dated August 29, 2002, to the Master
Investment Advisory Agreement, dated June 1, 2002
d(1)(d) Amendment No. 3, dated June 23, 2003, to the Master
Investment Advisory Agreement, dated June 1, 2000
e(1)(f) Amendment No. 5, dated June 23, 2003, to the Third
Amended and Restated Master Distribution Agreement,
dated November 28, 2000, (on behalf of its Class A
Shares, Class A3 Shares, Class C Shares, Class R
Shares, AIM Cash Reserve Shares, and Institutional
Class Shares)
e(1)(g) Form of Amendment No. 6, dated _________, 2003, to the
Third Amended and Restated Master Distribution
Agreement, dated November 28, 2000 (on behalf of its
Class A Shares, Class A3 Shares, Class C Shares, Class
R Shares, AIM Cash Reserve Shares and Institutional
Class Shares)
e(2)(c) Amendment No. 2 dated June 23, 2003, the First Amended
and Restated Master Distribution Agreement, dated
December 31, 2000, between the Registrant (on behalf of
its Class B Shares) and A I M Distributors, Inc.
f(2) Form of AIM Funds Director Deferred Compensation
Agreement, as amended March 7, 2000, September 28, 2001
and September 26, 2002
h(1)(h) Amendment No. 7, dated May 14, 2003, to the Amended and
Restated Transfer Agency and Service Agreement, dated
December 29, 1997, between Registrant and A I M Fund
Services, Inc.
h(1)(i) Amendment No. 8, dated June 11, 2003, to the Amended
and Restated Transfer Agency and Service Agreement,
dated December 29, 1997, between Registrant and A I M
Fund Services, Inc.
h(2)(d) Amendment No. 3, dated August 29, 2002, to the Master
Administrative Services Agreement, dated June 1, 2000.
h(2)(e) Amendment No. 4, dated June 23, 2003, to the Master
Administrative Services Agreement, dated June 1, 2000
h(4) Memorandum of Agreement, dated July 1, 2003, regarding
fee waivers, between Registrant and A I M Advisors,
Inc. (on behalf of AIM Short Term Bond Fund and AIM
Total Return Bond Fund)
h(5) Memorandum of Agreement, dated July 1, 2003, between
Registrant and A I M Distributors, Inc. (on behalf of
AIM Short Term Bond Fund and AIM Total Return Bond
Fund)
|
h(6) Memorandum of Agreement, dated July 1, 2003, between
Registrant (on behalf of each Fund's Institutional
Class) and A I M Fund Services, Inc.
i(1) Opinion and Consent of Ballard Spahr Andrews &
Ingersoll, LLP
i(2) Opinion, dated June 23, 2003, of Ballard Spahr Andrews
& Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM Global Income Fund into AIM
Income Fund
i(3) Opinion, dated June 23, 2003, of Ballard Spahr Andrews
& Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM Strategic Income Fund into AIM
Income Fund
i(4) Opinion, dated June 23, 2003, of Ballard Spahr Andrews
& Ingersoll, LLP, supporting the tax matters and
consequences to shareholders in connection with the
reorganization of AIM High Yield Fund II into AIM High
Yield Fund
j (1) Consent of Ernst & Young LLP
m(1)(b) Amendment No. 1, dated June 23, 2003, to Sixth Amended
and Restated Master Distribution Plan, dated October
31, 2002, for Registrant's Class A shares, Class A3
Shares, Class C Shares, Class R Shares and AIM Cash
Reserves Shares
m (2) Form of Seventh Amended and Restated Master
Distribution Plan, dated _________, 2003, for
Registrant's Class A Shares, Class A3 Shares, Class C
Shares, Class R Shares, AIM Cash Reserve Shares and
Investor Class Shares
m(3)(c) Amendment No. 2, dated June 23, 2003, to the First
Amended and Restated Master Distribution Plan, dated
December 31, 2000, for Registrant's Class A Shares,
Class A3 Shares, Class C Shares, Class R Shares and
AIM Cash Reserve Shares
n Third Amended and Restated Multiple Class Plan of The
AIM Family of Funds(R), as amended and restated March
4, 2002, and further amended and restated October 31,
2002 and as further amended and restated July 21, 2003
p (1) The A I M Management Group Inc. Code of Ethics adopted
May 1, 1981, as last amended September 27, 2002,
relating to A I M Management Group Inc. and A I M
Advisors, Inc. and its wholly owned and indirect
subsidiaries
p(2) The A I M Management Group Inc. Code of Ethics adopted
May 1, 1981, as last amended June 10, 2003, relating to
A I M Management Group Inc. and A I M Advisors, Inc.
and its wholly owned and indirect subsidiaries
|
Exhibit a(1)(d)
AMENDMENT NO. 3
TO AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST OF
AIM INVESTMENT SECURITIES FUNDS
This Amendment No. 3 to the Amended and Restated Agreement and Declaration of Trust of AIM Investment Securities Funds (this "Amendment") amends, effective as of May 14, 2003, the Amended and Restated Agreement and Declaration of Trust of AIM Investment Securities Funds (the "Trust") dated as of May 15, 2002, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby amended and restated to read in its entirety as set forth on Exhibit 1 to this Amendment.
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of May 14, 2003.
By: /s/ Robert H. Graham
------------------------------
Name: Robert H. Graham
Title: President
|
EXHIBIT 1 TO AMENDMENT NO. 3
TO
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF AIM INVESTMENT SECURITIES FUNDS
"SCHEDULE A
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
AIM High Yield Fund Class A Shares
Class B Shares
Class C Shares
Investor Class Shares
AIM High Yield Fund II Class A Shares
Class B Shares
Class C Shares
AIM Income Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Investor Class Shares
AIM Intermediate Government Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Investor Class Shares
AIM Limited Maturity Treasury Fund Class A Shares
Class A3 Shares
Institutional Class Shares
AIM Money Market Fund Class B Shares
Class C Shares
Class R Shares
AIM Cash Reserve Shares
Investor Class Shares
AIM Municipal Bond Fund Class A Shares
Class B Shares
Class C Shares
Investor Class Shares
AIM Short Term Bond Fund Class C Shares
AIM Total Return Bond Fund Class A Shares
Class B Shares
Class C Shares"
|
EXHIBIT a(1)(e)
AMENDMENT NO. 4
TO AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST OF
AIM INVESTMENT SECURITIES FUNDS
This Amendment No. 4 to the Amended and Restated Agreement and Declaration of Trust of AIM Investment Securities Funds (this "Amendment") amends, effective as of June 23, 2003, the Amended and Restated Agreement and Declaration of Trust of AIM Investment Securities Funds (the "Trust") dated as of May 15, 2002, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby amended and restated to read in its entirety as set forth on Exhibit 1 to this Amendment.
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of June 23, 2003.
By: /s/ Robert H. Graham --------------------------------------- Name: Robert H. Graham Title: President |
EXHIBIT 1 TO AMENDMENT NO. 4
TO
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF AIM INVESTMENT SECURITIES FUNDS
"SCHEDULE A
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
AIM High Yield Fund Class A Shares
Class B Shares
Class C Shares
Investor Class Shares
AIM Income Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Investor Class Shares
AIM Intermediate Government Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Investor Class Shares
AIM Limited Maturity Treasury Fund Class A Shares
Class A3 Shares
Institutional Class Shares
AIM Money Market Fund Class B Shares
Class C Shares
Class R Shares
AIM Cash Reserve Shares
Investor Class Shares
AIM Municipal Bond Fund Class A Shares
Class B Shares
Class C Shares
Investor Class Shares
AIM Short Term Bond Fund Class C Shares
AIM Total Return Bond Fund Class A Shares
Class B Shares
Class C Shares"
|
Exhibit d(1)(c)
AMENDMENT NO. 2
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of August 29, 2002, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 1, 2000, between AIM Investment Securities Funds, a Delaware business trust, and A I M Advisors, Inc., a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to add a new portfolio, the AIM Short Term Bond Fund;
NOW, THEREFORE, the parties agree as follows;
1. Schedule A and Schedule B to the Agreement are hereby deleted in their entirety and replaced with the following:
"SCHEDULE A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT AIM High Yield Fund June 1, 2000 AIM High Yield Fund II June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001" |
SCHEDULE B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM HIGH YIELD FUND
NET ASSETS ANNUAL RATE First $200 million.................................................. 0.625% Next $300 million................................................... 0.55% Next $500 million................................................... 0.50% Amount over $1 billion.............................................. 0.45% |
AIM HIGH YIELD FUND II
NET ASSETS ANNUAL RATE First $500 million.................................................. 0.625% Next $500 million................................................... 0.55% Amount over $1 billion.............................................. 0.50% |
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MUNICIPAL BOND FUND
NET ASSETS ANNUAL RATE First $200 million.................................................. 0.50% Next $300 million................................................... 0.40% Next $500 million................................................... 0.35% Amount over $1 billion.............................................. 0.30% |
AIM LIMITED MATURITY TREASURY FUND
NET ASSETS ANNUAL RATE First $500 million.................................................. 0.20% Amount over $500 million............................................ 0.175% |
AIM MONEY MARKET FUND
NET ASSETS ANNUAL RATE First $1 billion.................................................... 0.55% Over $1 billion..................................................... 0.50% |
AIM SHORT TERM BOND FUND
NET ASSETS ANNUAL RATE All Assets ......................................................... 0.40% |
AIM TOTAL RETURN BOND FUND
NET ASSETS ANNUAL RATE First $500 million.................................................. 0.50% Next $500 million................................................... 0.45% Over $1 billion..................................................... 0.40%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM INVESTMENT SECURITIES FUNDS
Attest: /s/ Lisa M. By: /s/ Robert H. Graham
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Lisa M. By: /s/ Robert H. Graham
----------------------------- -----------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
EXHIBIT d(1)(d)
AMENDMENT NO. 3
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of June 23, 2003, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 1, 2000, between AIM Investment Securities Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to delete a portfolio, the AIM High Yield Fund II;
NOW, THEREFORE, the parties agree as follows;
1. Schedule A and Schedule B to the Agreement are hereby deleted in their entirety and replaced with the following:
"SCHEDULE A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT ------------ ------------------------------------ AIM High Yield Fund June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001 |
SCHEDULE B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM HIGH YIELD FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $200 million................................. 0.625% Next $300 million.................................. 0.55% Next $500 million.................................. 0.50% Amount over $1 billion............................. 0.45% |
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MUNICIPAL BOND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $200 million................................. 0.50% Next $300 million.................................. 0.40% Next $500 million.................................. 0.35% Amount over $1 billion............................. 0.30% |
AIM LIMITED MATURITY TREASURY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million................................. 0.20% Amount over $500 million........................... 0.175% |
AIM MONEY MARKET FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion................................... 0.55% Over $1 billion.................................... 0.50% |
AIM SHORT TERM BOND FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets ........................................ 0.40% |
AIM TOTAL RETURN BOND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million................................. 0.50% Next $500 million.................................. 0.45% Over $1 billion.................................... 0.40%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM INVESTMENT SECURITIES FUNDS
Attest: /s/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
-------------------------- --------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ JOHN H. LIVELY By: /s/ MARK H. WILLIAMSON
-------------------------- --------------------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
Exhibit e(1)(f)
AMENDMENT NO. 5
TO THE THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM INVESTMENT SECURITIES FUNDS
(APPLICABLE TO CLASS A SHARES, CLASS A3, CLASS C SHARES, CLASS R SHARES,
AIM CASH RESERVE SHARES AND INSTITUTIONAL CLASS SHARES)
AND
A I M DISTRIBUTORS, INC.
The Third Amended and Restated Master Distribution Agreement (the "Agreement"), dated November 28, 2000, by and between AIM Investment Securities Funds, a Delaware statutory trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
1. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM INVESTMENT SECURITIES FUNDS
CLASS A SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
CLASS A3 SHARES
AIM Limited Maturity Treasury Fund
CLASS C SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Short Term Bond Fund
AIM Total Return Bond Fund
CLASS R SHARES
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM CASH RESERVE SHARES
AIM Money Market Fund
INSTITUTIONAL CLASS SHARES
AIM Limited Maturity Treasury Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 23, 2003
AIM INVESTMENT SECURITIES FUNDS
Attest: /s/ John H. Lively By: /s/ Robert H. Graham
------------------------------ ------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ John H. Lively By: /s/ Michael J. Cemo
------------------------------ ------------------------------
Assistant Secretary Michael J. Cemo
President
|
Exhibit e(1)(g)
AMENDMENT NO. 6
TO THE THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM INVESTMENT SECURITIES FUNDS
(APPLICABLE TO CLASS A SHARES, CLASS A3, CLASS C SHARES, CLASS R SHARES,
AIM CASH RESERVE SHARES AND INSTITUTIONAL CLASS SHARES)
AND
A I M DISTRIBUTORS, INC.
The Third Amended and Restated Master Distribution Agreement (the "Agreement"), dated November 28, 2000, by and between AIM Investment Securities Funds, a Delaware statutory trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
1. The following paragraph is added at the end of Section FOURTH: (A):
"The public offering price of the Investor Class shares of the Company shall be the net asset value per share. Net asset value per share shall be determined in accordance with the provisions of the then current Investor Class shares' prospectus and statement of additional information."
2. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM INVESTMENT SECURITIES FUNDS
CLASS A SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
CLASS A3 SHARES
AIM Limited Maturity Treasury Fund
CLASS C SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Short Term Bond Fund
AIM Total Return Bond Fund
CLASS R SHARES
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM CASH RESERVE SHARES
AIM Money Market Fund
INSTITUTIONAL CLASS SHARES
AIM Limited Maturity Treasury Fund
INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: , 2003
-------------------
AIM INVESTMENT SECURITIES FUNDS
Attest: By:
------------------------------ ------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: By:
------------------------------ ------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT e(2)(c)
AMENDMENT NO. 2
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The First Amended and Restated Master Distribution Agreement (the Agreement), dated December 31, 2000, by and between AIM Investment Securities Funds, a Delaware statutory trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A to the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM INVESTMENT SECURITIES FUNDS
CLASS B SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 23, 2003
AIM INVESTMENT SECURITIES FUNDS
Attest: /s/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
-------------------------- --------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ JOHN H. LIVELY By: /s/ MICHAEL J. CEMO
-------------------------- --------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT f(2)
AIM FUNDS
DIRECTOR DEFERRED COMPENSATION AGREEMENT
As Amended March 7, 2000, September 28, 2001 and September 26, 2002
AIM FUNDS
DIRECTOR DEFERRED COMPENSATION AGREEMENT
AGREEMENT, made on this __ day of _______, 20__, by and between the registered open-end investment companies listed on Appendix A hereto (the "Funds"), and _______________________________________________________ (the "Director") residing at _______________________________________.
WHEREAS, the Funds and the Director have entered into agreements pursuant to which the Director will serve as a director/trustee of the Funds; and
WHEREAS, if the Funds and the Director have previously entered into an additional agreement whereby the Funds will provide to the Director a vehicle under which the Director can defer receipt of directors' fees payable by the Funds, they now desire to amend and restate such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the Funds and the Director hereby agree as follows:
1. DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Agreement shall have the following meanings:
(a) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Director.
(b) "Boards of Directors" shall mean the respective Boards of Directors of the Funds.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of directors' fees paid by each of the Funds to the Director during a Deferral Year prior to reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or amounts of the Director's Compensation deferred under the provisions of Section 3 of this Agreement.
(f) "Deferral Accounts" shall mean the accounts maintained to reflect the Director's Compensation Deferrals made pursuant to Section 3 hereof (or pursuant to any prior agreement) and any other credits or debits thereto.
(g) "Deferral Year" shall mean each calendar year during which the Director makes, or is entitled to make, Compensation Deferrals under Section 3 hereof.
(h) "Retirement" shall have the same meaning as set forth under the Retirement Plan.
(i) "Retirement Plan" shall mean the "AIM Funds Retirement Plan for Eligible Directors/Trustees."
(j) "Valuation Date" shall mean the last business day of each calendar year and any other day upon which the Funds makes valuations of the Deferral Accounts.
1.2 Plurals and Gender. Where appearing in this Agreement the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning.
1.3 Directors and Trustees. Where appearing in this Agreement, "Director" shall also refer to "Trustee" and "Board of Directors" shall also refer to "Board of Trustees."
1.4 Headings. The headings and sub-headings in this Agreement are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof.
1.5 Separate Agreement for Each Fund. This Agreement is drafted, and shall be construed, as a separate agreement between the Director and each of the Funds.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
2.1 Commencement of Compensation Deferrals. The Director may elect, on a form provided by, and submitted to, the Presidents of the respective Funds, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the later of (i) the date this Agreement is executed or (ii) the date such form is submitted to the Presidents of the Funds.
2.2 Termination of Deferrals. The Director shall not be eligible to make Compensation Deferrals after the earliest of the following dates:
(a) The date on which he ceases to serve as a Director of all of the Funds; or
(b) The effective date of the termination of this Agreement.
3. COMPENSATION DEFERRALS
3.1 Compensation Deferral Elections.
(a) On or prior to the first day of any Deferral Year, the Director may elect, on the form described in Section 2.1 hereof, to defer the receipt of all or a portion of his Compensation for such Deferral Year. Such writing shall set forth the amount of such Compensation Deferral (in whole percentage amounts). Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below.
(b) Compensation Deferrals shall be withheld from each payment of Compensation by the Funds to the Director based upon the percentage amount elected by the Director under Section 3.1(a) hereof.
(c) The Director may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the Presidents of the Funds a revised Compensation Deferral election form. Such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the Presidents of the Funds.
3.2 Valuation of Deferral Account.
(a) Each Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Director's Compensation Deferrals under this Agreement made with respect to Compensation earned from each such Fund. Compensation Deferrals shall be allocated to the Deferral Accounts on the first business day following the date such Compensation Deferrals are withheld from the Director's Compensation. As of the date of this Agreement, the Deferral Accounts also shall be credited with the amounts credited to the Director under each other outstanding elective deferred compensation agreement entered into by and between the Funds and the Director which is superseded by this Agreement pursuant to Section 6.11 hereof. The Deferral Accounts shall be debited to reflect any distributions from such Accounts. Such debits shall be allocated to the Deferral Accounts as of the date such distributions are made.
(b) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Accounts are invested in the manner set forth under Section 3.3, below) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Director's Deferral Accounts.
3.3 Investment of Deferral Account Balances.
(a) (1) The Director may select, from various options made available by the Funds, the investment media in which all or part of his Deferral Accounts shall be deemed to be invested.
(2) The Director shall make an investment designation on a form provided by the Presidents of the Funds which shall remain effective until another valid direction has been made by the Director as herein provided. The Director may amend his investment designation by giving written direction to the Presidents of the Funds in such manner and at such time as the Funds may permit, but no less frequently than quarterly on thirty (30) days' notice prior to the end of a calendar quarter. A timely change to a Director's investment designation shall become effective as soon as practicable following receipt by the Presidents of the Funds.
(3) The investment media deemed to be made available to the Director, and any limitation on the maximum or minimum percentages of the Director's Deferral Accounts that may be invested any particular medium, shall be the same as from time-to-time communicated to the Director by the Presidents of the Funds.
(b) Except as provided below, the Director's Deferral Accounts shall be deemed to be invested in accordance with his investment designations, provided such designations conform to the provisions of this Section. If -
(1) the Director does not furnish the Presidents of the Funds with complete, written investment instructions, or
(2) the written investment instructions from the Director are unclear, then the Director's election to make Compensation Deferrals hereunder shall be held in abeyance and have no force or effect until such time as the Director shall provide the Presidents of the Funds with complete investment instructions. Notwithstanding the above, the Boards of Directors, in their sole discretion, may disregard the Director's election and determine that all Compensation Deferrals shall be deemed to be invested in a fund determined by the Boards of Directors. In the event that any fund under which any portion of the Director's Deferral Accounts is deemed to be invested ceases to exist, such portion of the Deferral Accounts thereafter shall be held in the successor to such fund, subject to subsequent deemed investment elections.
The Funds shall provide an annual statement to the Director showing such information as is appropriate, including the aggregate amount in the Deferral Accounts, as of a reasonably current date.
4. DISTRIBUTIONS FROM DEFERRAL ACCOUNTS
4.1 Payment Date and Methods.
(a) Designation of Date. Each deferral direction given pursuant to
Section 3.1 shall include designation of the Payment Date for the value of the
amount deferred. Such Payment Date shall be the first day of any calendar
quarter, subject to the limitation set forth in paragraph 4.1(c).
(b) Extension Date. At least one year before the Payment Date initially designated pursuant to paragraph 4.1(a) above, the Participant may irrevocably elect to extend such Payment Date to the first day of any calendar quarter, subject to the limitation set forth in paragraph 4.1(c).
(c) Limitation. The Director shall select a Payment Date (or extended Payment Date) that is no sooner than the earlier of (i) the January 1 that follows the second anniversary of the Participant's deferral election made pursuant to paragraph 4.1(a) or (b) or (ii) the January 1 of the year after the Participant's Retirement.
(d) Methods of Payment. Distributions from the Director's Deferral Accounts shall be paid in cash in a single sum unless the Participant elects, at the time a Payment Date is selected pursuant to paragraph 4.1(a) or 4.1(b), to receive the amount payable in generally equal quarterly installments over a period not to exceed ten (10) years. In addition, at least one year before the Payment Date, a Director may change the method of payment previously selected.
(e) Irrevocability. Except as provided in paragraphs 4.1(b) and 4.1(d), a designation of a Payment Date and an election of installment payments shall be irrevocable; provided, however, that payment shall be made or begin on a different date as follows:
(1) Upon the Director's death, payment shall be made in accordance with Section 4.2,
(2) Upon the Director's ceasing to serve as a director of all of the Funds for reasons other than death or Retirement, payment shall be made or begin within three months after the end of the calendar year in which such termination occurs in accordance with the method elected by the Director pursuant to paragraph 4.1(d) provided the designation of such method had been made at least one year before such termination occurred, except that the Boards of Directors, in their sole discretion, may accelerate the distribution of such Deferral Accounts,
(3) Upon termination of this Agreement, payment shall be made in accordance with Section 5.2, and
(4) In the event of the liquidation, dissolution or winding up of a Fund or the distribution of all or substantially all of a Fund's assets and property relating to one or more series of its shares to the shareholders of such series (for this purpose a sale, conveyance or transfer of a Fund's assets to a trust, partnership, association or corporation in exchange for cash, shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of the Fund shall not be deemed a termination of the Fund or such a distribution), all unpaid balances of the Deferral Accounts related to such Fund as of the effective date thereof shall be paid in a lump sum on such effective date.
4.2 Death Prior to Complete Distribution of Deferral Accounts. Upon the death of the Director prior to the commencement of the distribution of the amounts credited to his Deferral Accounts, the balance of such Accounts shall be distributed to his Beneficiary in accordance with the method of payment selected pursuant to paragraph 4.1(d), commencing as soon as practicable after the Director's death. In the event of the death of the Director after the commencement of such distribution, but prior to the complete distribution of his Deferral Accounts, the balance of the amounts credited to his Deferral Accounts shall be distributed to his Beneficiary over the remaining period during which such amounts were distributable to the Director under Section 4.1 hereof. Notwithstanding the above, the Boards of Directors, in their sole discretion, may accelerate the distribution of the Deferral Accounts.
4.3 Designation of Beneficiary. For purposes of Section 4.2 hereof, the
Director's Beneficiary shall be the person or persons so designated by the
Director in a written instrument submitted to the Presidents of the Funds. In
the event the Director fails to properly designate a Beneficiary, his
Beneficiary shall be the person or persons in the first of the following classes
of successive preference Beneficiaries surviving at the death of the Director:
the Director's (1) surviving spouse or (2) estate.
4.4 Payments Due Missing Persons. The Funds shall make a reasonable effort to locate all persons entitled to benefits under this Agreement. However, notwithstanding any provisions of this Agreement to the contrary, if, after a period of five (5) years from the date such
benefit shall be due, any such persons entitled to benefits have not been located, their rights under this Agreement shall stand suspended. Before this provision becomes operative, the Funds shall send a certified letter to all such persons to their last known address advising them that their benefits under this Agreement shall be suspended. Any such suspended amounts shall be held by the Funds for a period of three (3) additional years (or a total of eight (8) years from the time the benefits first become payable) and thereafter, if unclaimed, such amounts shall be forfeited.
5. AMENDMENTS AND TERMINATION
5.1 Amendments.
(a) The Funds and the Director may, by a written instrument signed by, or on behalf of, such parties, amend this Agreement at any time and in any manner.
(b) The Funds reserve the right to amend, in whole or in part, and in any manner, any or all of the provisions of this Agreement by action of their Boards of Directors for the purposes of complying with any provision of the Code or any other technical or legal requirements, provided that:
(1) No such amendment shall make it possible for any part of the Director's Deferral Accounts to be used for, or diverted to, purposes other than for the exclusive benefit of the Director or his Beneficiaries, except to the extent otherwise provided in this Agreement; and
(2) No such amendment may reduce the amount of the Director's Deferral Accounts as of the effective date of such amendment.
5.2 Termination. The Director and the Funds may, by written instrument signed by, or on behalf of, such parties, terminate this Agreement at any time. In the event of the termination of this Agreement, the Boards of Directors, in their sole discretion, may choose to pay out the Director's Deferral Accounts prior to the designated Payment Dates. Otherwise, following a termination of this Agreement, such Accounts shall continue to be maintained in accordance with the provisions of this Agreement until the time they are paid out.
6. MISCELLANEOUS.
6.1 Rights of Creditors.
(a) This Agreement is unfunded. Neither the Director nor any other persons shall have any interest in any specific asset or assets of the Funds by reason of any Deferral Accounts hereunder, nor any rights to receive distribution of his Deferral Accounts except and as to the extent expressly provided hereunder. The Funds shall not be required to purchase, hold or dispose of any investments pursuant to this Agreement; however, if in order to cover their obligations hereunder the Funds elect to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Funds, subject to the claims of their general creditors and no person other than the Funds shall by virtue of the provisions of this Agreement have any interest in such assets other than an interest as a general creditor.
(b) The rights of the Director and the Beneficiaries to the amounts held in the Deferral Accounts are unsecured and shall be subject to the creditors of the Funds. With respect to the payment of amounts held under the Deferral Accounts, the Director and his Beneficiaries have the status of unsecured creditors of the Funds. This Agreement is executed on behalf of the Funds by an officer, or other representative, of the Funds as such and not individually. Any obligation of the Funds hereunder shall be an unsecured obligation of the Funds and not of any other person.
6.2 Agents. The Funds may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform their duties under this Agreement. The Funds shall bear the cost of such services and all other expenses they incur in connection with the administration of this Agreement.
6.3 Liability and Indemnification. Except for their own gross negligence, willful misconduct or willful breach of the terms of this Agreement, the Funds shall be indemnified and held harmless by the Director against liability or losses occurring by reason of any act or omission of the Funds or any other person.
6.4 Incapacity. If the Funds shall receive evidence satisfactory to them that the Director or any Beneficiary entitled to receive any benefit under the Agreement is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Director or Beneficiary and that no guardian, committee or other representative of the estate of the Director or Beneficiary shall have been duly appointed, the Funds may make payment of such benefit otherwise payable to the Director or Beneficiary to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.
6.5 Cooperation of Parties. All parties to this Agreement and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Agreement or any of its provisions.
6.6 Governing Law. This Agreement is made and entered into in the State of Texas and all matters concerning its validity, construction and administration shall be governed by the laws of the State of Texas.
6.7 Nonguarantee of Directorship. Nothing contained in this Agreement shall be construed as a contract or guarantee of the right of the Director to be, or remain as, a director of any of the Funds or to receive any, or any particular rate of, Compensation from any of the Funds.
6.8 Counsel. The Funds may consult with legal counsel with respect to the meaning or construction of this Agreement, their obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel.
6.9 Spendthrift Provision. The Director's and Beneficiaries' interests in the Deferral Accounts may not be anticipated, sold, encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor become subject to execution, garnishment or attachment and any attempt to do so by any person shall render the Deferral Accounts immediately forfeitable.
6.10 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service providing for a signed return receipt, addressed to the Director at the home address set forth in the Funds' records and to the Funds at the address set forth on the first page of this Agreement, provided that all notices to the Funds shall be directed to the attention of the Presidents of the Funds or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
6.11 Entire Agreement. This Agreement contains the entire understanding between the Funds and the Director with respect to the payment of non-qualified elective deferred compensation by the Fund to the Director. Effective as of the date hereof, this Agreement replaces, and supersedes, all other non-qualified elective deferred compensation agreements by and between the Director and the Funds.
6.12 Interpretation of Agreement. Interpretations of, and determinations (including factual determinations) related to, this Agreement made by the Funds in good faith, including any determinations of the amounts of the Deferral Accounts, shall be conclusive and binding upon all parties; and the Funds shall not incur any liability to the Director for any such interpretation or determination so made or for any other action taken by it in connection with this Agreement in good faith.
6.13 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Funds and their successors and assigns and to the Director and his heirs, executors, administrators and personal representatives.
6.14 Severability. In the event any one or more provisions of this Agreement are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability.
6.15 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
The Funds
By:
------------------------ ------------------------
Witness Name:
Title:
------------------------ ----------------------------
Witness Director
|
DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
|
"Agreement") dated as of ________________________ by and between the undersigned and the AIM Funds, I hereby make the following elections:
Deferral of Compensation
Starting with Compensation to be paid to me with respect to services provided by me to the AIM Funds after the date this election Form is received by the AIM Funds, I hereby elect that ______ percent (_____%) of my Compensation (as defined under the Agreement) be reduced and that the Fund establish a bookkeeping account credited with amounts equal to the amount so reduced (the "Deferral Account"). The Deferral Account shall be further credited with income equivalents as provided under the Agreement. I understand that this election will remain in effect with respect to Compensation I earn in subsequent years unless I modify or revoke it. I further understand that such modification or revocation will be effective only prospectively and will apply commencing with the Compensation I earn in the calendar year that begins after the change is received by you.
Payment Date
I hereby designate ________ 1 (select the first month in any calendar quarter) in the year ______ (select a year that is at least two years after the year this election is made) as the Payment Date for the amounts credited to my Deferral Account pursuant to the election made above. If my Retirement (as defined in the Agreement) occurs sooner, I [ ] do [ ] do not (check the appropriate box) want payment of such amounts to commence effective the January 1 following my Retirement. I understand that amounts credited to my Deferral Account may be paid to me prior to the Payment Date as provided in the Agreement.
Payment Method
I hereby elect to receive the amounts credited to my Deferral Account in (check one)
[ ] a single payment in cash
[ ] annual installments for a period of ____ (select no more than 10 years)
beginning within 30 days following the payment date selected above.
I understand that the amounts credited to my Deferral Account shall remain the general assets of the AIM Funds and that, with respect to the payment of such amounts, I am merely a general creditor of the AIM Funds. I may not sell, encumber, pledge, assign or otherwise alienate the amounts credited to my Deferral Account.
I hereby agree that the terms of the Agreement are incorporated herein and are made a part hereof. Dated as of the day and year first above written.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
AIM Funds
------------------------------
By:
--------------------------
Date:
------------------------
|
DEFERRED COMPENSATION AGREEMENT
INVESTMENT DIRECTION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") by and between the undersigned and the AIM Funds, I hereby elect that my Deferral Account under the Agreement be considered to be invested as follows (in multiples of 10%):
NAME OF FUND %
------------ ---
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
|
I acknowledge that I may amend this Investment Agreement in the manner, and at such time, as permitted under the Agreement. Furthermore, I acknowledge that, pursuant to Section 3.3(b) of the Agreement, the Fund has reserved the right to disregard the elections made above to consider my Deferral Account to be deemed to be invested in a fund of its choosing.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
|
DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") by and between the undersigned and the AIM Funds, I hereby make the following beneficiary designations:
I. Primary Beneficiary
I hereby appoint the following as my Primary Beneficiary(ies) to receive at my death the amounts credited to my Deferral Account under the Agreement. In the event I am survived by more than one Primary Beneficiary, such Primary Beneficiaries shall share equally in such amounts unless I indicate otherwise on an attachment to this form:
----------------------------------------------------------------- Name Relationship ----------------------------------------------------------------- Address ----------------------------------------------------------------- City State Zip |
II. Secondary Beneficiary |
In the event I am not survived by any Primary Beneficiary, I hereby appoint the following as Secondary Beneficiary(ies) to receive death benefits under the Agreement. In the event I am survived by more than one Secondary Beneficiary, such Secondary Beneficiaries shall share equally unless I indicate otherwise on an attachment to this form:
----------------------------------------------------------------- Name Relationship ----------------------------------------------------------------- Address ----------------------------------------------------------------- City State Zip |
I understand that I may revoke or amend the above designations at any time. I further understand that if I am not survived by a Primary or Secondary Beneficiary, my Beneficiary shall be as set forth under the Agreement.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
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PAYMENT DATE ELECTION FORM
FOR PREVIOUSLY DEFERRED COMPENSATION
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
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"Agreement") by and between the undersigned and the AIM Funds, pursuant to which I have previously elected to defer Compensation,
Payment Date Change:
I hereby designate ________ 1 (select the first month in any
calendar quarter) in the year ______ (select a year that is at least two years
after the year this election is made) as the Payment Date for the amounts
previously credited to my Deferral Account and amounts subsequently credited
thereto. If my Retirement (as defined in the Agreement) occurs sooner, I [ ] do
[ ] do not (check the appropriate box) want payment of such amounts to commence
effective the January 1 following my Retirement. I understand that amounts
credited to my Deferral Account may be paid to me prior to the Payment Date as
provided in the Agreement.
Payment Method Change
I hereby elect to receive the amounts credited to my Deferral Account in (check one)
[ ] a single payment in cash
[ ] annual installments for a period of ____ (select no more than 10 years)
I understand that this change in payment method will not be given effect unless my Payment Date is at least one year from the date hereof and I do not cease to be a Director within such year.
I understand that I may amend this designation in the manner, and at such time, as permitted under the Agreement.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
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DEFERRED COMPENSATION AGREEMENT
SUMMARY
Your Deferred Compensation Agreement (the "Agreement") allows you to defer some or all of your annual trustee's fees otherwise payable by the Funds. Deferred fees are deemed invested in certain mutual funds selected by you. The deferral is pre-tax, and the deferred amount and the credited gains, losses and income are not subject to tax until paid out to you.
Your deferrals (and investment experience) are posted to a bookkeeping account maintained by the Funds in your name. In order for you to enjoy the tax deferral, the payments due under the Agreement will be paid from the Funds' general assets, and you are considered a general unsecured creditor of the Funds; you may not transfer your right to receive payments under the Agreement to any other person, nor may you pledge that right to secure any debt or other obligation; finally, an election to defer must be made in writing before the first day of the calendar year for which the fees are earned (the "Election Date") and elections can be changed only prospectively, effective for the next calendar year.
An important change has been made to your Agreement to give you greater flexibility to select the time and method of payment of amounts that you defer: for amounts previously deferred and for future elections you now designate a specific Payment Date and payment method which generally may be changed with at least one year's advance notice.
PAYMENT DATE ELECTION
Deferred fees (and the income, gains and losses credited during the deferral period) generally will be paid out as elected by you in installments or a single sum in cash within 30 days of the Payment Date elected. (For payments in connection with your termination of service as a trustee, see below.)
Deferrals must be for a minimum two year period (unless your retirement date under the Retirement Plan is earlier). Thus, the Payment Date may be the first day of any calendar quarter that follows the second anniversary of the applicable Election Date or your retirement date. Thus, fees previously deferred and fees payable for the calendar year beginning January 1, 1997 may be deferred to the first day of any calendar quarter in any year from 1999.
EXTENDING A PAYMENT DATE
At least one year prior to any Payment Date, you may extend that Date, provided that the additional period of deferral is at least two years. You may make this change in Payment Date only once.
PAYMENT METHOD
The value of your deferrals (based on your election as to how your deferral account is to be considered invested) will be paid in cash, in one lump sum or in annual
installments (over a period not to exceed 10 years) as you select at the time you select your Payment Date. You may change this election, but the change will not be given effect unless it is made at least one year before your Payment Date or your ceasing to be a trustee (whichever occurs first). This one year requirement is waived in the case of your death (see Termination of Service, below).
TERMINATION OF SERVICE
Upon your death, your account under the Agreement will be paid out as elected by you in installments or in a single sum in cash as soon as practicable. Payment will be made to your designated Beneficiary or Beneficiaries or to your estate if there is no surviving Beneficiary.
Upon termination of your service as trustee for any reason other than death or your retirement (as defined in the Retirement Plan), your account will be paid to you as a single sum (or in installments if you had timely elected that method) in cash within three months following the end of the fiscal year in which you terminate, regardless of the Payment Dates you elected.
As revised September 26, 2002
APPENDIX A
For the purposes of the Deferred Compensation Agreement "AIM Funds" shall mean each of the regulated investment companies constituting classes or series of shares of the following entities:
AIM ADVISOR FUNDS
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL FUNDS, INC.
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SERIES TRUST
AIM SPECIAL OPPORTUNITIES FUNDS
AIM SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS CO.
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS CO.
Exhibit h(1)(h)
AMENDMENT NO. 7 TO
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
This Amendment, dated May 14, 2003, is made to the Amended and Restated Transfer Agency and Service Agreement originally dated December 29, 1997, as amended (the "Agreement") between AIM Investment Securities Funds (the "Fund") and A I M Fund Services, Inc. ("AFS") pursuant to Article 11 of the Agreement.
WHEREAS, the Fund and AFS desire to amend the Fee Schedule of the Agreement to reflect minor revisions, and in accordance with Article 11 of the Agreement, have agreed to execute this amendment to evidence such amendment.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. The Fee Schedule is hereby deleted in its entirety and replaced with the following:
"1. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts that are open during any monthly period as set forth below, and an annualized fee of $.70 per shareholder account that is closed during any monthly period. Both fees shall be billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the annualized fee for all such accounts.
PER ACCOUNT FEE
FUND TYPE ANNUALIZED
Class A, A3, B, C, R
and AIM Summit Fund
Non-Daily Accrual Funds $15.20
Class A, A3, B, C and R
Monthly Dividend and
Daily Accrual Funds $16.20
AIM Floating Rate Fund $17.60
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2. Investment Credits
The total fees due to the Transfer Agent from all funds affiliated with the Fund shall be reduced by an amount equal to the investment income earned by the Transfer Agent, if any, on the balances of the disbursement accounts for those funds.
3. Out-of-Pocket Expenses
The Fund shall reimburse the Transfer Agent monthly for applicable out-of-pocket expenses relating to the procurement of the following goods and services, as they relate to the performance of the Transfer Agent's obligations set forth in Article I of the Agreement, including, but not limited to:
- Remote access, license and usage charges paid by the Transfer Agent for use of shareholder record keeping and related systems provided by DST Systems, Inc., and used by the Transfer Agent to service Shareholder accounts, including but not limited to:
- TA2000--Registered Trademark--, the recordkeeping system on which records related to most Shareholder accounts will be maintained;
- TRAC2000--Registered Trademark--, the recordkeeping system on which records related to Shareholder accounts held by and through employer-sponsored retirement plans are maintained;
- Automated Work Distributor--Trademark--, a document imaging, storage and distribution system;
- Financial Access Network, a computer system and related software applications which will provide the necessary interfaces to allow customers to access account information residing on the TA2000 and TRAC2000 systems through aiminvestments.com; and
- PowerSelect--Trademark--, a reporting database that AFS can query to produce reports derived from Shareholder account data residing on the TA2000 and TRAC2000 systems.
- Client specific system enhancements.
- Computer terminals, communication lines, printers and other equipment and any expenses incurred in connection with such terminals and lines.
- Magnetic media tapes and related freight.
- Microfiche, microfilm and electronic image scanning equipment, production and storage costs.
- Telephone and telecommunication costs, including all lease, maintenance and line costs.
- Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by third party record keeping vendors.
- Duplicating services.
- Courier services.
- Ad hoc reports.
- Programming costs, system access and usage fees, electronic presentment service fees, data and document delivery fees, and other related fees and costs paid by the Transfer Agent to Fiserv Solutions, Inc., which relate to the printing and delivery of the following documents to Shareholders and to each Shareholder's broker of record:
- Investment confirmations;
- Periodic account statements;
- Tax forms; and
- Redemption checks.
- Printing costs, including, without limitation, the costs associated with printing certificates, envelopes, checks, stationery, confirmations and statements.
- Postage (bulk, pre-sort, ZIP+4, bar coding, first class).
- Shipping, certified and overnight mail and insurance.
- Certificate insurance.
- Banking charges, including without limitation, incoming and outgoing wire charges.
- Check writing fees.
- Federal Reserve charges for check clearance.
- Rendering fees.
- Third party audit reviews.
- Due diligence mailings.
- Proxy solicitations, mailings and tabulations.
- Shareholder information and education mailings, including, but not limited to, periodic shareholder newsletters and tax guides.
- Such other miscellaneous expenses reasonably incurred by the Transfer Agent in performing its duties and responsibilities.
The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing. In addition, the Fund will promptly reimburse the Transfer Agent for any other unscheduled expenses incurred by the Transfer Agent whenever the Fund and the Transfer Agent mutually agree that such expenses are not otherwise properly borne by the Transfer Agent as part of its duties and obligations under the Agreement.
4. The fees and credits described in Paragraphs 1 and 2 above shall first be allocated to the Institutional Class, if any, of such Portfolio based upon the number of shareholder accounts holding shares of such Class relative to the total number of shareholder accounts holding all Classes of shares in the Portfolio. The Portfolio's remaining fiscal year-to-date fees and credits described in Paragraphs 1 and 2 above for shareholder accounts holding Class A, A3, B, C and/or R Class shares of each Portfolio shall be allocated among such Classes on the basis of fiscal year-to-date average net assets.
5. Fees payable by the Transfer Agent for Ancillary Services provided
to the Institutional Class, if any, of each Portfolio pursuant to
Section 2.04 of the Agreement shall be allocated to such
Institutional Class. The Portfolio's fiscal year-to-date fees
payable by the Transfer Agent for Ancillary Services provided to the
Class A, A3, B, C and/or R Class shares of each Portfolio pursuant
to Section 2.04 of the Agreement shall be allocated among such
Classes of each Portfolio based upon fiscal year-to-date average net
assets of each such Class.
6. Out-of-pocket expenses incurred by the Transfer Agent in acting as transfer agent for the AIM Funds Accounts shall first be allocated among such funds and portfolios based upon the number of shareholder accounts maintained by the Transfer Agent for such funds and portfolios. Such out-of-pocket expenses that have been allocated to a Portfolio shall be further allocated to the Institutional Class, if any, of such Portfolio based upon the number of shareholder accounts holding shares of such Class relative to the total number of shareholder accounts holding all Classes of shares in the Portfolio. The remaining amount of the Portfolio's fiscal year-to-date out-of-pocket expenses shall be further allocated among the Class A, A3, B, C and R Class shares of each Portfolio based upon fiscal year-to-date average net assets of each such Class.
7. Specifically identified fees, credits and out-of-pocket expenses incurred by the Transfer Agent on behalf of one or more, but less than all, Portfolios or Classes shall be allocated solely to the affected Portfolios or Classes using the allocation methodologies described in paragraphs 4, 5 and 6 above.
8. As used in this Fee Schedule, "AIM Funds" shall mean all investment companies and their series portfolios, if any, comprising, from time to time, the AIM Family of Funds--Registered Trademark--, and "AIM Funds Accounts" shall mean shareholder accounts for the AIM Funds."
2. Except as modified by this Amendment, the Agreement is hereby ratified and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have entered into this Amendment as of the date first above written.
AIM INVESTMENT SECURITIES FUNDS
By: /s/ ROBERT H. GRAHAM
--------------------------------------
President
ATTEST:
/s/ JIM COPPEDGE
-----------------------------------
Assistant Secretary
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A I M FUND SERVICES, INC.
By: /s/ TONY GREEN
--------------------------------------
President
ATTEST:
/s/ JIM COPPEDGE
-----------------------------------
Assistant Secretary
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Exhibit h(1)(i)
AMENDMENT NO. 8 TO
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
This Amendment, dated June 11, 2003, is made to the Amended and Restated Transfer Agency and Service Agreement originally dated December 29, 1997, as amended (the "Agreement") between AIM Investment Securities Funds (the "Fund") and A I M Fund Services, Inc. ("AFS") pursuant to Article 11 of the Agreement.
1. Paragraph 1 of the Fee Schedule is hereby deleted in its entirety and replaced with the following:
"1. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts that are open during any monthly period as set forth below, and an annualized fee of $.70 per shareholder account that is closed during any monthly period. Both fees shall be billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the annualized fee for all such accounts.
PER ACCOUNT FEE
FUND TYPE ANNUALIZED
Class A, A3, B, C, R and Investor
And AIM Summit Fund
Non-Daily Accrual Funds $15.20
Class A, A3, B, C, R and Investor
Monthly Dividend and
Daily Accrual Funds $16.20
AIM Floating Rate Fund $17.60 "
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2. Paragraphs 4, 5 and 6 of the Fee Schedule are hereby deleted in their entirety and replaced with the following:
"4. The fees and credits described in Paragraphs 1 and 2 above shall first be allocated to the Institutional Class, if any, of such Portfolio based upon the number of shareholder accounts holding shares of such Class relative to the total number of shareholder accounts holding all Classes of shares in the Portfolio. The Portfolio's remaining fiscal year-to-date fees and credits described in Paragraphs 1 and 2 above for shareholder accounts holding Class A, A3, B, C, R and Investor Class shares, as applicable, of each Portfolio shall be allocated among such Classes on the basis of fiscal year-to-date average net assets.
5. Fees payable by the Transfer Agent for Ancillary Services provided
to the Institutional Class, if any, of each Portfolio pursuant to
Section 2.04 of the Agreement shall be allocated to such
Institutional Class. The Portfolio's fiscal year-to-date fees
payable by the Transfer Agent for Ancillary Services provided to the
Class A, A3, B, C, R and Investor Class shares, as applicable, of
each Portfolio pursuant to Section 2.04 of the Agreement shall
be allocated among such Classes of each Portfolio based upon fiscal year-to-date average net assets of each such Class.
6. Out-of-pocket expenses incurred by the Transfer Agent in acting as transfer agent for the AIM Funds Accounts shall first be allocated among such funds and portfolios based upon the number of shareholder accounts maintained by the Transfer Agent for such funds and portfolios. Such out-of-pocket expenses that have been allocated to a Portfolio shall be further allocated to the Institutional Class, if any, of such Portfolio based upon the number of shareholder accounts holding shares of such Class relative to the total number of shareholder accounts holding all Classes of shares in the Portfolio. The remaining amount of the Portfolio's fiscal year-to-date out-of-pocket expenses shall be further allocated among the Class A, A3, B, C, R and Investor Class shares, as applicable, of each Portfolio based upon fiscal year-to-date average net assets of each such Class. "
3. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have entered into this Amendment as of the date first above written.
AIM INVESTMENT SECURITIES FUNDS
By: /s/ ROBERT H. GRAHAM
--------------------------------------
President
ATTEST:
/s/ JIM COPPEDGE
-----------------------------------
Assistant Secretary
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A I M FUND SERVICES, INC.
By: /s/ TONY GREEN
--------------------------------------
President
ATTEST:
/s/ JIM COPPEDGE
-----------------------------------
Assistant Secretary
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EXHIBIT h(2)(d)
AMENDMENT NO. 3
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated June 1, 2000, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Investment Securities Funds, a Delaware business trust, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM High Yield Fund June 1, 2000 AIM High Yield Fund II June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: August 29, 2002
A I M ADVISORS, INC.
Attest: /s/ LISA MOSS By: /s/ ROBERT H. GRAHAM
------------------------ -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
AIM Investment Securities Funds
Attest: /s/ LISA MOSS By: /s/ ROBERT H. GRAHAM
------------------------ -----------------------------
Assistant Secretary Robert H. Graham
President
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(SEAL)
EXHIBIT h(2)(e)
AMENDMENT NO. 4
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated June 1, 2000, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Investment Securities Funds, a Delaware statutory trust, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM High Yield Fund June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 23, 2003
AIM ADVISORS, INC.
Attest: /s/ JOHN H. LIVELY By: /s/ MARK H. WILLIAMSON
-------------------------- --------------------------------
Assistant Secretary Mark H. Williamson
President
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(SEAL)
AIM INVESTMENT SECURITIES FUNDS
Attest: /s/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
-------------------------- --------------------------------
Assistant Secretary Robert H. Graham
President
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(SEAL)
EXHIBIT h(4)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of this 1st day of July, 2003 between AIM Investment Securities Funds (the "Trust"), on behalf of the funds listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM").
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trust and AIM agree as follows:
The Trust and AIM agree until the date set forth on the attached Exhibit "A" that AIM will waive its fees or reimburse expenses to the extent that expenses (excluding interest, taxes, dividends on short sales, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees, and increases in expenses due to expense offset arrangements, if any) of a class of a Fund exceed the rate, on an annualized basis, set forth on Exhibit "A" of the average daily net assets allocable to such class. The Board of Trustees and AIM may terminate or modify this Memorandum of Agreement prior to the date set forth on Exhibit "A" only by mutual written consent. AIM will not have any right to reimbursement of any amount so waived or reimbursed.
The Trust and AIM agree to review the then-current waivers or expense limitations for each class of each Fund listed on Exhibit "A" on a date prior to the date listed on that Exhibit to determine whether such waivers or limitations should be amended, continued or terminated. Unless the Trust, by vote of its Board of Trustees, or AIM terminates the waivers or limitations, or the Trust and AIM are unable to reach an agreement on the amount of the waivers or limitations to which the Trust and AIM desire to be bound, the waivers or limitations will continue for additional one-year terms at the rate to which the Trust and AIM mutually agree. Exhibit "A" will be amended to reflect that rate and the new date through which the Trust and AIM agree to be bound.
It is expressly agreed that the obligations of the Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust personally, but shall only bind the assets and property of the Funds, as provided in the Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trust, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trust acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in the Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the Trust and AIM have entered into this Memorandum of Agreement as of the date first above written.
AIM Investment Securities Funds, on behalf of each Fund listed in Exhibit "A" to this Memorandum of Agreement
By: /s/ Robert H. Graham
----------------------------------
Title: President
--------------------------------
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A I M Advisors, Inc.
By: /s/ Mike Cemo
----------------------------------
Title: President
--------------------------------
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EXHIBIT "A"
AIM INVESTMENT SECURITIES FUNDS
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM Short Term Bond Fund
Class C 1.20% July 31, 2004
AIM Total Return Bond Fund
Class A 1.25% July 31, 2004
Class B (See Note 1 below) July 31, 2004
Class C (See Note 1 below) July 31, 2004
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NOTE 1: The amount equal to Total Annual Fund Operating Expenses (as
calculated in the Fund's financial statements less expense exclusions
listed in the Memorandum of Agreement) less the basis point amounts
necessary to limit Class A shares' Total Annual Fund Operating Expenses
to 1.25%.
EXHIBIT h(5)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of this 1st day of July, 2003 between AIM Investment Securities Funds (the "Trust"), on behalf of the fund listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and A I M Distributors, Inc. ("Distributors").
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trust and Distributors agree as follows:
The Trust and Distributors agree until the date set forth on the attached Exhibit "A" that Distributors will waive Rule 12b-1 distribution plan payments at the rates, on an annualized basis, set forth on Exhibit "A" of the average daily net assets allocable to such class. The Board of Trustees and AIM may terminate or modify this Memorandum of Agreement prior to the date set forth on Exhibit "A" only by mutual written consent. Distributors will not have any right to reimbursement of any amount so waived.
The Trust and Distributors agree to review the then-current waivers for each class of each Fund listed on Exhibit "A" on a date prior to the date listed on that Exhibit to determine whether such waivers should be amended, continued or terminated. Unless the Trust, by vote of its Board of Trustees, or Distributors terminates the waivers, or the Trust and Distributors are unable to reach an agreement on the amount of the waivers to which the Trust and Distributors desire to be bound, the waivers will continue for additional one-year terms at the rate to which the Trust and Distributors mutually agree. Exhibit "A" will be amended to reflect that rate and the new date through which the Trust and Distributors agree to be bound.
It is expressly agreed that the obligations of the Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust personally, but shall only bind the assets and property of the Funds, as provided in the Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trust, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trust acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in the Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the Trust and Distributors have entered into this Memorandum of Agreement as of the date first above written.
AIM Investment Securities Funds, on behalf of each Fund listed in Exhibit "A" to this Memorandum of Agreement
By: /s/ Robert H. Graham
--------------------------------
Title: President
------------------------------
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A I M Distributors, Inc.
By: /s/ Mark H. Williamson
--------------------------------
Title: President
------------------------------
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EXHIBIT "A"
AIM INVESTMENT SECURITIES FUNDS
FUND WAIVER COMMITTED UNTIL
---- ------ ---------------
AIM Short Term Bond Fund
Class C 0.40% of Rule 12b-1 distribution plan July 31, 2004
payments on average net assets
AIM Total Return Bond Fund
Class A Up to 0.10% of Rule 12b-1 July 31, 2004
distribution plan payments on average
net assets
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EXHIBIT h(6)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of this 1st day of July, 2003, between AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Funds, Inc. and AIM Investment Securities Funds, (each a "Company" and collectively, the "Companies"), on behalf of the funds listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and A I M Fund Services, Inc. ("AFS").
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Companies and AFS as follows:
Each Company and AFS agree until the date set forth on the attached Exhibit "A" that AFS will limit transfer agency expenses of each Fund's Institutional Class at the rates, on an annualized basis, set forth on Exhibit "A". The Boards of Directors/Trustees and AFS may terminate or modify this Memorandum of Agreement prior to the date set forth on Exhibit "A" only by mutual written consent. AFS will not have any right to reimbursement of any amount so waived.
The Companies and AFS agree to review the then-current waivers or expense limitations for each class of each Fund listed on Exhibit "A" on a date prior to the date listed on that Exhibit to determine whether such waivers or limitations should be amended, continued or terminated. Unless the Companies, by vote of its Boards of Directors/Trustees, or AFS terminate the waivers or limitations, or the Companies and AFS are unable to reach an agreement on the amount of the waivers or limitations to which the Companies and AFS desire to be bound, the waivers or limitations will continue for additional one-year terms at the rate to which the Companies and AFS mutually agree. Exhibit "A" will be amended to reflect that rate and the new date through which the Companies and AFS agree to be bound.
IN WITNESS WHEREOF, each Company, on behalf of itself and its Funds listed in Exhibit "A" to this Memorandum of Agreement, and AFS have entered into this Memorandum of Agreement as of the date written above.
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL FUNDS, INC.
AIM INVESTMENT SECURITIES FUNDS
By: /s/ Robert H. Graham
-------------------------------
Title: President
----------------------------
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A I M FUND SERVICES, INC.
By: /s/ Tony D. Green
-------------------------------
Title: President
----------------------------
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EXHIBIT "A"
AIM EQUITY FUNDS
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM Aggressive Growth Fund
Institutional Class 0.10% October 31, 2004
AIM Blue Chip Fund
Institutional Class 0.10% October 31, 2004
AIM Capital Development Fund
Institutional Class 0.10% October 31, 2004
AIM Charter Fund
Institutional Class 0.10% October 31, 2004
AIM Constellation Fund
Institutional Class 0.10% October 31, 2004
AIM Weingarten Fund
Institutional Class 0.10% October 31, 2004
|
AIM FUNDS GROUP
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM Balanced Fund
Institutional Class 0.10% December 31, 2004
AIM Premier Equity Fund
Institutional Class 0.10% December 31, 2004
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AIM GROWTH SERIES
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM Basic Value Fund
Institutional Class 0.10% December 31, 2004
AIM Mid Cap Core Equity Fund
Institutional Class 0.10% December 31, 2004
AIM Small Cap Growth Fund
Institutional Class 0.10% December 31, 2004
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AIM INTERNATIONAL FUNDS, INC.
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM International Growth Fund
Institutional Class 0.10% October 31, 2004
|
AIM INVESTMENT SECURITIES FUNDS
FUND EXPENSE LIMITATION COMMITTED UNTIL
---- ------------------ ---------------
AIM Limited Maturity Treasury Fund
Institutional Class 0.10% July 31, 2004
|
EXHIBIT I(1)
[BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
July 2, 2003
AIM Investment Securities Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: AIM Investment Securities Funds Registration Statement on Form N-1A
Ladies and Gentlemen:
We have acted as counsel to AIM Investment Securities Funds, a statutory trust organized under the laws of the State of Delaware (the "Trust") and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, series management investment company.
This opinion is given in connection with the filing by the Trust of Post-Effective Amendment No. 22 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and Amendment No. 26 to such Registration Statement under the 1940 Act (collectively, the "Registration Statement") relating to the registration of an indefinite number of Investor Class shares of beneficial interest, par value $.01 per share (the "Shares"), of AIM High Yield Fund, AIM Income Fund, AIM Intermediate Government Fund, AIM Money Market Fund and AIM Municipal Bond Fund (each, a "Fund" and, collectively, the "Funds").
In connection with our giving this opinion, we have examined copies of the Trust's Restated Certificate of Trust, Amended and Restated Agreement and Declaration of Trust, as amended (the "Trust Agreement"), and resolutions of the Board of Trustees adopted May 14, 2003, and originals or copies, certified or otherwise identified to our satisfaction, of such other documents, records and other instruments as we have deemed necessary or advisable for purposes of this opinion. We have also examined the prospectuses for the Funds, which are included in the Registration Statement, substantially in the form in which they are to become effective (the "Prospectuses"). As to various questions of fact material to our opinion, we have relied upon information provided by officers of the Trust.
AIM Investment Securities Funds
July 2, 2003
Based on the foregoing, we are of the opinion that the Shares to be offered for sale pursuant to the Prospectuses are duly authorized and, when sold, issued and paid for as described in each Prospectus, will be validly issued, fully paid and nonassessable.
We express no opinion concerning the laws of any jurisdiction other than the federal law of the United States of America and the Delaware Statutory Trust Act.
Both the Delaware Statutory Trust Act and the Trust Agreement provide that shareholders of the Trust shall be entitled to the same limitation on personal liability as is extended under the Delaware General Corporation Law to stockholders of private corporations for profit. There is a remote possibility, however, that, under certain circumstances, shareholders of a Delaware statutory trust may be held personally liable for that trust's obligations to the extent that the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement also provides for indemnification out of property of a Fund for all loss and expense of any shareholder held personally liable for the obligations of that Fund. Therefore, the risk of any shareholder incurring financial loss beyond his investment due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the express limitation of shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and to the reference to our firm under the caption "Investment Advisory and Other Services - Other Service Providers - Counsel to the Trust" in the Statement of Additional Information for the Funds, which is included in the Registration Statement.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL, LLP |
EXHIBIT i(2)
June 23, 2003
AIM International Funds, Inc. AIM Investment Securities Funds 11 Greenway Plaza 11 Greenway Plaza Suite 100 Suite 100 Houston, TX 77046-1173 Houston, TX 77046-1173 |
RE: FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
OF AIM GLOBAL INCOME FUND
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Global Income Fund ("Global Fund"), an investment portfolio of AIM International Funds, Inc. ("AIFI"), a Maryland corporation, to AIM Income Fund ("Income Fund"), an investment portfolio of AIM Investment Securities Funds ("AIS"), a Delaware business trust, in exchange solely for shares of beneficial interest of Income Fund ("Income Fund Shares") issued by AIS directly to Global Fund Shareholders, and Income Fund's assumption of Global Fund's liabilities, and the termination of Global Fund as a designated series of shares of AIFI, all pursuant to the Agreement and Plan of Reorganization dated as of February 6, 2003 between AIFI, AIS and A I M Advisors, Inc., a Delaware corporation (the "Agreement") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Agreement.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Agreement, the exhibits attached thereto, the Registration Statement on Form N-14 filed by AIS on February 12, 2003 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
AIM International Funds, Inc.
AIM Investment Securities Funds
June 23, 2003
In rendering this opinion, we are relying upon the representations, warranties and covenants made by AIFI and AIS in the Agreement as well as on letters of representation of even date that we have received from the officers of AIFI and AIS, copies of which are attached as Exhibits A and B hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding, or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Global Fund to Income Fund in exchange for Income Fund Shares distributed directly to Global Fund Shareholders, as provided in the Agreement, will constitute a "reorganization" within the meaning of Section 368(a) of the Code and that Global Fund and Income Fund will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Section 361(a) and Section 361(c)(1) of the Code, no gain or loss will be recognized by Global Fund on the transfer of its assets to Income Fund solely in exchange for Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares or on the distribution of Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares to Global Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Income Fund upon the receipt of assets of Global Fund in exchange for Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares issued directly to Global Fund Shareholders and Income Fund's assumption of Global Income Fund's liabilities.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Global Fund Shareholders on the receipt of Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares in exchange for their respective Global Fund Shares.
5. In accordance with Section 362(b) of the Code, the basis to Income Fund of the assets of Global Fund will be the same as the basis of such assets in the hands of Global Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Global Fund Shareholder's basis for Income Fund Class A Shares, Income Fund Class B Shares or Income
AIM International Funds, Inc.
AIM Investment Securities Funds
June 23, 2003
Fund Class C Shares received by the Global Fund Shareholder will be the same as his basis for the Global Fund Shares respectively exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Global Fund Shareholder's holding period for Income Fund Class A Shares, Income Fund Class B Shares or Income Fund Class C Shares will be determined by including such Global Fund Shareholder's holding period for the Global Fund Shares respectively exchanged therefor, provided that the Global Fund Shareholder held such Global Fund Shares as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Global Fund transferred to Income Fund in the Reorganization will include the holding period for such assets in the hands of Global Fund immediately prior to the Reorganization.
9. The tax year of Global Income Fund will end on the Closing Date, and Income Fund will thereafter succeed to and take into account the capital loss carryover and certain other tax attributes of Global Income Fund, subject to all relevant conditions and limitations on the use of such tax benefits.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Global Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Global Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Agreement, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
AIM International Funds, Inc.
AIM Investment Securities Funds
June 23, 2003
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL |
Exhibit i(3)
June 23, 2003
AIM Investment Funds AIM Investment Securities Funds 11 Greenway Plaza 11 Greenway Plaza Suite 100 Suite 100 Houston, TX 77046-1173 Houston, TX 77046-1173 |
RE: FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
OF AIM STRATEGIC INCOME FUND
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM Strategic Income Fund ("Strategic Fund"), an investment portfolio of AIM Investment Funds ("AIF"), a Delaware business trust, to AIM Income Fund ("Income Fund"), an investment portfolio of AIM Investment Securities Funds ("AIS"), a Delaware business trust, in exchange solely for shares of beneficial interest of Income Fund ("Income Fund Shares") issued by AIS directly to Strategic Fund Shareholders, and Income Fund's assumption of Strategic Fund's liabilities, and the termination of Strategic Fund as a designated series of shares of AIF, all pursuant to the Agreement and Plan of Reorganization dated as of February 6, 2003 between AIF, AIS and A I M Advisors, Inc., a Delaware corporation (the "Agreement") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Agreement.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Agreement, the exhibits attached thereto, the Registration Statement on Form N-14 filed by AIS on February 12, 2003 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
AIM Investment Funds
AIM Investment Securities Funds
June 23, 2003
In rendering this opinion, we are relying upon the representations, warranties and covenants made by AIF and AIS in the Agreement as well as on letters of representation of even date that we have received from the officers of AIF and AIS, copies of which are attached as Exhibits A and B hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding, or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of Strategic Fund to Income Fund in exchange for Income Fund Shares distributed directly to Strategic Fund Shareholders, as provided in the Agreement, will constitute a "reorganization" within the meaning of Section 368(a) of the Code and that Strategic Fund and Income Fund will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Section 361(a) and Section 361(c)(1) of the Code, no gain or loss will be recognized by Strategic Fund on the transfer of its assets to Income Fund solely in exchange for Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares or on the distribution of Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares to Strategic Fund Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by Income Fund upon the receipt of assets of Strategic Fund in exchange for Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares issued directly to Strategic Fund Shareholders and Income Fund's assumption of Strategic Fund's liabilities.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by Strategic Fund Shareholders on the receipt of Income Fund Class A Shares, Income Fund Class B Shares and Income Fund Class C Shares in exchange for their respective Strategic Fund Shares.
5. In accordance with Section 362(b) of the Code, the basis to Income Fund of the assets of Strategic Fund will be the same as the basis of such assets in the hands of Strategic Fund immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a Strategic Fund Shareholder's basis for Income Fund Class A Shares, Income Fund Class B Shares or Income
AIM Investment Funds
AIM Investment Securities Funds
June 23, 2003
Fund Class C Shares received by the Strategic Fund Shareholder will be the same as his basis for the Strategic Fund Shares respectively exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a Strategic Fund Shareholder's holding period for Income Fund Class A Shares, Income Fund Class B Shares or Income Fund Class C Shares will be determined by including such Strategic Fund Shareholder's holding period for the Strategic Fund Shares respectively exchanged therefor, provided that the Strategic Fund Shareholder held such Strategic Fund Shares as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of Strategic Fund transferred to Income Fund in the Reorganization will include the holding period for such assets in the hands of Strategic Fund immediately prior to the Reorganization.
9. The tax year of Strategic Income Fund will end on the Closing Date, and Income Fund will thereafter succeed to and take into account the capital loss carryover and certain other tax attributes of Strategic Income Fund, subject to all relevant conditions and limitations on the use of such tax benefits.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain Strategic Fund Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such Strategic Fund Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Agreement, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
AIM Investment Funds
AIM Investment Securities Funds
June 23, 2003
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL |
Exhibit i(4)
June 23, 2003
AIM Investment Securities Funds
11 Greenway Plaza
Suite 100
Houston, TX 77046-1173
RE: FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
OF AIM HIGH YIELD FUND II
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax consequences in connection with the transfer of the property and assets of AIM High Yield Fund II ("High Yield Fund II"), to AIM High Yield Fund ("High Yield Fund"), each an investment portfolio of AIM Investment Securities Funds ("AIS"), a Delaware business trust, in exchange solely for shares of beneficial interest of High Yield Fund ("High Yield Fund Shares") issued by AIS directly to High Yield Fund II Shareholders, and High Yield Fund's assumption of High Yield Fund II's liabilities, and the termination of High Yield Fund II as a designated series of shares of AIS, all pursuant to the Agreement and Plan of Reorganization dated as of February 6, 2003 between AIS and A I M Advisors, Inc., a Delaware corporation (the "Agreement") (the transaction in its entirety being hereinafter referred to as the "Reorganization"). Capitalized terms used in this letter without definition shall have the meanings given them in the Agreement.
For purposes of this opinion, we have examined and relied upon the accuracy and completeness of the facts, information, covenants, statements and representations contained in originals or copies of the Agreement, the exhibits attached thereto, the Registration Statement on Form N-14 filed by AIS on February 12, 2003 with the Securities and Exchange Commission, and such other documents and instruments as we have deemed necessary or appropriate. In our examination of the foregoing materials, we have assumed the genuineness of all signatures, legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity to the original documents of all documents submitted to us as copies. We have assumed that such documents reflect all the material facts relating to the Reorganization. In addition, we have assumed that the Reorganization will be consummated in accordance with the terms of such documents and that none of the material terms and conditions contained therein will have been waived or modified prior to the consummation of the Reorganization.
AIM Investment Securities Funds
June 23, 2003
In rendering this opinion, we are relying upon the representations, warranties and covenants made by AIS in the Agreement as well as on letters of representation of even date that we have received from an officer of AIS, a copy of which is attached as Exhibit A hereto. We have not been asked to, nor have we undertaken to, verify the accuracy of these and other representations made to us. In this regard, we have assumed that any representation made "to the best of knowledge," "to the knowledge" or similarly qualified is correct without such qualification. As to all matters in which a person making a representation has represented that such person either is not a party to, does not have, or is not aware of, any plan or intention, understanding or agreement, we have likewise assumed that there is in fact no such plan, intention, understanding, or agreement.
Based upon and subject to the foregoing, it is our opinion that, for federal income tax purposes:
1. The transfer of the assets of High Yield Fund II to High Yield Fund in exchange for High Yield Fund Shares distributed directly to High Yield Fund II Shareholders, as provided in the Agreement, will constitute a "reorganization" within the meaning of Section 368(a) of the Code and that High Yield Fund II and High Yield Fund will be "a party to a reorganization" within the meaning of Section 368(b) of the Code.
2. In accordance with Section 361(a) and Section 361(c)(1) of the Code, no gain or loss will be recognized by High Yield Fund II on the transfer of its assets to High Yield Fund solely in exchange for High Yield Fund Class A Shares, High Yield Fund Class B Shares and High Yield Fund Class C Shares or on the distribution of High Yield Fund Class A Shares, High Yield Fund Class B Shares and High Yield Fund Class C Shares to High Yield Fund II Shareholders.
3. In accordance with Section 1032 of the Code, no gain or loss will be recognized by High Yield Fund upon the receipt of assets of High Yield Fund II in exchange for High Yield Fund Class A Shares, High Yield Fund Class B Shares and High Yield Fund Class C Shares issued directly to High Yield Fund II Shareholders and High Yield Fund's assumption of High Yield Fund II's liabilities.
4. In accordance with Section 354(a)(1) of the Code, no gain or loss will be recognized by High Yield Fund II Shareholders on the receipt of High Yield Fund Class A Shares, High Yield Fund Class B Shares and High Yield Fund Class C Shares in exchange for their respective High Yield Fund II Shares.
5. In accordance with Section 362(b) of the Code, the basis to High Yield Fund of the assets of High Yield Fund II will be the same as the basis of such assets in the hands of High Yield Fund II immediately prior to the Reorganization.
6. In accordance with Section 358(a) of the Code, a High Yield Fund II Shareholder's basis for High Yield Fund Class A Shares, High Yield Fund Class B Shares or
AIM Investment Securities Funds
June 23, 2003
High Yield Fund Class C Shares received by the High Yield Fund II Shareholder will be the same as his basis for the High Yield Fund II Shares respectively exchanged therefor.
7. In accordance with Section 1223(1) of the Code, a High Yield Fund II Shareholder's holding period for High Yield Fund Class A Shares, High Yield Fund Class B Shares or High Yield Fund Class C Shares will be determined by including such High Yield Fund II Shareholder's holding period for the High Yield Fund II Shares respectively exchanged therefor, provided that the High Yield Fund II Shareholder held such High Yield Fund II Shares as a capital asset as of the Closing Date.
8. In accordance with Section 1223(2) of the Code, the holding period with respect to the assets of High Yield Fund II transferred to High Yield Fund in the Reorganization will include the holding period for such assets in the hands of High Yield Fund II immediately prior to the Reorganization.
9. The tax year of High Yield Fund II will end on the Closing Date, and High Yield Fund will thereafter succeed to and take into account the capital loss carryover and certain other tax attributes of High Yield Fund II, subject to all relevant conditions and limitations on the use of such tax benefits.
We express no opinion as to the tax consequences of the Reorganization except as expressly set forth above, or as to any transaction except the Reorganization. We also note that certain High Yield Fund II Shareholders may be subject to special rules because of their particular federal income tax status and that the tax consequences of the Reorganization to such High Yield Fund II Shareholders may accordingly differ from the ones of general application that are described above. This opinion is intended to satisfy the mutual condition precedent to the Reorganization set forth in Section 6.2(f) of the Agreement, is being furnished to you solely for that purpose, and may not be relied upon by any other person without our express written consent.
Our opinion is based upon the Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, judicial decisions, interpretative rulings of the Internal Revenue Service and such other authorities as we have considered relevant, all as in effect on the date hereof. All such legal authorities are subject to change, either prospectively or retroactively. We are not undertaking hereby any obligation to advise you of any changes in the applicable law subsequent to the date hereof, even if such changes materially affect the tax consequences of the Reorganization that are set forth above.
If any of the facts, assumptions or representations on which our opinion is based are incorrect, we expect you to advise us so that we may consider the effect, if any, on our opinion.
AIM Investment Securities Funds
June 23, 2003
Our opinion has no binding effect on the Internal Revenue Service or the courts of any jurisdiction. No assurance can accordingly be given that, if the matter were contested, a court would agree with the legal conclusions set forth above.
Sincerely,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL |
EXHIBIT j(1)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Financial Highlights" in the Prospectus and "Auditors" in the Statement of Additional Information and to the use of our reports dated September 10, 2002, on the financial statements and financial highlights of AIM High Yield Fund, AIM High Yield Fund II, AIM Income Fund, AIM Intermediate Government Fund, AIM Limited Maturity Fund, AIM Money Market Fund, AIM Municipal Bond Fund, and AIM Total Return Bond Fund as of and for the year ended July 31, 2002 in the Post-Effective Amendment Number 22 to the Registration Statement (Form N-1A No. 33-39519).
ERNST & YOUNG LLP
Houston, Texas
July 1, 2003
Exhibit m(1)(b)
AMENDMENT NO. 1
TO THE
SIXTH AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
OF AIM INVESTMENT SECURITIES FUNDS
(CLASS A SHARES, CLASS A3 SHARES, CLASS C SHARES, CLASS R SHARES AND
AIM CASH RESERVE SHARES)
The Sixth Amended and Restated Master Distribution Plan (the "Plan"), dated October 31, 2002, pursuant to Rule 12b-1 of AIM Investment Securities Funds, a Delaware statutory trust, is hereby amended as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
SIXTH AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT SECURITIES FUNDS (CLASS A SHARES, CLASS A3
SHARES, CLASS C SHARES, CLASS R SHARES
AND AIM CASH RESERVE SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or class thereof) as designated below, a Distribution Fee* determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio (or Class thereof).
PORTFOLIO MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS A SHARES SALES CHARGE FEE FEE
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS A3 SHARES SALES CHARGE FEE FEE
AIM Limited Maturity Treasury Fund 0.10% 0.25% 0.35%
|
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS C SHARES SALES CHARGE FEE FEE
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS R SHARES SALES CHARGE FEE FEE
AIM Income Fund 0.25% 0.25% 0.50%
AIM Intermediate Government Fund 0.25% 0.25% 0.50%
AIM Money Market Fund 0.25% 0.25% 0.50%
|
MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
AIM CASH RESERVE SHARES SALES CHARGE FEE FEE
AIM Money Market Fund 0.00% 0.25% 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: ____________, 2003
AIM INVESTMENT SECURITIES FUNDS (on behalf of its Class A Shares, Class A3 Shares, Class C Shares, Class R Shares and AIM Cash Reserve Shares)
Attest: By:
-----------------------------------------
Assistant Secretary Robert H. Graham
President
|
Exhibit m(2)
SEVENTH AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT SECURITIES FUNDS
(CLASS A SHARES, CLASS A3 SHARES, CLASS C SHARES, CLASS R SHARES,
AIM CASH RESERVE SHARES AND INVESTOR CLASS SHARES)
SECTION 1. AIM Investment Securities Funds (the "Fund") on behalf of the series of the Shares of beneficial interest set forth in Appendix A attached hereto (the "Portfolios") may act as a distributor of the Class A shares, Class A3 shares, Class C shares, Class R shares, AIM Cash Reserve shares, Institutional Class shares and Investor Class shares of such Portfolios (the "Shares") of which the Fund is the issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur pursuant to the terms of this Master Distribution Plan expenses at the rates set forth in Appendix A per annum of the average daily net assets of the Fund attributable to the Shares, subject to any applicable limitations imposed from time to time by applicable rules of the National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Appendix A may be used to finance any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, expenses of organizing and conducting sales seminars, advertising programs, finders fees, printing of prospectuses and statements of additional information (and supplements thereto) and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature, overhead, supplemental payments to dealers and other institutions as asset-based sales charges. Amounts set forth in Appendix A may also be used to finance payments of service fees under a shareholder service arrangement to be established by A I M Distributors, Inc. ("Distributors") as the Fund's distributor in accordance with Section 4, and the costs of administering the Plan. To the extent that amounts paid hereunder are not used specifically to reimburse Distributors for any such expense, such amounts may be treated as compensation for Distributors' distribution-related services. All amounts expended pursuant to the Plan shall be paid to Distributors and are the legal obligation of the Fund and not of Distributors. That portion of the amounts paid under the Plan that is not paid to, or paid or advanced by Distributors to dealers or other institutions, for providing personal continuing shareholder service as a service fee pursuant to Section 4 shall be deemed an asset-based sales charge. The distribution agreement with any Distributor shall provide that the portion of the amounts set forth in Appendix A that is an asset based sales charge with respect to Class C Shares shall be deemed to be paid for services rendered by the Distributor or any Dealers in placing the Class C Shares, which services are fully performed upon the settlement of each sale of a Class C Share (or share of another portfolio from which the Class C Share derives). No provision of this Plan shall be interpreted to prohibit any payments by the Fund during periods when the Fund has suspended or otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in part for the implementation by Distributors of shareholder service arrangements with respect to the Shares. The maximum service fee paid to any service provider shall be twenty-five one-hundredths of one percent (0.25%) per annum of the average daily net assets of the Fund attributable to the Shares owned by the customers of such service provider.
(b) Pursuant to this program, Distributors may enter into agreements substantially in the form attached hereto as Exhibit A ("Service Agreements") with such broker-dealers ("Dealers") as may be selected from time to time by Distributors for the provision of distribution-related personal shareholder services in connection with the sale of Shares to the Dealers' clients and customers ("Customers") who may from time to time directly or beneficially own Shares. The distribution-related personal continuing shareholder services to be rendered by Dealers under the Service Agreements may include, but shall not be limited to, the following: (i) distributing sales literature; (ii) answering routine Customer inquiries concerning the Fund and the Shares; (iii) assisting Customers in changing dividend options, account designations and addresses, and in enrolling into any of several retirement plans offered in connection with the purchase of Shares; (iv) assisting in the establishment and maintenance of customer accounts and records, and in the processing of purchase and redemption transactions; (v) investing dividends and capital gains distributions automatically in Shares; and (vi) providing such other information and services as the Fund or the Customer may reasonably request.
(c) Distributors may also enter into Bank Shareholder Service Agreements substantially in the form attached hereto as Exhibit B ("Bank Agreements") with selected banks acting in an agency capacity for their customers ("Banks"). Banks acting in such capacity will provide some or all of the shareholder services to their customers as set forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Variable Group Annuity Contractholder Service Agreements substantially in the form attached hereto as Exhibit C ("Variable Contract Agreements") with selected insurance companies ("Companies") offering variable annuity contracts to employers as funding vehicles for retirement plans qualified under Section 401(a) of the Internal Revenue Code, where amounts contributed under such plans are invested pursuant to such variable annuity contracts in Shares of the Fund. The Companies receiving payments under such Variable Contract Agreements will provide specialized services to contractholders and plan participants, as set forth in the Variable Contract Agreements from time to time.
(e) Distributors may also enter into Agency Pricing Agreements substantially in the form attached hereto as Exhibit D ("Pricing Agreements") with selected retirement plan service providers acting in an agency capacity for their customers ("Retirement Plan Providers"). Retirement Plan Providers acting in such capacity will provide some or all of the shareholder services to their customers as set forth in the Pricing Agreements from time to time.
(f) Distributors may also enter into Shareholder Service Agreements substantially in the form attached hereto as Exhibit E ("Bank Trust Department Agreements and Brokers for Bank Trust Department Agreements") with selected bank trust departments and brokers for bank trust departments. Such bank trust departments and brokers for bank trust departments will provide some or all of the shareholder services to their customers as set forth in the Bank Trust Department Agreements and Brokers for Bank Trust Department Agreements from time to time.
(g) Distributors, as agent of the Portfolios may also enter into a Shareholder Service Agreement substantially in the form attached hereto as Exhibit F ("Agreement") with Distributors, acting as principal. Distributors, acting as principal, will provide some or all of the shareholder services to Portfolio shareholders for which Distributors is the broker of record, as set forth in such Agreement.
SECTION 5. Any amendment to this Plan that requires the approval of the shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall become effective as to such Class upon the approval of such amendment by a "majority of the outstanding voting securities" (as defined in the 1940 Act) of such Class, provided that the Board of Trustees of the Fund has approved such amendment in accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements related to this Plan shall become effective immediately upon the receipt by the Fund of both (a) the affirmative vote of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a majority of those trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Dis-interested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. Notwithstanding the foregoing, no such amendment that requires the approval of the shareholders of a Class of a Fund shall become effective as to such Class until such amendment has been approved by the shareholders of such Class in accordance with the provisions of Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan shall continue in effect until June 30, 2004 and thereafter shall continue in effect so long as such continuance is specifically approved, at least annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Trustees and the Board of Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made.
SECTION 9. This Plan may be terminated at any time by vote of a majority of the Dis-interested Trustees, or by vote of a majority of the outstanding voting securities of the Shares . If this Plan is terminated, the obligation of the Fund to make payments pursuant to this Plan will also cease and the Fund will not be required to make any payments beyond the termination date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Dis-interested Trustees or by a vote of the outstanding voting securities of the Fund attributable to the Shares, on not more than sixty (60) days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 5 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for in Section 6 hereof.
AIM INVESTMENT SECURITIES FUNDS (on behalf
of its Class A Shares, Class A3 Shares,
Class C Shares, Class R Shares, AIM Cash
Reserve Shares and Investor Class Shares)
Attest: By:
-------------------------- ---------------------------------
Assistant Secretary President
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Amended and restated for all Portfolios as of September 28, 1998, as amended June 1, 2000.
Amended and restated for all Portfolios as of July 1, 2000, and as amended December 28, 2001.
Amended and restated for all Portfolios as of June 3, 2002.
Amended and restated for all Portfolios as of October 31, 2002 and as amended June 23, 2003.
Amended and restated for all Portfolios as of July 21, 2003.
APPENDIX A
TO
SEVENTH AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT SECURITIES FUNDS (CLASS A SHARES, CLASS A3
SHARES, CLASS C SHARES, CLASS R SHARES,
AIM CASH RESERVE SHARES AND INVESTOR CLASS SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or class thereof) as designated below, a Distribution Fee* determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio (or Class thereof).
MINIMUM
ASSET
PORTFOLIO BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS A SHARES CHARGE FEE FEE
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS A3 SHARES SALES CHARGE FEE FEE
AIM Limited Maturity Treasury Fund 0.10% 0.25% 0.35%
|
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS C SHARES CHARGE FEE FEE
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
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MINIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS R SHARES CHARGE FEE FEE
AIM Income Fund 0.25% 0.25% 0.50%
AIM Intermediate Government Fund 0.25% 0.25% 0.50%
AIM Money Market Fund 0.25% 0.25% 0.50%
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MINIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
AIM CASH RESERVE SHARES CHARGE FEE FEE
AIM Money Market Fund 0.00% 0.25% 0.25%
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MINIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
INVESTOR CLASS SHARES CHARGE FEE FEE
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Money Market Fund 0.00% 0.25% 0.25%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
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EXHIBIT m(3)(c)
AMENDMENT NO. 2
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT SECURITIES FUNDS
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The First Amended and Restated Master Distribution Plan (the "Plan"), dated as of December 31, 2000, pursuant to Rule 12b-1 of AIM Investment Securities Funds, a Delaware statutory trust, is hereby amended as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT SECURITIES FUNDS
(CLASS B SHARES)
(DISTRIBUTION FEE)
MAXIMUM MAXIMUM MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE ANNUAL FEE
---- ------------ ------- ----------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: June 23, 2003
AIM INVESTMENT SECURITIES FUNDS
(on behalf of its Class B Shares)
Attest: /s/ JOHN H. LIVELY By: /s/ ROBERT H. GRAHAM
----------------------- -----------------------------------
Assistant Secretary Robert H. Graham
President
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EXHIBIT n
THIRD AMENDED AND RESTATED
MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS--Registered Trademark--
1. This Multiple Class Plan (the "Plan") adopted in accordance with Rule 18f-3 under the Act shall govern the terms and conditions under which the Funds may issue separate Classes of Shares representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the meanings ascribed to them below.
(a) Act - Investment Company Act of 1940, as amended.
(b) AIM Cash Reserve Shares - shall mean the AIM Cash Reserve Shares Class of AIM Money Market Fund, a Portfolio of AIM Investment Securities Funds.
(c) CDSC - contingent deferred sales charge.
(d) CDSC Period - the period of years following acquisition of Shares during which such Shares may be assessed a CDSC upon redemption.
(e) Class - a class of Shares of a Fund representing an interest in a Portfolio.
(f) Class A Shares - shall mean those Shares designated as Class A Shares in the Fund's organizing documents.
(g) Class A3 Shares - shall mean those Shares designated as Class A3 Shares in the Fund's organizing documents.
(h) Class B Shares - shall mean those Shares designated as Class B Shares in the Fund's organizing documents.
(i) Class C Shares - shall mean those Shares designated as Class C Shares in the Fund's organizing documents.
(j) Class R Shares - shall mean those Shares designated as Class R Shares in the Fund's organizing documents.
(k) Directors - the directors or trustees of a Fund.
(l) Distribution Expenses - expenses incurred in activities which are primarily intended to result in the distribution and sale of Shares as defined in a Plan of Distribution and/or agreements relating thereto.
(m) Distribution Fee - a fee paid by a Fund to the Distributor to compensate the Distributor for Distribution Expenses.
(n) Distributor - A I M Distributors, Inc. or Fund Management Company, as applicable.
(o) Fund - those investment companies advised by A I M Advisors, Inc. which have adopted this Plan.
(p) Institutional Class Shares - shall mean those Shares designated as Institutional Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by A I M Distributors, Inc. that is offered for sale to institutional customers as may be approved by the Directors from time to time and as set forth in the Fund's Prospectus.
(q) Institutional Money Market Fund Shares - shall mean those Shares designated as Cash Management Class Shares, Institutional Class Shares, Personal Investment Class Shares, Private Investment Class Shares, Reserve Class Shares, Resource Class Shares and Sweep Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by Fund Management Company that is offered for sale to institutional customers as may be approved by the Directors from time to time and as set forth in the Fund's Prospectus.
(r) Investor Class Shares - shall mean those Shares designated as Investor Class Shares in the Fund's organizing documents.
(s) Plan of Distribution - any plan adopted under Rule 12b-1 under the Act with respect to payment of a Distribution Fee and/or Service Fee.
(t) Portfolio - a series of the Shares of a Fund constituting a separate investment portfolio of the Fund.
(u) Prospectus - the then currently effective prospectus and statement of additional information of a Portfolio.
(v) Service Fee - a fee paid to financial intermediaries for the ongoing provision of personal services to Fund shareholders and/or the maintenance of shareholder accounts.
(w) Share - a share of common stock or beneficial interest in a Fund, as applicable.
3. Allocation of Income and Expenses.
(a) Distribution Fees and Service Fees - Each Class shall bear directly any and all Distribution Fees and/or Service Fees payable by such Class pursuant to a Plan of Distribution adopted by the Fund with respect to such Class.
(b) Transfer Agency and Shareholder Recordkeeping Fees - Each Class shall bear directly the transfer agency fees and expenses and other shareholder recordkeeping fees and expenses payable by that Class pursuant to a Transfer Agency and Service Agreement adopted by the Fund with respect to such Class.
(c) Allocation of Other Expenses - Each Class shall bear proportionately all other expenses incurred by a Portfolio based on the relative net assets attributable to each such Class.
(d) Allocation of Income, Gains and Losses - Except to the extent provided in the following sentence, each Portfolio will allocate income and realized and unrealized capital gains and losses to a Class based on the relative net assets of each Class. Notwithstanding the foregoing, each Portfolio that declares dividends on a daily basis will allocate income on the basis of settled Shares.
(e) Waiver and Reimbursement of Expenses - A Portfolio's adviser, underwriter or any other provider of services to the Portfolio may waive or reimburse the expenses of a particular Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and servicing arrangements identified below will apply for the following Classes offered by a Fund with respect to a Portfolio. The provisions of the Fund's Prospectus describing the distribution and servicing arrangements in detail are incorporated herein by this reference.
(a) AIM Cash Reserve Shares. AIM Cash Reserve Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(b) Class A Shares. Class A Shares shall be offered at net asset value plus a front-end sales charge as approved from time to time by the Directors and set forth in the Fund's Prospectus, which sales charge may be reduced or eliminated for certain money market fund shares, for larger purchases, under a combined purchase privilege, under a right of accumulation, under a letter of intent or for certain categories of purchasers as permitted by Section 22(d) of the Act and as set forth in the Fund's Prospectus. Class A Shares that are not subject to a front-end sales charge as a result of the foregoing shall be subject to a CDSC for the CDSC Period set forth in Section 5(a) of this Plan if so provided in the Fund's Prospectus. The offering price of Shares subject to a front-end sales charge shall be computed in accordance with Rule 22c-1 and Section 22(d) of the Act and the rules and regulations thereunder. Class A Shares shall be subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(c) Class A3 Shares. Class A3 Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(d) Class B Shares. Class B Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(b), (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus, and (iv) converted to Class A Shares eight years from the end of the calendar month in which the shareholder's order to purchase was accepted, as set forth in the Fund's Prospectus.
Class B Shares of AIM Global Trends Fund acquired prior to June 1, 1998 which are continuously held in AIM Global Trends Fund shall convert to Class A Shares seven years from the end of the calendar month in which the shareholder's order to purchase was accepted, as set forth in the Fund's Prospectus.
Class B Shares of AIM Money Market Fund will convert to AIM Cash Reserve Shares of AIM Money Market Fund.
(e) Class C Shares. Class C Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(c), and (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(f) Class R Shares. Class R Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(d), and (iii) subject to on-going Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(g) Institutional Class Shares. Institutional Class Shares shall be (i) offered at net asset value and (ii) offered only to certain categories of institutional customers as approved from time to time by the Directors and as set forth in the Fund's Prospectus.
(h) Institutional Money Market Fund Shares. Institutional Money
Market Fund Shares shall be (i) offered at net asset value,
(ii) offered only to certain categories of institutional
customers as approved from time to time by the Directors and
as set forth in the Fund's Prospectus, and (iii) may be
subject to ongoing Service Fees and/or Distribution Fees as
approved from time to time by the Directors and set forth in
the Fund's Prospectus.
(i) Investor Class Shares. Investor Class Shares shall be (i) offered at net asset value, (ii) offered only to certain categories of customers as approved from time to time by the Directors and as set forth in the Fund's Prospectus, and (iii) may be subject to ongoing Service Fees and/or Distribution Fees as approved from time to time by the Directors and set forth in the Fund's Prospectus.
()
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not incur a front-end sales charge, and of certain AIM Cash Reserve Shares, Class B Shares, Class C Shares and Class R Shares as follows:
(a) AIM Cash Reserve Shares acquired through exchange of Class A Shares of another Portfolio may be subject to a CDSC for the CDSC Period set forth in Section 5(b) of this Plan if so provided in the Fund's Prospectus.
(b) Class A Shares. The CDSC Period for Class A Shares shall be the period set forth in the Fund's Prospectus. The CDSC rate shall be as set forth in the
Fund's Prospectus, the relevant portions of which are incorporated herein by this reference. No CDSC shall be imposed on Class A Shares unless so provided in a Fund's Prospectus.
(c) Class B Shares. The CDSC Period for the Class B Shares shall be six years. The CDSC rate for the Class B Shares shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by this reference.
(d) Class C Shares. The CDSC Period for the Class C Shares that are subject to a CDSC shall be one year. The CDSC rate for the Class C Shares that are subject to a CDSC shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by reference.
(e) Class R Shares. The CDSC Period for the Class R Shares that are subject to a CDSC shall be the period set forth in the Fund's Prospectus. The CDSC rate for the Class R Shares that are subject to a CDSC shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by reference.
(f) Method of Calculation. The CDSC shall be assessed on an amount equal to the lesser of the then current market value or the cost of the Shares being redeemed. No CDSC shall be imposed on increases in the net asset value of the Shares being redeemed above the initial purchase price. No CDSC shall be assessed on Shares derived from reinvestment of dividends or capital gains distributions. The order in which Shares are to be redeemed when not all of such Shares would be subject to a CDSC shall be determined by the Distributor in accordance with the provisions of Rule 6c-10 under the Act.
(g) Waiver. The Distributor may in its discretion waive a CDSC otherwise due upon the redemption of Shares on terms disclosed in the Fund's Prospectus and, for the Class A Shares and AIM Cash Reserve Shares, as allowed under Rule 6c-10 under the Act.
(h) CDSC Computation. The CDSC payable upon redemption of AIM Cash Reserve Shares, Class A Shares, Class B Shares, Class C Shares, and Class R Shares subject to a CDSC shall be computed in the manner described in the Fund's Prospectus.
6. Exchange Privileges. Exchanges of Shares, except for Institutional Money Market Fund Shares, shall be permitted between Funds as follows:
(a) Shares of a Fund generally may be exchanged for Shares of the same Class of another Fund, subject to such exceptions and such terms and limitations as are disclosed in the Fund's Prospectus.
(b) Shares of a Fund generally may not be exchanged for Shares of a different Class of that Fund or another Fund, subject to such exceptions and such terms and limitations as are disclosed in the Fund's Prospectus.
(c) Depending upon the Portfolio from which and into which an exchange is being made and when the shares were purchased, shares being acquired in an exchange may be acquired at their offering price, at their net asset value or by paying the difference in sales charges, as disclosed in the Fund's Prospectus.
7. Service Fees and Distribution Fees. The Service Fee and Distribution Fee applicable to any Class shall be those set forth in the Fund's Prospectus, relevant portions of which are incorporated herein by this reference. All other terms and conditions with respect to Service Fees and Distribution Fees shall be governed by the Plan of Distribution adopted by the Fund with respect to such fees and Rule 12b-1 of the Act.
8. Conversion of Class B Shares.
(a) Shares Received upon Reinvestment of Dividends and Distributions - Shares purchased through the reinvestment of dividends and distributions paid on Shares subject to conversion shall be treated as if held in a separate sub-account. Each time any Shares in a Shareholder's account (other than Shares held in the sub-account) convert to Class A Shares, a proportionate number of Shares held in the sub-account shall also convert to Class A Shares.
(b) Conversions on Basis of Relative Net Asset Value - All conversions shall be effected on the basis of the relative net asset values of the two Classes without the imposition of any sales load or other charge.
(c) Amendments to Plan of Distribution for Class A Shares - If any amendment is proposed to the Plan of Distribution under which Service Fees and Distribution Fees are paid with respect to Class A Shares of a Fund that would increase materially the amount to be borne by those Class A Shares, then no Class B Shares shall convert into Class A Shares of that Fund until the holders of Class B Shares of that Fund have also approved the proposed amendment. If the holders of such Class B Shares do not approve the proposed amendment, the Directors of the Fund and the Distributor shall take such action as is necessary to ensure that the Class voting against the amendment shall convert into another Class identical in all material respects to Class A Shares of the Fund as constituted prior to the amendment.
9. Effective Date. This Plan shall not take effect until a majority of the Directors of a Fund, including a majority of the Directors who are not interested persons of the Fund, shall find that the Plan, as proposed and including the expense allocations, is in the best interests of each Class individually and the Fund as a whole.
10. Amendments. This Plan may not be amended to materially change the provisions of this Plan unless such amendment is approved in the manner specified in Section 9 above.
11. Administration of Plan. This Plan shall be administered in compliance with all applicable provisions of the Act and all applicable rules promulgated under the Act, including but not limited to Rule 18f-3, Rule 6c-10 (with respect to the imposition of CDSCs upon the redemption of Shares) and Rule 11a-3 (with respect to exchange privileges among Shares).
Effective December 12, 2001 as amended and restated March 4, 2002, as amended and restated October 31, 2002 and as further amended and restated effective July 21, 2003.
EXHIBIT p(1)
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(AS LAST AMENDED SEPTEMBER 27, 2002)
WHEREAS, the members of the AIM Management Group are A I M Management Group Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and its wholly owned and indirect subsidiaries (individually and collectively referred to as "AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to AIM's investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as principal underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the transfer agent, dividend disbursing agent and shareholder processing agent for AIM's investment company clients; and
WHEREAS, the investment advisory business involves decisions and information which may have at least a temporary impact on the market price of securities, thus creating a potential for conflicts of interest between the persons engaged in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect to each portfolio under management and the interests of the client accounts and of the shareholders of AIM's investment company clients must take precedence over the personal interests of the employees of AIM, thus requiring a rigid adherence to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no intentional or inadvertent action is taken by an employee of AIM which is, or appears to be, adverse to the interests of AIM or any of its client accounts, including the defining of standards of behavior for such employees, while at the same time avoiding unnecessary interference with the privacy or personal freedom of such employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the Code") on May 1, 1981, and adopted amendments thereto in January 1989, October 1989, April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and now deem it advisable to update and revise said Code in light of new investment company products developed by AIM and changing circumstances in the securities markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM Advisors hereby adopt the following revised Code pursuant to the provisions of Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act"), with the intention that certain provisions of the Code shall become applicable to the officers, directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers, directors and employees (as hereinafter designated) of AIM. Unless otherwise indicated, the term "employee" as used herein means: (i) all officers, directors and employees of AIM Advisors and its wholly owned and indirect subsidiaries and (ii) officers, directors and employees of AIM Management who
have an active part in the management, portfolio selection, underwriting or shareholder functions with respect to AIM's investment company clients or provide one or more similar services for AIM's non-investment company clients. The term "employee" does not include directors of AIM Management who do not maintain an office at the home office of AIM Management and who do not regularly obtain information concerning the investment recommendations or decisions made by AIM on behalf of client accounts ("independent directors").
B. The Code shall also apply to any person or entity appointed as a
sub-advisor for an AIM investment company client account unless such
person or entity has adopted a code of ethics in compliance with
Section 17(j) of the 1940 Act; or, in the event that such person or
entity is domiciled outside of the United States, has adopted
employee standards of conduct that provide equivalent protections to
AIM's client accounts. In performing sub-advisory services, such
person or entity will be subject to the direction and supervision of
AIM, and subject to the policies and control of the Boards of
Directors/Trustees of the respective AIM investment company
client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a Code of Ethics Committee ("Committee"). The Committee shall have the responsibility for interpreting the provisions of the Code, for adopting and implementing Procedures for the enforcement of the provisions of the Code, and for determining whether a violation of the provisions of the Code, or of any such related Procedures has occurred. The Committee will appoint an officer to monitor personal investment activity by "Covered Persons" (as defined in the Procedures adopted hereunder), both before and after any trade occurs and to prepare periodic and annual reports, conduct education seminars and obtain employee certifications as deemed appropriate. In the event of a finding that a violation has occurred requiring significant remedial action, the Committee shall take such action as it deems appropriate on the imposition of sanctions or initiation of disgorgement proceedings. The Committee shall also make recommendations and submit reports to the Boards of Directors/Trustees of AIM's investment company clients.
B. If a sub-advisor has adopted a code of ethics in accordance with
Section 17(j) of the 1940 Act, then pursuant to a sub-advisory
agreement with AIM, it shall be the duty of such sub-advisor to
furnish AIM with a copy of the following:
o code of ethics and related procedures of the sub-advisor, and a statement as to its employees' compliance therewith;
o any statement or policy on insider trading adopted pursuant to
Section 204A under the 1940 Act; and the procedures designed to
prevent the misuse of material non-public information by any
person associated with such sub-advisor; and
o such other information as may reasonably be necessary for AIM to report to the Boards of Directors/Trustees of its investment company client account(s) as to such sub-advisor's adherence to the Boards' policies and controls referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out the intent of the Code. Among other things, the Procedures require certain new employees to complete an Asset Disclosure Form, a Brokerage Accounts Listing Form and such other forms as deemed appropriate by the Committee. Such Procedures are hereby incorporated into the Code and are made a part of the Code. Therefore, a violation of the Procedures shall be deemed a violation of the Code itself.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each employee shall have and maintain knowledge of and shall comply strictly with all applicable federal and state laws and all rules and regulations of any governmental agency or self-regulatory organization governing his/her actions as an employee.
B. Each employee shall comply with all laws and regulations, and AIM's prohibition against insider trading. Trading on or communicating material non-public information, or "inside information", of any sort, whether obtained in the course of research activities, through a client relationship or otherwise, is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines established by AIM to ensure compliance with applicable federal and state laws and regulations of governmental agencies and self-regulatory organizations. No employee shall knowingly participate in, assist, or condone any act in violation of any statute or regulation governing AIM or any act that would violate any provision of this Code, or of the Procedures adopted hereunder.
D. Each employee shall have and maintain knowledge of and shall comply with the provisions of this Code and any Procedures adopted hereunder.
E. Each employee having supervisory responsibility shall exercise reasonable supervision over employees subject to his/her control, with a view to preventing any violation by such persons of applicable statutes or regulations, AIM's corporate procedures, or the provisions of the Code, or the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of applicable statutes, regulations or provisions of the Code or of any Procedures adopted hereunder has occurred shall immediately report such evidence to the Chief Compliance Officer of AIM. Such action by the employee will remain confidential, unless the employee waives confidentiality or federal or state authorities compel disclosure. Failure to report such evidence may result in disciplinary proceedings and may include sanctions as set forth in Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the highest ethical and fiduciary standards. They shall avoid any action, whether for personal profit or otherwise, that results in an actual or potential conflict of interest with AIM or its client accounts, or which may be otherwise detrimental to the interests of the members of AIM or its client accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary obligation to clients of AIM, and shall not deprive any client account of an investment opportunity in order to personally benefit from that opportunity.
C. Without the knowledge and approval of the Ethics Committee of AIM Management, employees shall not engage in a business activity or practice for compensation in competition with the members of AIM. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, shall obtain the written approval of the Ethics Committee to participate on a board of directors/trustees of any of the following organizations:
o publicly traded company, partnership or trust;
o hospital or philanthropic institution;*
o local or state municipal authority;* and/or
o charitable organization.*
* These restrictions relate to organizations that have or intend to raise proceeds in a public securities offering.
In the relatively small number of instances in which board approval is authorized, investment personnel serving as directors shall be isolated from those making investment decisions through AIM's "Chinese Wall" Procedures.
D. Each employee, in making an investment recommendation or taking any investment action, shall exercise diligence and thoroughness, and shall have a reasonable and adequate basis for any such recommendation or action.
E. Each employee shall not attempt to improperly influence for such person's personal benefit any investment strategy to be followed or investment action to be taken by the members of AIM for its client accounts.
F. Each employee shall not improperly use for such person's personal benefit any knowledge, whether obtained through such person's relationship with AIM or otherwise, of any investment recommendation made or to be made, or of any investment action taken or to be taken by AIM for its client accounts.
G. Employees shall not disclose any non-public information relating to a client account's portfolio or transactions or to the investment recommendations of AIM, nor shall any employee disclose any non-public information relating to the business or operations of the members of AIM, unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a broker/dealer or other vendor who transacts business with AIM or its client accounts, any gifts, gratuities or other things of more than de minimis value or significance that their acceptance might reasonably be expected to interfere with or influence the exercise of independent and objective judgment in carrying out such person's duties or otherwise gives the appearance of a possible impropriety. For this purpose, gifts, gratuities and other things of value shall not include unsolicited entertainment so long as such unsolicited entertainment is not so frequent or extensive as to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of AIM shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest in an initial public offering ("IPO") or on behalf of any person, entity or organization that is not an AIM client. All other employees shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest offered in an IPO or on behalf of any person, entity or organization that is not an AIM client account except in those circumstances where different amounts of such offerings are specified for different investor types (e.g., private investors and institutional investors) and such transaction has been pre-cleared by the Compliance Office.
J. All personal securities transactions by employees must be conducted consistent with this Code and the Procedures adopted hereunder, and in such a manner as to avoid any actual or potential conflicts of interest or any abuse of such employee's position of trust and responsibility. Unless an exemption is available, employees who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, shall pre-clear all personal securities transactions in securities in accordance with the Procedures adopted hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, (or registered representative and/or principal of AIM), shall refrain from engaging in personal securities transactions in connection with a security that is not registered under Section 12 of the Securities Act of 1933 (i.e., a private placement security) unless such transaction has been pre-approved by the Chief Compliance Officer or the Director of Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, may not engage in a transaction in connection with the purchase or sale of a security within seven calendar days before and after an AIM investment company client trades in that same (or equivalent) security unless the de minimis exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, may not purchase and voluntarily sell, or sell and voluntarily purchase the same (or equivalent) securities of the same issuer within 60 calendar days unless such employee complies with the disgorgement procedures adopted by the Code of Ethics Committee. Subject to certain limited exceptions set forth in the related Procedures, any transaction under this provision may result in disgorgement proceedings for any profits received in connection with such transaction by such employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures adopted hereunder may be subject to sanctions, which may include, among other things, restrictions on such person's personal securities transactions; a letter of admonition, education or formal censure; fines, suspension, re-assignment, demotion or termination of employment; or other significant remedial action. Employees may also be subject to disgorgement proceedings for transactions in securities that are inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every situation in which choices and decisions must be made, because other company policies, practices and procedures (as well as good common sense) and good business judgment also apply. Every person subject to this Code should read and understand these documents thoroughly. They present important rules of conduct and operating controls for all employees. Employees are also expected to present questions to the attention of their supervisors and to the Chief Compliance Officer (or designee) and to report suspected violations as specified in these documents.
For the Boards of Directors:
The AIM Management Group and its
subsidiaries
by: /s/ Bob Graham
-----------------------------------
Bob Graham
|
EXHIBIT P(2)
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(AS LAST AMENDED JUNE 10, 2003)
WHEREAS, the members of the AIM Management Group are A I M Management Group Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and its wholly owned and indirect subsidiaries (individually and collectively referred to as "AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to AIM's investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as principal underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the transfer agent, dividend disbursing agent and shareholder processing agent for AIM's investment company clients; and
WHEREAS, the investment advisory business involves decisions and information which may have at least a temporary impact on the market price of securities, thus creating a potential for conflicts of interest between the persons engaged in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect to each portfolio under management and the interests of the client accounts and of the shareholders of AIM's investment company clients must take precedence over the personal interests of the employees of AIM, thus requiring a rigid adherence to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no intentional or inadvertent action is taken by an employee of AIM which is, or appears to be, adverse to the interests of AIM or any of its client accounts, including the defining of standards of behavior for such employees, while at the same time avoiding unnecessary interference with the privacy or personal freedom of such employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the Code") on May 1, 1981, and adopted amendments thereto in January 1989, October 1989, April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and now deem it advisable to update and revise said Code in light of new investment company products developed by AIM and changing circumstances in the securities markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM Advisors hereby adopt the following revised Code pursuant to the provisions of Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act"), with the intention that certain provisions of the Code shall become applicable to the officers, directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers, directors and employees (as hereinafter designated) of AIM. Unless otherwise indicated, the term "employee" as used herein means: (i) all officers, directors and employees of AIM Advisors and its wholly owned and indirect subsidiaries and (ii) officers, directors and employees of AIM Management who have an active part in the management, portfolio selection, underwriting or shareholder functions with respect to AIM's investment company clients or provide one or more similar
services for AIM's non-investment company clients. The term "employee" does not include directors of AIM Management who do not maintain an office at the home office of AIM Management and who do not regularly obtain information concerning the investment recommendations or decisions made by AIM on behalf of client accounts ("independent directors").
B. The Code shall also apply to any person or entity appointed as a
sub-advisor for an AIM investment company client account unless such
person or entity has adopted a code of ethics in compliance with
Section 17(j) of the 1940 Act; or, in the event that such person or
entity is domiciled outside of the United States, has adopted
employee standards of conduct that provide equivalent protections to
AIM's client accounts. In performing sub-advisory services, such
person or entity will be subject to the direction and supervision of
AIM, and subject to the policies and control of the Boards of
Directors/Trustees of the respective AIM investment company
client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a Code of Ethics Committee ("Committee"). The Committee shall have the responsibility for interpreting the provisions of the Code, for adopting and implementing Procedures for the enforcement of the provisions of the Code, and for determining whether a violation of the provisions of the Code, or of any such related Procedures has occurred. The Committee will appoint an officer to monitor personal investment activity by "Covered Persons" (as defined in the Procedures adopted hereunder), both before and after any trade occurs and to prepare periodic and annual reports, conduct education seminars and obtain employee certifications as deemed appropriate. In the event of a finding that a violation has occurred requiring significant remedial action, the Committee shall take such action as it deems appropriate on the imposition of sanctions or initiation of disgorgement proceedings. The Committee shall also make recommendations and submit reports to the Boards of Directors/Trustees of AIM's investment company clients.
B. If a sub-advisor has adopted a code of ethics in accordance with
Section 17(j) of the 1940 Act, then pursuant to a sub-advisory
agreement with AIM, it shall be the duty of such sub-advisor to
furnish AIM with a copy of the following:
o code of ethics and related procedures of the sub-advisor, and a statement as to its employees' compliance therewith;
o any statement or policy on insider trading adopted pursuant to Section 204A under the 1940 Act; and the procedures designed to prevent the misuse of material non-public information by any person associated with such sub-advisor; and
o such other information as may reasonably be necessary for AIM to report to the Boards of Directors/Trustees of its investment company client account(s) as to such sub-advisor's adherence to the Boards' policies and controls referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out the intent of the Code. Among other things, the Procedures require certain new employees to complete an Asset Disclosure Form, a Brokerage Accounts Listing Form and such other forms as deemed appropriate by the Committee. Such Procedures are hereby incorporated into the Code and are made a part of the Code. Therefore, a violation of the Procedures shall be deemed a violation of the Code itself.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each employee shall have and maintain knowledge of and shall comply strictly with all applicable federal and state laws and all rules and regulations of any governmental agency or self-regulatory organization governing his/her actions as an employee.
B. Each employee shall comply with all laws and regulations, and AIM's prohibition against insider trading. Trading on or communicating material non-public information, or "inside information", of any sort, whether obtained in the course of research activities, through a client relationship or otherwise, is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines established by AIM to ensure compliance with applicable federal and state laws and regulations of governmental agencies and self-regulatory organizations. No employee shall knowingly participate in, assist, or condone any act in violation of any statute or regulation governing AIM or any act that would violate any provision of this Code, or of the Procedures adopted hereunder.
D. Each employee shall have and maintain knowledge of and shall comply with the provisions of this Code and any Procedures adopted hereunder.
E. Each employee having supervisory responsibility shall exercise reasonable supervision over employees subject to his/her control, with a view to preventing any violation by such persons of applicable statutes or regulations, AIM's corporate procedures, or the provisions of the Code, or the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of applicable statutes, regulations or provisions of the Code or of any Procedures adopted hereunder has occurred shall immediately report such evidence to the Chief Compliance Officer of AIM. Such action by the employee will remain confidential, unless the employee waives confidentiality or federal or state authorities compel disclosure. Failure to report such evidence may result in disciplinary proceedings and may include sanctions as set forth in Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the highest ethical and fiduciary standards. They shall avoid any action, whether for personal profit or otherwise, that results in an actual or potential conflict of interest with AIM or its client accounts, or which may be otherwise detrimental to the interests of the members of AIM or its client accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary obligation to clients of AIM, and shall not deprive any client account of an investment opportunity in order to personally benefit from that opportunity.
C. Without the knowledge and approval of the Ethics Committee of AIM Management, employees shall not engage in a business activity or practice for compensation in competition with the members of AIM. Each employee, who is deemed to be a "Covered Person" as defined in the
(1) Conflicts of interest generally result from a situation in which an individual has a personal interest in a matter that is or may be competitive with his or her responsibilities to other persons or entities (such as AIM or its client accounts) or where an individual has or may have competing obligations or responsibilities to two or more persons or entities. In the case of the relationship between a client account on the one hand, and AIM, its officers, directors and employees, on the other hand, such conflict may result from the purchase or sale of securities for a client account and for the personal account of the individual involved or the account of any "affiliate" of such individual, as such term is defined in the 1940 Act. Such conflict may also arise from the purchase or sale for a client account of securities in which an officer, director or employee of AIM has an economic interest. Moreover, such conflict may arise in connection with vendor relationships in which such employee has any direct or indirect financial interest, family interests or other personal interest. To the extent of conflicts of interest between AIM and a vendor, such conflicts must be resolved in a manner that is not disadvantageous to AIM. In any such case, potential or actual conflicts must be disclosed to AIM and the first preference and priority must be to avoid such conflicts of interest wherever possible and, where they unavoidably occur, to resolve them in a manner that is not disadvantageous to a client.
Procedures adopted hereunder, shall obtain the written approval of the Ethics Committee to participate on a board of directors/trustees of any of the following organizations:
o publicly traded company, partnership or trust;
o hospital or philanthropic institution;*
o local or state municipal authority;* and/or
o charitable organization.*
* These restrictions relate to organizations that have or intend to raise proceeds in a public securities offering. For those non-profit organizations that do not intend to raise proceeds in a public securities offering, and whose directorship/trusteeship are held in a non-compensatory manner, written approval by the Ethics Committee is not required, but such employees must notify the Chief Compliance Officer (or designee). In the relatively small number of instances in which board approval is authorized, investment personnel serving as directors shall be isolated from those making investment decisions through AIM's "Chinese Wall" Procedures.
D. Each employee, in making an investment recommendation or taking any investment action, shall exercise diligence and thoroughness, and shall have a reasonable and adequate basis for any such recommendation or action.
E. Each employee shall not attempt to improperly influence for such person's personal benefit any investment strategy to be followed or investment action to be taken by the members of AIM for its client accounts.
F. Each employee shall not improperly use for such person's personal benefit any knowledge, whether obtained through such person's relationship with AIM or otherwise, of any investment recommendation made or to be made, or of any investment action taken or to be taken by AIM for its client accounts.
G. Employees shall not disclose any non-public information relating to a client account's portfolio or transactions or to the investment recommendations of AIM, nor shall any employee disclose any non-public information relating to the business or operations of the members of AIM, unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a broker/dealer or other vendor who transacts business with AIM or its client accounts, any gifts, gratuities or other things of more than de minimis value or significance that their acceptance might reasonably be expected to interfere with or influence the exercise of independent and objective judgment in carrying out such person's duties or otherwise gives the appearance of a possible impropriety. For this purpose, gifts, gratuities and other things of value shall not include unsolicited entertainment so long as such unsolicited entertainment is not so frequent or extensive as to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of AIM shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest in an initial public offering ("IPO") or on behalf of any person, entity or organization that is not an AIM client. All other employees shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest offered in an IPO or on behalf of any person, entity or organization that is not an AIM client account except in those circumstances where different amounts of such offerings are specified for different investor types (e.g., private investors and institutional investors) and such transaction has been pre-cleared by the Compliance Office.
J. All personal securities transactions by employees must be conducted consistent with this Code and the Procedures adopted hereunder, and in such a manner as to avoid any actual or potential conflicts of interest or any abuse of such employee's position of trust and responsibility. Unless
an exemption is available, employees who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, shall pre-clear all personal securities transactions in securities in accordance with the Procedures adopted hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, (or registered representative and/or principal of AIM), shall refrain from engaging in personal securities transactions in connection with a security that is not registered under Section 12 of the Securities Act of 1933 (i.e., a private placement security) unless such transaction has been pre-approved by the Chief Compliance Officer or the Director of Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, may not engage in a transaction in connection with the purchase or sale of a security within seven calendar days before and after an AIM investment company client trades in that same (or equivalent) security unless the de minimis exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, may not purchase and voluntarily sell, or sell and voluntarily purchase the same (or equivalent) securities of the same issuer within 60 calendar days unless such employee complies with the disgorgement procedures adopted by the Code of Ethics Committee. Subject to certain limited exceptions set forth in the related Procedures, any transaction under this provision may result in disgorgement proceedings for any profits received in connection with such transaction by such employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures adopted hereunder may be subject to sanctions, which may include, among other things, restrictions on such person's personal securities transactions; a letter of admonition, education or formal censure; fines, suspension, re-assignment, demotion or termination of employment; or other significant remedial action. Employees may also be subject to disgorgement proceedings for transactions in securities that are inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every situation in which choices and decisions must be made, because other company policies, practices and procedures (as well as good common sense) and good business judgment also apply. Every person subject to this Code should read and understand these documents thoroughly. They present important rules of conduct and operating controls for all employees. Employees are also expected to present questions to the attention of their supervisors and to the Chief Compliance Officer (or designee) and to report suspected violations as specified in these documents.
For the Boards of Directors:
The AIM Management Group and its
subsidiaries
by: /s/ Mark Williamson
-------------------------------------------
Mark Williamson
June 10, 2003
-------------------------------------------
Date
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